In the second of a series of interviews with key CEOs, Rod Oram talks with Z Energy’s Mike Bennetts about “Code Red” preparations for the Covid-19 pandemic and the key lessons the company has learnt so far
Over the past few weeks, Z Energy has seen demand for its jet fuel plunge from 20 percent of its sales. Soon they will be minimal, with sharply reduced domestic flights being the only users.
Meanwhile this Monday its retail sales volume of petrol and diesel hit a record high for a non-discount day. Yet, those sales could slump by 50 percent over the next four weeks as the nationwide lockdown causes a sharp economic contraction, says Mike Bennetts, Z Energy’s chief executive.
Normally, fuel companies experience only very occasional, short-lived disruptions on the supply side of their business. But these dramatic, and perhaps lengthy, changes in demand are creating new problems.
For example, crude oil is refined by fractionating it into different products such as petrol, jet fuel, diesel and lubricating oils. A refinery has only limited scope to change the mix of outputs or to switch to a crude with different characteristics. Even so, Z orders its crude four months in advance for the Marsden Point refinery of Refining NZ, the NZX company owned by market investors, Z, BP and ExxonMobil.
Z has 60-days of storage for products based on normal demand. But thankfully it and the other fuel companies will get some respite from production and storage headaches because the refinery is due to start soon a long-planned shutdown for maintenance.
Meanwhile, the plunge in crude oil prices, though abnormally deep and rapid, have been easier to deal with by replenishing its inventory of crude at low prices and passing on the savings to customers.
With the coronavirus epidemic escalating rapidly in China in January, Z activated its crisis management team the last week of January. At that stage Z was at Code White. That held for the next three or four weeks while the company worked through the potential impact of the virus on it.
Two weeks later in mid-February Z moved up to Code Yellow; in early March it moved to Code Orange; and then last Friday to Code Red, the highest of its four stages.
As its challenges grew, so did its readiness. “Along the way, we’ve learnt a lot of lessons,” Bennetts says. For example, it began trialling working from home two weeks ago and ordered some 300 monitors for staff to plug into their laptops to work more effectively at home.
Some three-quarters are in commercial and support roles, which lend themselves to remote working, with an average of some 50 percent doing so over the past few weeks. But the other quarter are in operational roles at storage and distribution facilities which need people present.
Developing more comprehensive communication practices has been crucial for all employees. It has moved, for example, from a written update to staff once a week, to daily half-hour live video ones accessible to all at 3pm. These are recorded so staff can easily retrieve them later if they prefer. Once some semblance of a new normal emerges, these video briefings will likely become every other day.
Z is also using some of its existing online resources in different ways. For example, it has an internal database on which people can seek help from others for their projects and their career development needs. Now this is being tweaked to be a place where people who are over-worked by the new circumstances can seek help from people who have capacity to spare because their normal jobs have quietened down.
When Z hit Code Orange it activated its Crisis Strategic Team. This is working on finance, people, reputation and supply issues with a 30-day to 180-day timeframe, and reports directly to Bennetts twice a week. Meanwhile, the Crisis Management Team is dealing with issues over the five to 10 day timeframe.
Some of the key lessons so far, Bennetts says, are:
– “Crisis manage on three horizons: daily, rolling; 30-180 days; and a year plus, which has a particular focus on how we exit from this as a better company.”
– “Business leaders need to understand that their staff’s personal values completely over-ride business values.” For example, some people are revelling in the crisis for the opportunity to learn, solve problems and to show their initiative; whereas other people are fearful and want routines, stability and the opportunity to devote more time to their parental responsibilities. “Under stress, we go back to our core values. We have to communicate our appreciation” of that diversity.
– “Constantly look for weak signals” such as some seemingly innocuous comment or behaviour that reveals an incipient or deeper problem.
– “We have to do as much crisis leadership as management” to give people the opportunity to take the initiative to contribute creatively.