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0406 HR Magazine: Big Oil’s HR Champion

By Ann Pomeroy  4/1/2006
 

HR Magazine, April 2006

Vol. 51, No. 4

This oil industry leader is a problem-solver who relies on his HR skills to tackle the most intractable challenges.  are everal reasons that employers decide John Hofmeister, president of Shell Oil Co. and U.S. Country Chair for Royal Dutch/Shell Group, exudes an air of quiet confidence.

Seated in his book-lined office overlooking the collection of glass skyscrapers that forms the Houston skyline, the head of U.S. operations and former HR leader at one of the world’s largest oil companies strikes an observer as a man who is comfortable in his own skin.

Although he works in what he describes as “a dangerous business” at a job that demands he be on call 24 hours a day, seven days a week, Hofmeister is undaunted.

“I love it,” he says. “I hope to do this for a long time to come.”

Hofmeister the Behaviorist

While today he is a focused executive, Hofmeister wasn’t always so sure of his career path. Like most college freshmen, Hofmeister entered Kansas State University in the late 1960s without a clear idea of what career he wanted to pursue. He was interested in political science, but less as a study of government than as a study of behavior. Growing up in the Cold War era, he recalls that “the great democratic/communistic divides were fascinating to me as a student.” He was 14—“a very impressionable age”—when the Berlin Wall was built. The arms race and then the Vietnam War galvanized his political thinking, Hofmeister says.

He earned bachelor’s and master’s degrees in political science and also studied economics and the social sciences with a view toward giving himself several career options. His wrote his thesis on a form of political behavior, and considers himself to be a behaviorist.

When he graduated, he was broke and in debt, recalls Hofmeister. “I didn’t have two nickels to rub together.” As he considered what to do next, he examined four possibilities: attending law school (he had applied and been accepted at several schools), going back to graduate school for a Ph.D. (he had been offered a fellowship), working for the federal government or working for General Electric (GE).

Pragmatism carried the day. Deciding that further schooling could wait—“I needed money!”—Hofmeister entered GE’s Human Resources Management Program in 1973. This turned out to be a felicitous choice that established his HR career path, and Hofmeister spent 15 challenging years working in five of GE’s major businesses in several locations.

A Businessman First

“My first assignment in HR was actually in the marketing and sales of lightbulbs in France and West Germany” as part of GE’s cross functional training program, says Hofmeister. It was his job to commission a study on how to improve the sales penetration of lightbulbs in those countries and make recommendations to GE.

“I enjoyed it,” he says. “I learned a lot, and GE became more successful as a result of my recommendations.”

Hofmeister praises the training he received at GE, where he took courses—complete with homework—taught by senior GE executives. In some ways, he says, the classes were like a continuation of graduate school. It was at GE, says Hofmeister, that he learned to approach business issues from an HR point of view.

“I am a businessman first who worked in HR as my main contribution to business,” he says. He has always been interested in working in large technical global companies that are “multi-industry, multi-country, multi-function and multi-technology,” he says. And he has always loved a challenge. “The pattern of my career,” says Hofmeister, “has been to be with extremely challenging technical businesses at difficult cycles in their history. I’m a sucker for difficult cycles.”

Hofmeister has ridden out difficult cycles to eventual success at four major corporations: GE, Northern Telecom Inc. (now Nortel), Allied Signal Inc. (now Honeywell International) and Shell. At each company, he says, he has had the satisfaction of feeling that he has made a difference.

Some Major Challenges

The toughest challenge at GE came in the mid-1980s, says Hofmeister, “when the Rust Belt issues of America were roaring in my ears.” Facing high domestic costs and global competition—especially from Asia—in GE’s motor business, “we arrested the decline in” the division, he says.

He left GE in 1988 to join Northern Telecom, where he took up the challenge of shifting that organization from a national company to a global company.

At Allied Signal, which he joined in 1992, he discovered that “we were organized backward to the industry,” he says. Realizing that the company needed to become more market-focused, Hofmeister helped it take 23 product divisions and reorganize them around four major divisions. “We reorganized for the customer, not for ourselves,” he says, “and gained a competitive advantage.”

When Hofmeister joined Shell as group human resources director in 1997, he was one of the first external hires into a senior leadership position at a company that favored long-term employees and promotion from within.

Hofmeister brought 25 years of experience to the job, including stints in Hong Kong and Paris at Allied Signal. That global experience was extremely valuable, he says, as he tackled the challenges of shifting Shell from a national to a global focus.

The company has faced plenty of challenges during his tenure, including what Hofmeister terms a “hugely embarrassing” situation involving Shell’s oil reserves. In 2004, the company’s proven oil reserves base was discovered to be significantly less than had previously been stated, and Shell was forced to perform a major re-categorization of reserves. The company also postponed publication of its 2003 annual report.

Hofmeister, who was based in The Hague at the time, maintains that the problem was the result of a “flawed process” and involved no intentional wrongdoing. “We didn’t know what we didn’t know,” he says.

“Shell investigated and corrected the problem,” says Hofmeister, and two senior executives were asked to leave the company following a vote of no confidence by the board.

In the wake of this scandal, the company merged Royal Dutch and Shell Transport and Trading into a single entity known as Royal Dutch/Shell Group. The reorganized company is headquartered in The Hague and trades both on the London Stock Exchange and the New York Stock Exchange.

Running U.S. Shell

In March 2005, Hofmeister was named to the new position of president of Shell’s U.S. affiliate, Shell Oil Co. In that role, he represents the interests of the Shell Group to U.S. stakeholders, including investors, the government, customers, staff and communities. Working closely with U.S. policy-makers, Hofmeister says he is a “bipartisan business leader” who tells every member of Congress, “It is my goal that you will never know whether I’m a Democrat or Republican.”

As a 23-year Shell veteran, Dale Wunder, vice president of human resources in the Americas for Shell’s exploration and production business, says he wasn’t surprised by Hofmeister’s promotion to president. “HR plays a significant role at Shell,” he says. “HR isn’t just warming a seat [here]; it’s clearly at the table, and John is a strong proponent of HR as part of the business.”

David Sexton, vice president of strategy and portfolio and a 28-year Shell veteran, agrees that Hofmeister is eminently qualified for his current role. “He sat at the highest levels of Shell” before becoming president, Sexton says. “Having an HR person [as president] sends a message to employees that HR and talent and people” are important to the company.

In addition, Sexton says that Hofmeister is an extremely effective company spokesman and “a very good communicator who doesn’t allow us to become too siloed.” He adds that Hofmeister is “a believable, creditable presence when giving congressional testimony.”

(Hofmeister was one of several oil company executives who appeared before the Senate Energy and Commerce committees last fall to answer questions about high oil prices and high oil company profits following the Gulf hurricanes in August and September.)

Wunder says he appreciates the fact that Hofmeister provides a broad perspective and a long-term vision, and then “allows people to deliver without micromanaging.”

Shell’s U.S. Country Controller, Randy Braud, says that in addition to understanding the business, Hofmeister knows that “it’s all about the people. He’s a great listener with an excellent radar detection system.”

As U.S. Shell’s “head bean counter,” Braud says he and Hofmeister developed a close working relationship last year during hurricanes Katrina and Rita. Shell’s offshore platforms in the Gulf of Mexico were heavily damaged, as were refineries in the affected area. Nearly 5,000 Shell employees were affected by the storms, he says, and 1,000 New Orleans employees had to be evacuated and relocated to other offices.

“John’s passion for HR was evident” in the way he handled this disaster, says Braud. “Our employees were the top priority.” Braud says all affected employees remained on the payroll and the company located apartments and homes for those whose homes were damaged or destroyed by the hurricanes.

Managing Globally

Talent management will be a critical focus of Hofmeister’s efforts to position U.S. Shell for the next 50 years and build its reputation as a major U.S. company, he says, and that includes recruiting and retaining new staff to keep up with attrition; 70 percent of Shell’s 24,000 U.S. employees are baby boomers in their 40s and 50s.

In his previous role as head of HR for Shell, Hofmeister says he wanted “a globally consistent HR agenda for the world, recognizing that its application had to be locally adapted and managed.” To that end, Shell has developed a global framework for talent management that encompasses recruitment, compensation and benefits, HR information management, and leadership learning.

Shell’s integrated global pro-cesses “work throughout the whole of Shell,” Hofmeister says proudly. “All are focused on today’s business deliverables we are trying to achieve.”

Shell has facilities in 140 countries, and Hofmeister says the company “needs to be developing global nationals around the world so that our future management population is not dominated by any particular nationality” to pursue a diversity of thought.

To aid in such efforts, he advises HR executives to take global assignments. It’s difficult to understand global operations if you haven’t worked and lived internationally, he says. “They can’t be understood by visitors.”

Hofmeister stresses three critical success factors that have worked for Shell and should be the focus at any major organization: Have a succession plan, a talent management plan and a leadership development plan, he says, with each plan serving the future purposes of the organization. “But you need all three. You can’t do just one.”

The Workforce of the Future

A major HR issue for the next 20 to 25 years will be ensuring the availability of future talent, says Hofmeister, and he’s greatly concerned about what he terms a “bipolar future workforce.” In his opinion, the U.S. education system requires a “serious update” to avoid creating a society of haves and have nots, a society in which some children receive an excellent education and others—those in poor inner-city schools—receive a very poor one.

“HR people must address this [issue]. It is missing the boat!” he says. The problem falls under HR’s purview, he insists, because the function is responsible for ensuring the welfare of the workforce. At Shell, he says, the company’s workforce development program is working to improve math and science in the nation’s secondary schools. “We’ve started in six states, and the program will continue to grow.”

According to Hofmeister, HR also has another critical responsibility. He stresses the need for HR to “advocate on behalf of employees and not simply be stewards of the organization. Our people are the reason for our success.”

A Balanced Life

Unlike business leaders who talk about concern for employees but personally model a lifestyle where work/life balance is nearly nonexistent, Hofmeister makes time for personal pursuits.

That’s a tall order, given that his responsibilities require him to burn the midnight oil at times. But even workaholics need a respite now and then. He says executives need to learn, early in their careers, to “compartmentalize” their responsibilities at work and at home. “There must be room for both,” says Hofmeister, “as well as room for their responsibilities to society.”

We all make choices, he says, and he is comfortable that his have been balanced choices. “I have no regrets. All choices have consequences,” he says, and he and his wife “thought about the consequences ahead of the choice,” rather than after the fact.

“I’ve always compartmentalized my time and energy,” he says, “and tried to have invigorating pursuits outside work.”

One of those outside interests is the historic farm and gristmill he owns in Lancaster County, Pa. “This is a deliberate pursuit to take me out of my ‘compartment’ as business leader,” says Hofmeister, “and put me into nature and agriculture.” His farm, he says, provides “a complete refreshment of my otherwise very busy business life, far removed from shareholders, quarterly results and other business dynamics.”

Hofmeister, who grew up in New Holland, Pa., has fond memories of childhood summers spent working on a farm. He’s also interested in historic preservation. These interests mesh as he and his wife work to restore the 18th century mill and convert what is a traditional dairy farm today “back to its organic, non-chemical tradition.”

He is able to visit the farm about three times a year, he says, and one of those visits coincides with an annual event that represents another of his interests—cycling. Each August, Hofmeister participates in a 100-kilometer bike ride over a route that crosses seven covered bridges in the Amish countryside.

Being who he is—the quintessential businessman—Hofmeister and his wife have formed the John and Karen Hofmeister Foundation and incorporated the farm. It’s a working farm, he says, which sells wool from the sheep raised there, as well as corn and other field crops. (The web site is www.limevalleymill.com.) Although restoration efforts are expensive, Hofmeister says the farm has been profitable two out of the last five years.

‘Success Is Fleeting’

Asked to describe his greatest career success, Hofmeister maintains that he’s “not satisfied with anything yet. Success is fleeting,” he says. “Today’s success is tomorrow’s challenge.” Good HR people, he says, can never rest on their laurels because tomorrow’s business needs will be different.

In the highly visible energy business, “everybody in all walks of life is interested in what we do and how we do it,” says Hofmeister. He’s on call around-the-clock because “the refineries never stop. And if the phone rings in the middle of the night, it’s probably an important call,” he says, and one that he must take.

Hofmeister admits that this nonstop responsibility has “given me headaches, it has given me stomachaches, and it has exhausted me physically. So it’s not easy.”

And yet, he says, “I deeply embrace what I do. It gives me joy, fulfillment and the satisfaction of challenge.”

Ann Pomeroy is senior writer for HR Magazine .

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At a Glance: John Hofmeister

Personal: Age 58. Born in Cheverly, Md. Lives in Houston with his wife, Karen. They have two adult daughters.

Current Job: President of Shell Oil Co. and U.S. Country Chair, Royal Dutch/Shell Group, based in Houston, 2005–present.

Previous Jobs: Served as group human resources director at Royal Dutch/Shell Group, based in The Hague and London, 1997–2005; worked at Allied Signal Inc. (now Honeywell International) as vice president, international human resources, based in Hong Kong and Paris, 1995–1997, and as vice president, aerospace human resources, based in Los Angeles, 1992–1995; served as vice president, U.S. human resources, at Northern Telecom Inc. (now Nortel), based in Nashville, Tenn., 1989–1992, and as assistant vice president-human resources based in Raleigh, N.C., 1988–1989; began his career at General Electric, working in several GE facilities from 1973–1988.



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