Case Study: Shell Ties Performance on Strategic Priorities With Executive Compensation
Earlier this year, the CBC reported that Shell was tying their executive compensation to the company's overall performance to carbon footprint.
"We have to be at the forefront of the transition. By the middle of the century, you want to look at a portfolio that is really fit for that future," Shell CEO Ben van Beurden said.
With the increased volatility of the price of oil, one could see why Shell would be looking at tying a KPI into their bonuses and moving to a more sustainable source of energy. There are a few reasons why Shell might make such a significant shift to their strategic plan long term, and it might not have anything to do with the environment.
What are some of the reasons Shell would tie performance to carbon output?
- Decrease reliance on fossil fuels
- Better corporate citizenship
- Increase innovation
- Share holder appeasement
- Better competitive position
According to the article it still has a long way to go before it makes significant impact to the Paris climate targets, BUT it will certainly create some changes to the way Shell does business.
Sustainability aside, Shell is adopting " Decreased Carbon Emission" as a strategic priority to help them move forward in their vision of the future. This strategic priority is measurable, and because there is a measure, the company can take steps in line with getting closer to their target.
An action plan to move the needle on their targets would be reducing the flaring of their excess towers:
"In the near term, Shell aims to reduce the burning of excess gas from oil fields, known as flaring, and lower methane gas leaks from thousands of miles of pipelines. Up to 70 per cent of Shell's carbon emissions could be reduced by this drive", the CEO said.
(Visit here for other examples of strategic priorities and KPIs)
Once they set the strategic priority for their organization, along with the right motivations and targets for the initiative, then they start taking actions that will create progress towards them.
Although the specific target was un-determined, it's clear that they have put their money where their mouth is by aligning bonuses with achieving one of their core strategic priorities.
What high level strategic priorities would have an impact on your whole organization moving forward?
How can you measure them?
What actions can you take to move that initiative forward?
Are they in line with your vision and purpose?
Learn how to create strategic priorities with your team, or learn how to guide your team through the process with our complete Strategic Planning Starter Kit: