Is there no other way for a better efficiency and net return than downsizing jobs and costs ?

Yes there is. A way we would like to see our company on does exist. This way is of a socially responsible company aiming at a durable gain (sustainability). Hereafter are some of our sources, for the benefit of our Management.

Mr KOEMER from TEXACO analyses in 1996 in a communication to SPE (Society of Petroleum Engineering) the reengineering in the oil industry :

• The first step addressed the functions by cost and jobs reduction, with a simplification of the organization and decrease of the middle levels of management.
• The second step known as reengineering addressed the processes with downsizing and outsourcing of activities and salaries.

The goal of cost reduction was met. However, a study on 1,000 of the larger groups in the US showed an annual growth of 11% between 1988 and 1994 for the ones who reduced their staff, while the ones who concentrated on growth income gained as much as 15%. It seems moreover quite difficult to change from a politics of costs reduction to a growth politics, as the trend is to follow the path.

Actives reduction is also a source of loss. Some sold as of insufficient gain may turn later to be very profitable with the emergence of new technologies (3D-seismic, stimulation...).

Outsourcing, the financial gain is not proved, is also harmful to the remaining staff, who usually endures a loss of efficiency. Says Jim McLachlan from Deloitte Touche Consulting : " Be sure that if you look at people as meat, you will have it back ".

The third step is now toward a new concept of the oil company with the care to evolution and building personality, with five keys to the success :

• Transparency and open inquiry : does the company tells the truth ? Is there constructive criticism ?
• Morale : Are employees, especially the management, cynical ? Are retired and former employees proud of their company ?
• Humility : Is the company arrogant ?
• Learning : Is study and experience regarded with favor ? Is the risk accepted or rewarded ? Or is the company in the single search of a financial result ?
• Sustainability : Is the company culture an old tradition from successive managers, or is it the result of the will of an individual it will not survive ?

This is really humane. How a company, as a machinery designed to make money, may obtain these qualities ? It is only through people, and the very first step is hence of knowing that PEOPLE is really the basic richness in a company and not a charge....

A congress of June, 1998 about pension funds and how to reconcile ethics and finance gave interesting elements :

Mr Sassenou from CD Markets quotes a study by Mercer on 800 US companies in 35 sectors that discriminates the " growth " and the " costs reduction " groups. The former try and grow their total income whilst the later go for decreasing costs. From 1991 to 1996, the stock value of the " growth " goes to 21% against 12% for the " costs reducing ". The market hence grants the income or new customer research. Another study relating profits and jobs firing shows that after a short term benefit, the long term is a real loss.

Mr FERONE, from ARESE, explained the development of the " socially responsible " funds in the US. Reaching in 1997 about 10% of the financial market in the US, these funds look for both a financial gain and a social added value. From 600 billions in 1993, they grew to 1,200 billions in 1997. They go to the companies showing social and environmental care.

In the French newspaper " Le Monde " of April, 27, 1999, a paper developed these other way of profit making. The conclusion is that sustainability makes a higher value to the stock holder.

This is a five points strategy : the Management should " play a unique role in the development and diffusion of these new values ", " transparency " and " dialogue " are prerequisite for the establishment of confidence between the social partners, " justification " must be possible at any level of the production, the definition of precise goal is required to stimulate innovation. Meeting these criteria reduces the production costs, and positive the fame of the company.

So another way is open. It leads to more added value for the shareholders, but also to the customers, states, partners, staff and community. A better financial return, while caring of the salaries as being the main richness of the company : what are we waiting for ?