BUILDING UNION ENGAGEMENT IN

EXXONMOBIL

William R. VickersAugust 2012

Private 2

ExxonMobil in Australia

• Number of employees 1700

• Cumulative investment >$16 billion

• Annual payment to Government $202 billion

• 23 Offshore Oil and Gas Facilities

• Gas and oil Refining facilities onshore

• Distribution Terminals

• Major investment in Gorgon and PNG projects

• Global Corporate Earnings US$41 billion for 2011

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Why build engagement?

• History of “forced” change had mixed results and created baggage

• Productivity and “discretionary effort” maximised when people feel valued

• Conservative: pragmatic not ideological

• Strong safety culture and positive lessons

• Unions are entrenched

• Is it worth it?

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Key Drivers

• A “burning bridge” promotes (temporary) engagement and allignment with corporate goals

• Passionate management leadership and continuity of “message”

• Open and transparent communication with employees

• Business education/literacy

• Building an enduring relationship with influential union officials/delegates

• Do what you say

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The Esso and Mobil Experience

Esso

•Highly unionised since Bass Strait oil/gas field developed

•Profitable business

•Legacy of resistance to change

•Low workforce turnover

•Management turnover

•Workforce insulated from competitive pressures

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The Esso & Mobil Experience

Mobil

•Opportunities created by enterprise bargaining

•Workforce exposed to domestic and international competition

•Continuity of line management

•Senior union leadership alignment with business interests

•Open and transparent communication with workforce

•Management commitment to drive change and acceptance of risk

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“Happy Talk” or Actual Outcomes

• Restructuring and downsizing of Altona Refinery

• Introduction of performance linked pay

• Introduction of annualised salaries

• Annual refinery operator pay reviews tied to non-unionised remuneration system

ALL IMPLEMENTED WITHOUT INDUSTRIAL ACTION, UNFAIR DISMISSAL CASES OR FEDERAL COURT INTERVENTIONS

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Impact of Fair Work Act

• A major shift in bargaining power of unions

• Removal of alternative agreement making options: IFA sham

• IFAs ineffective

• Opportunity for unions to rebuild membership base and “grow their business”

• Major impact on cost of new projects via Greenfield agreement provisions

• Union influence enhanced via expanded scope of agreement content and availability of protected action

• Collective bargaining promoted at the expense of productivity

• FWA appointments have devalued independent and objective expertise

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What Does This Mean for Corporate Relationships With Unions?

• A positive relationship almost obligatory in unionised industry

• Non-unionised workplaces face more pressure to maintain direct relationship with employees

• IR skills gap after an era of declining private sector union membership

• Pressure on line management to exercise leadership in non-familiar territory

• Responsibility on union leadership NOT to abuse post FWA leverage

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Experience Post FWA

• We are not interested in an ideological debate

• No “bonus points” for our business decision to maintain constructive engagement during Workchoices

• Some unions cannot resist short term leverage opportunities

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The Challenge of Major Projects

A Different Set of Rules

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Development Concept

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Our Engagement Initiative

• Poor relationship between Union and lead contractor

• EM Management safety priority

• A legitimate safety initiative was undermined by pursuit of an industrial agenda

• Concession in WA Project Negotiations established precedent

• Fair Work Act provides zero protection

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Esso’s People Strategy: From Adversarial Bargaining to Interest-Based Problem-Solving

• Approach developed independently of IR legislation

• Consistent with long term business focus and approach to management of risk

• Structured problem solving process based on recognition of joint interests

• Why Now?

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“Trying to get to heaven before they close the door”

Bob Dylan

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What is IBPS?

• Parties develop independent negotiation position(s) and fallbacks (ambit)

• Parties use power, influence and “facts” to achieve own desired outcome

• Parties accept, deny or discredit “facts” to achieve own desired outcome

• Parties win, lose or compromise for settlement

• Parties may distort settlement throughout implementation

• Parties agree upon issue(s) to be addressed

• Parties identify shared and separate interests and concerns

• Parties identify options which may address interests or concerns

• Parties agree key Criteria for acceptable solution(s)

• Parties develop options into draft solution(s)

• Jointly document, plan and implement best solution(s)

Adversarial Bargaining versus Interest-Based Problem-Solving

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How we apply the Process

SCHNEIDERAUSTRALIACONSULTING

Building High performance Organization's

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Outcomes: Report Card

• Improved relationships: transparent communication

• Measurable business gains limited

• Management turnover inhibits change

• Culture change in a profitable, low turnover company a marathon not a sprint

• Extensive use of contractors adds significant complexity

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Barriers to Building Engagement

• History of Adversarial Industrial Relations

• Career Shop stewards

• Management turnover in key leadership roles

• Cultural norms : “win/lose” mentality

• Risk aversion : short tem expediency

• No obvious imperative to drive change

• Traditional methods delivered union gains

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Agreement-Making and Change Management

Keys to success

•Be clear on overall positioning of negotiations within business strategy

•EBAs should be an enabler of change not a barrier

•Articulate business requirements and performance objectives to all employees

•Build internal management and union alignment

•Set realistic expectations

•Allocate and manage resources/timelines

•Don’t take first-line Supervisors for granted

•Competitive Remuneration Package

Private 22

A Warning from Bob Dylan

UNION SUNDOWN

Well, my shoes, they come from Vietnam

My flashlight’s from China

My tablecloth’s from Cambodia

My belt buckle’s from the Amazon

You know, this shirt I wear comes from the Philippines

And the car I drive is a Chevrolet

It was put together down in Mexico

By a guy makin’ 30 cents a day

Well, its sundown on the union

And what’s made in the USA

Sure was a good idea

‘Til greed got in the way

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