Aurelio Di Fresco - Constructing Excellence

Management and Construction OperationsInternal Benchmarking SystemAurelio Di FrescoSnamprogetti

G R O U PSnamprogettiMACOP/BPOKPI Launch in the NorthWorldwide Benchmarking & KPIs in Construction ConferenceOrganised in Partnership with Manchester City CouncilPresentsSnamprogetti (ENI Group)Management and Construction OperationsInternal Benchmarking SystemInternational case – studypresented by:Aurelio Di FrescoSnamprogetti Best Practices Office ManagerTuesday July 19 2005 – City of Manchester Stadium

G R O U PENI GROUP & COMPANY PROFILEEni is an international company active in around 70 countries with a staff of about 71,500 employees.The company is listed on the Milan and the New York stock exchanges (NYSE).The operating activities are:•oil• natural gas• electricity generation• engineering and construction• petrochemical businessThe three main business areas are:• Exploration & Production• Gas & Power• Refining & Marketing.Eni’s 2004 results:• consolidated revenues, of around €58.3 billion• generated a net profit of €7.3 billion• return on capital employed of 18.8%.The company has also adopted a code of practice in its relations with its stakeholders and iscommitted to the development of guidelines and policies pertinent to corporate responsibility, toinvesting in people and their valorisation and to the pursuit of sustainable development throughthe integration of environmental and social considerations in its growth processes.SnamprogettiMACOP/BPO – BENCHMARKING

G R O U PENI GROUP & COMPANY PROFILESnamprogettiMACOP/BPO – BENCHMARKING

G R O U PENI GROUP & COMPANY PROFILESnamprogettiMACOP/BPO – BENCHMARKING

G R O U PSNAMPROGETTI COMMITMENT TOWARDSTHE BENCHMARKINGSnamprogettiMACOP/BPO – BENCHMARKING

G R O U PG R O U PSnamprogettiGCIIBENCHMARKINGDefinitionECIR O U PENIMACOP/BPTBenchmarking is thesystematic process ofmeasuring one’s performanceagainst recognized leaders forthe purpose of determiningbest practices that lead tosuperior performance whenadapted and utilized.Benchmarking is thepractice of being enoughhumble to admit thatsomeone else is betterthan us in doingsomething and enoughwise to try to comparehim and directlyovercome him.A continuous andsystematic process ofcomparison of theorganization, functionsand working processversus internationalexcellence performances,not only with the aim toequal them, but also toovercome them.MEASURING IS THE PRECURSOR OF THEWORKING PROCESS VALORISATIONSnamprogettiMACOP/BPO – BENCHMARKING 8

G R O U PBENCHMARKING LEVELSInternalSingle companyCompetitivenessConcurrent CompaniesIt’s used within anorganization in order tostimulate the continuousimprovement in everyDepartment or TechnicalUnit.Looks at the directconcurrent Companieswith the aim to identifytheir strong and weakaspects .BENCHMARKINGBy SectorField of ActivitiesTries to define themarket trends withinthe business sectorPLANACTCHECKDOSnamprogettiMACOP/BPO – BENCHMARKING 9Best in ClassLeader CompaniesIt aims at identifyingthe leader Companiesregardless theirbusiness sector inwhich they operate.

G R O U PDoing Benchmarking means:METHODOLOGY1. To fix the KPI2. To Evaluate the actual performance of an activity orworking process.3. To fix improving aims.4. To identify the actions useful to reach the aim5. To do what you planned6. To verify what you did and the results you obtained7. To re-start the cycleDeming CycleMETHODOLOGY MANUALPLANACTDOCHECKMETHODOLOGY CARDMETHODOLOGY DESCRIPTIONPROCEDURESTOOL:Operating manual anduser manualTRAINING MATERIALSnamprogettiMACOP/BPO – BENCHMARKING 10

G R O U PA TWO PHASES CYCLING ACTIVITYPHASE 1 PHASE 2PREPARATORYCYCLEINTRODUCEDATAMEASUREEVALUATE THEAPPLIEDSOLUTIONPLANANALYSERESULTSPLANACTDOGATHERANALYSEAPPLYTHE SELECTEDSOLUTIONCHECKIDENIFY THE GAPADAPTIDENTIFYTHE IMPROVINGACTIONSSnamprogettiMACOP/BPO – BENCHMARKING 11

G R O U PPHASE 1 - PREPARATORY CYCLEMEASURE• Identify what benchmarking is to be appliedto. So that, identify:Key Perfomance IndicatorsPLANGATHER• Identify work process’ main actors, roles andresponsibilities. Who does what?• Determine the plan and the timing of theactivities. How long?• Develop the tools for the data collection.How?• Collect data.• Introduce the gathered data into the tool andelaborate them.ANALYSEADAPT• Study the obtained results.• Identify the actual performance index pereach KPI: actual KPI / KPI objective• Do the identified KPI really cover the needsfor which they were selected?SnamprogettiMACOP/BPO – BENCHMARKING 12

G R O U PBENCHMARKING CYCLEDATA COLLECTIONAND ANALYSISMEASURE THE GAP• Data collection, report planning, resultspresentation• Compare the results with the ones of thepreparatory cycle in order to estimate theirsteadiness• Quantify the gap following the fixed aimIDENTIFYIMPROVING ACTIONSAPPLY THESELECTED ACTION• Identify improving areas• Identify the involved functions• Define the aims• Plan the interventions• Give the right operative dispositions• Apply what has been planned• Establish interventions’ check times andmonitor their executionVALUE THEAPPLIED ACTIONSnamprogettiMACOP/BPO – BENCHMARKING 13• Verify the obtained results:ABIf the values are satisfactory you mustmaintain and improve themIf the values are not satisfactory youmust elaborate new solutions.

G R O U PTOOL AND REPORTINGProject KPIFilterElaborazione datiREPORTING EXAMPLESData elaborationINDEX ANNUAL TREND12,0%11,0%OBIETTIVOPROGETTISTATO PROGETTI ALLA CUT OFF11,1%CUT OFF8%KPI - TREND (VALORE MEDIO PER CUT-OFF)VALOREOBIETTIVO10,0%9,0%9,1%STATUS PROJECTS8,0%7,0%7,4%6%6,1%6,2%6,0% 6,0% 6,1%6,3%6,2%6,0%5,0%4,0%4,3%5,7%4,5%6,0%4,6%6,1%CUT OFF TREND4%3,0%3,0%2,0%CR 40 DAOGO FINERMantovaRas LaffanTrain 5Bonny Island Taranto Sannazzaro Mellitah Ain Dar &ShedgumBrindisiSur Oman2%SETTEMBRE 03 DICEMBRE 03 MARZO 04 GIUGNO 04 SETTEMBRE 04 DICEMBRE 04 MARZO 05SnamprogettiMACOP/BPO – BENCHMARKING 14

G R O U PSAMPLE OF REPORTINGPROCO INDICES7° CUT-OFFSnamprogettiMACOP/BPO – BENCHMARKING 15GR O U PSnamprogettiMACOP/BPO

G R O U P8%KPI - TREND (VALORE MEDIO PER CUT-OFF)VALOREOBIETTIVOKPI6%4%6,3%6,2%6,1%6,0% 6,0% 6,1%MEDIA OF INDICES AT CUT OFF DATESVSOBJECTIVE:TRENDmetricobjective2%SETTEMBRE 03 DICEMBRE 03 MARZO 04 GIUGNO 04 SETTEMBRE 04 DICEMBRE 0412%OBIETTIVOPROGETTISTATO PROGETTI ALLA CUT OFFNOTES10%8%6%4%2%10,4%9,2%INDEX OF EACH PROJECT AT MARCH 8,1% 20056,1%4,5%CUT- OFF DATE4,5%2,3%VS6,1%OBJECTIVE5,8%5,1%7,4%0%CR 40 DAOGO FINERSnamprogettiMantova Bonny Island Taranto Qatif ook Sannazzaro Mellitah Ain Dar &ShedgumMACOP/BPO – BENCHMARKING 16Ravenna Brindisi Sur OmanG R O U PSnamprogettiMACOP/BPO

G R O U P12%10%8%6%Entra AinDarKPI - TREND (VALORE MEDIO PER CUT-OFF)EntraBonnyEntraSannazzaroEntraPrioloEsceFerreraVALOREOBIETTIVOEsceRavennaQatifEntra RasLaffanPROCO 3Management of Change OrdersAPPROVED PROCEEDS FROM C.O(%)4%CONTRACT PROCEEDS AS PERINITIAL BUDGET2%0%-2%1,8%1,4%0,9%0,5%0,6%0,1%0,3%SETTEMBRE 03 DICEMBRE 03 MARZO 04 GIUGNO 04 SETTEMBRE 04 DICEMBRE 04 MARZO 055%10,0%9,0%OBIETTIVOPROGETTISTATO SINGOLI PROGETTINOTE8,0%7,0%6,0%5,0%4,0%3,0%2,0%1,0%0,0%-1,0%-2,0%5,0%CR 40 DAO GOFINERMantovaRas LaffanTrain 5Snamprogetti0,0%2,8%0,7%2,6%1,7%Bonny Island Sannazzaro Mellitah Ain Dar &ShedgumBrindisiMACOP/BPO – BENCHMARKING 17Sur Oman0,0%Sono stati esclusi i progettiEnipower perché buona partedi change orders sono di fattoopzioni contrattualiG R O U PSnamprogettiMACOP/BPO

G R O U P2,01,8KPI - TREND (VALORE MEDIO PER CUT-OFF)Tolto AIN Dar e QatifVALOREOBIETTIVOPROCO 4Profitability of Change Orders1,61,41,21,27 1,27 1,301,211,33 1,321,37APPROVED PROCEEDS FROM C.O.1,00,8APPROVED COSTS OF C.O.0,60,40,20,0EntraBonnyEntra AinDarSannazzaroEntraPrioloEsceFerreraEsceRavennaQatifSETTEMBRE 03 DICEMBRE 03 MARZO 04 GIUGNO 04 SETTEMBRE 04 DICEMBRE 04 MARZO 051,352,01,51,0NOTE1,71OBIETTIVOPROGETTI1,24STATO SINGOLI PROGETTI1,641,091,251,431,31NOTE• Ain dar: non attendibileperché non presenta verie propri c.o. macompensazioni di costotra IK e OOK0,5CR 40 DAO GOFINERSnamprogettiMantova Bonny Island Sannazzaro Mellitah Ain Dar & Shedgum BrindisiMACOP/BPO – BENCHMARKING 18G R O U PSnamprogettiMACOP/BPO

G R O U PBENCHMARKING ANNUAL PLANNINGSTART DATE1ª CUTOFF DATE2ª CUTOFF DATE3ª CUTOFF DATE4ª CUTOFF DATE3rd MONTH6th MONTH9th MONTH12th MONTHDATA COLLECTIONRESULTS ANALYSISAND HIGHLIGHTS1st COMPARISONEXPECTATIONVS RESULTSPRESENTATION KPIOBTAINED ANDDEFINITION OF KPIOBJECTIVE FOR THENEXT YEAR3 MONTHS 3 MONTHS 3 MONTHS 3 MONTHS1 YEAR – COMPLETE CYCLESnamprogettiMACOP/BPO – BENCHMARKING 19

G R O U PBENCHMARKING ACTIVITY FACILITATIONSManagement’s firm and precise commitmentRealize process’ importancePrecision in data collectionCollectivity Attention to the group’s workIdentify the difficulties incurredShare the resultsSnamprogettiMACOP/BPO – BENCHMARKING 20

G R O U PTROUBLES IN BENCHMARKING ACTIVITYLittle interest by managementUnderestimate the importance of the processSuperficiality in data collectionIndividuality Attention only to one’s own workHide difficulties incurredNot to share one’s own knowledgeSnamprogettiMACOP/BPO – BENCHMARKING 21

G R O U PADVANTAGESWISHED BENEFITSTANGIBLEGAINED BENEFITSIncreasing of project’s controlabilityA conspicuous data collection thatconstitutes a firm datum-point for theIdentification of benchmarks objectiveSpreading of benchmarking processand systematic sharing of thetreated results (especially bid phase)WISHED BENEFITSIncreasing of self evaluationin order to single outimprovement opportunitiesNOT-TANGIBLEGAINED BENEFITSIncreases the sensibility through dataquality which has to be supplied in order toassure true performance indexSnamprogettiMACOP/BPO – BENCHMARKING 22

G R O U PADDITIONAL ADVANTAGESThe collection of information feeds a data base which gives uptodateinformantion on the performance of each project worldwide.Through the setting of a standardized procedure of data collectioncomparison is allowed between several projectsStrengths and challenges can be easly identifiedTargets can be set at corporate level and implemented throughout thestructureStaff are kept informed and focus on the set quality and performancegoalsInternal benchmarking provides datas which can be used for externalcomparison of performance and further improvement of processesKPI should led to excellenceIdentifing strenght and weakness of the organizationIncreasing profittability of the projectsreducing costs of redoing worksChanging the mentality and culture.SnamprogettiMACOP/BPO – BENCHMARKING 23

G R O U POn be half of Snamprogetti and ENI GROUPI wish to thank all of you for the kind attentionBefore closing my interventionI wish to share with you what you should not do with the KPI outputif you don’t want to lose the provenimplementation benefits of this Best PracticeSnamprogettiMACOP/BPO – BENCHMARKING 24