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Sunday Telegraph: Mr Mobile’s Shell shock

Sunday Telegraph: Mr Mobile’s Shell shock

“Jorma Ollila, the new chairman of Shell, is one of the world’s most admired businessmen. But how will he adapt to the oil giant’s bureaucracy…”: “Shell is still dealing with the consequences of last year’s scandal of the over-booking of its oil and gas reserves. That debacle led to the departure of its three most senior executives, including Sir Philip Watts, the chairman”

Sunday 7 August 2005

(Filed: 07/08/2005)

Jorma Ollila, the new chairman of Shell, is one of the world’s most admired businessmen. But how will he adapt to the oil giant’s bureaucracy, having come from fast-growing, unhierarchical Nokia? asks Sylvia Pfeifer

British teenagers voted him the most creative thinker of modern times in a poll conducted last year by the Design Council. It was an unexpected accolade from text-obsessed 14-to-18 year-olds for Jorma Ollila, the chief executive of Nokia, the Finnish mobile phone manufacturer.

However, he is unlikely to prove quite so appealing to the youth market in his next big job, as chairman of Royal Dutch Shell.

When it announced his appointment last week, the oil giant was breaking with a century of tradition. The 54-year-old Finnish businessman will be the first non-Dutch or non-British person to chair the company, which last month also unified its corporate and board structures.

So after a long search by headhunters Egon Zehnder, who were supervised by Lord Kerr, the former head of the Foreign Office who is Shell’s deputy chairman, why was Ollila the winner?

“The man has vision at his fingertips,” says a businessman with a close knowledge of the process. “He was the best man for the job because of a staggering track record of success and remarkable focus.”

Lord Kerr says: “We were looking worldwide for a chairman with international standing, a global outlook and proven success in managing a complex organisation. In Jorma Ollila we found all these qualities, and more.”

Ollila’s appointment as non-executive chairman of the oil giant came just three days after he announced he was stepping down as CEO from Nokia, although he will remain as part-time chairman at the group.

His selection, given the green light on Thursday morning, ends a nine-month process that scrutinised people of a variety of nationalities from governmental, regulatory and business backgrounds. Ollila was viewed as the outstanding candidate from a final short-list of six.

He is a legend in his homeland, where he transformed Nokia from a little-known local manufacturer of rubber boots and paper products into a household name. He became chief executive in 1992 when the company had a market capitalisation of just €150m (£104m). Today its market cap has grown to a staggering €62bn.

However, the lustre has slightly gone off Nokia’s reputation over the past couple of years: it has been perceived by mobile operators as being behind the curve in developing 3G and next-generation handsets and is also thought to have lost its design edge.

The high point of Ollila’s tenure was probably in 1998 when Nokia overtook Motorola as the world’s largest mobile phone manufacturer. Today, three in every 10 mobile phones sold around the world are Nokias.

Even so, a colleague who worked closely with him over the past 20 years describes Ollila as “a very determined person” with “a very good eye for people”.

But for all his talents, Ollila won’t find he has taken a sinecure. He will be moving from an innovative telecoms company that has little truck with hierarchies, to a famously bureaucratic business with a strong sense of its own history.

Shell directors insist that their reorganised company is much less stuffy and cumbersome than it was, noting that the unification of the structure has done much to cut out unnecessary layers of management. That said, the company’s headquarters remain redolent of a government department rather than the centre of a cutting-edge, entrepreneurial business.

Furthermore, Shell is still dealing with the consequences of last year’s scandal of the over-booking of its oil and gas reserves. That debacle led to the departure of its three most senior executives, including Sir Philip Watts, the chairman.

Under Jeroen van der Veer, the new chief executive, the company embarked on a sweeping corporate overhaul, culminating in the merger of its British and Dutch arms.

If that has restored internal confidence, van der Veer is well aware that the company faces tough operational challenges. It lags behind rivals like BP and ExxonMobil in terms of production growth and last month revealed a $10bn cost overrun at Sakhalin 2, its hugely important Russian project.

According to a businessman close to Shell, Ollila’s talent for managing people will stand him in good stead.

“This is a guy who is very good at managing people,” he says. “If you look at the history of Nokia, you discover that he hand picked the guys who have been the movers and shakers there.”

Meanwhile shareholders last week welcomed Shell’s choice. “It’s an interesting appointment. He obviously did a great job over the years at Nokia,” says William Claxton-Smith, a director at Insight Investment. “He’s got global experience and some experience of dealing with governments.”

Other shareholders also said they were not concerned about Ollila’s lack of experience of the oil industry, pointing out that Shell’s rival, BP, has fared well under the chairmanship of Peter Sutherland, who has a banking background.

The role is expected to take up two to three days a week of Ollila’s time, and will be mainly based in The Hague, Shell’s headquarters. Ollila will also spend time in London where the company has its stockmarket listing. He will be paid £500,000 a year.

Although his new job does not start until next June, Ollila – who is married with three children, is a keen tennis player, and shuns publicity – couldn’t be more enthusiastic to get started.

In Finland, Nokia is often equated with the country as a whole. As for Shell, it’s one of those old-established multi-nationals that has much of the mentality of a country in its own right.

So perhaps, after all, it’s a case of plus ça change for the flying Finn.

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