Friday, Aug 05, 2005

It would be tempting to think that what made Finland's Jorma Ollila so attractive as a chairman of Royal Dutch Shell was that he is neither British nor Dutch.

Certainly, his neutrality will be an asset in the cultural battleground which is the world's third-largest oil company.

But, at a company digesting huge change and facing many challenges, what will count will be the fact that he has proved to be one of Europe's leading industrialists.

He led the transformation of Nokia from a little-known Finnish conglomerate making everything from Wellington boots to televisions into the world's leading mobile phone manufacturer, operating in 140 countries. And this he achieved in six years.

Analysts say Shell badly needs a hands-on non-executive chairman who will drive the transformation of the old, cumbersome process of management that led to last year's reserves scandal and the massive cost overruns and delays Shell announced this year.

The oil industry - which suffers from a workforce with the average age near 50 and needs a serious technical breakthrough to tackle the task of producing oil in ever more difficult places - needs new leaders with fresh thoughts, industry executives say.

Moreover, an increasing proportion of the world's oil production is moving to within the Organisation of the Petroleum Exporting Countries, many of whose members are relying on service companies such as Halliburton and Schlumberger rather than on international oil companies such as Shell.

Many in the industry believe that deep pockets, advanced technology and the ability to handle big complex projects are the skills international oil companies must deploy to win contracts.

This will be made more difficult by the surging costs of equipment as rigs become scarce.

Meanwhile, national oil companies from consuming countries such as India and China are becoming more aggressive competitors, while national oil companies from producing nations that form partnerships with international oil companies, such as is the case inVenezuela and Angola, are demanding more of the windfall from high oil prices.

If indeed, as a person close to Shell says, "he is looking for a challenge and he is excited about the big stage of Shell", he has found what he was after.

One of Mr Ollila's first tasks is expected to be a complete revamp of Shell's board. As the company's Dutch and UK boards were amalgamated, board members agreed that all the non-executives would step down within about two years to give Shell a fresh start, one executive close to the board says.

Mr Ollila, 54, is not short of boardroom experience but Shell was drawn to him by his industrial pedigree.

He joined what was then an industrial conglomerate in 1985, having graduated from his technology studies and spent eight years invarious roles at Citibank.

In 1992, he took over as chief executive of a company that made products as far removed from phones as tyres. In the job prior to that, he had run the mobile phones business and proceeded to put the business at the core of his transformation strategy.

In pursuit of his vision, he surrounded himself with four trusted managers, who became known as "Jorma's gang", and embarked on disposals and investment.

Six years later, this saw Nokia knock Motorola of the US off its perch as the largest mobile phone-maker.

Shell was especially impressed by the ability to spot and apply technical breakthroughs that he developed along the way. The fact that Nokia came to operate in about as many countries as Shell also helped.

Although protective of his private life, Mr Ollila used the media in his early days in charge at Nokia to get his vision for mobile communications across.

In later years, he became more media-shy but internally his low-key management style played well, often rubbing shoulders with employees in the staff canteen.

The challenges that Mr Ollila will face at Shell - a more mature, divided and less consumer-oriented company than he is used to - will be very different from those he faced at Nokia. And, of course, he will be non-executive chairman, not chief executive.

For Shell, he is said already to have a vision but will use the time before he starts his new job, in June of next year, to learn more about the company.

That should then leave him almost a decade, before the company's mandatory retirement age kicks in, to make the second big transformation of his career - or so the board of Shell, which unanimously voted for him, hopes.

By CAROLA HOYOS and MARK ODELL

Copyright The Financial Times Ltd 2005. Privacy policy.