Description
Organizational growth and survival relate to change, which is inevitable, especially
within an economic environment that is in constant evolution, such as Saudi Arabia. The
volatility of market conditions, changes in technology, and fluctuating regulations require the
company’s continued observation. One such organization is Saudi Aramco, the largest oil
company in the world and a major corporation in the Kingdom of Saudi Arabia. Over the years,
Aramco has changed many times, mainly regarding sustainability and renewable energy
investments. This change had to be made, especially concerning systems and structures.
Organizational Systems and Structures at Saudi Aramco
Saudi Aramco is regulated by most large corporations’ usual hierarchal group structure.
The organization is centralized; its chain of command is well-defined, and the roles of its
different management levels are allocated. Its structure is divided into many divisions, such as
exploration, production, refining, marketing, and distribution, in which each separate function is
facilitated or governed (Aramco, 2024). Aramco also has a matrix system that blends functional
and divisional organization designs. Teams work on significant projects across departments
while specializing in their expertise.
One unique feature of the organizational system adopted by Aramco is the intense use of
bureaucratic measures to guarantee operational efficiency and adherence to various national and
international regulations. This bureaucratic setup was implemented to govern such massive
operations in the oil and gas industry, which conventionally were aligned with ensuring
efficiency at the oil extraction and refining level. However, as Aramco attempted to diversify
into renewable energy, its systems and structures presented opportunities and challenges for the
leaders managing the change to this new vision.
How Organizational Structures and Systems Affected the Change
The prevailing hierarchical and bureaucratic systems at Saudi Aramco enabled different
leaders to attempt to realize change by presenting challenges and opportunities (Albalwi, 2022).
For example, the well-organized chain of command and the well-institutionalized processes
enabled the new communication strategy to be spread quickly throughout the organization.
However, this system generated significant friction during the process since the rigid structure
highly disrupted employees from the bottom and middle layers and led the leadership to assume
the flexibility necessary for radical transformation.
Challenges of Bureaucracy
One of the primary problems with the existing structure of Aramco was that it was
bureaucratic and suitable for the well-behaved and orderly processes of producing oil. Naturally,
bureaucratic organizations resist change because they work through a system of rules and set
ways of doing things (Krane et al., 2021). For instance, it was challenging for those engineers
and managers who had dedicated their careers to oil extraction to shift into new roles centered on
solar or wind energy projects.
Opportunities from the Hierarchical Structure
While bureaucracy-built barriers, it allowed the hierarchical structure of Aramco to create
a basis for good communication. The top-down decision-making process allowed the change
leaders to communicate rapidly from top management downwards the new vision and strategic
goals. The commitment of the senior management team to the transition into renewable energy
ensured a trickling effect that would, in time, permeate through all structures of the company
despite initial resistance (Albalwi, 2022). The matrix structure allowed cross-functional
collaboration through innovation teams focused on renewable energy projects to some extent.
Systems Changed to Prepare for the Change
A shift toward sustainability required changing some of Aramco’s systems and processes.
For example, new project management systems had to be devised to ensure the intricacy of
renewable energy projects was managed entirely differently from conventional oil production
operations. These systems were necessary to support collaboration between engineering,
environmental science, and finance departments.
Investment in Training and Development
One key system change was the addition of programs in renewable energy and
sustainability training and development. Aramco understood that its people were well-versed in
oil production, but other skills were required to manage projects in renewable energy. Thus,
serious investments were made in education and training internally and through academic
collaborations. Technical training in renewable energy, especially solar and wind technologies,
was imperative to prepare the workforce for new responsibilities (Deszca et al., 2020). This
facilitated the transition and minimized resistance by making the employees active participants in
the company’s strategic shift.
Digital Transformation Initiatives
Another major change included the introduction of digital technologies that would
enhance operational efficiency and innovation in renewable energy projects (Fu et al., 2022).
Saudi Aramco was among the leading investors in digital transformation initiatives, such as
using artificial intelligence, big data, and the Internet of Things to optimize traditional and
renewable energy operations. Technological advancement helped the company manage the
increased complexity of renewable energy projects more efficiently.
Impact of Organizational Structures and Systems on Uncertainty and Complexity
Change inherently brings uncertainty and complexity along with it. Saudi Aramco was no
different, shifting operations into a renewable direction. This held a particular challenge to it, as
it had to keep up its operations as the world’s largest oil producer while venturing into new
energy markets. Thus, organizational structures and systems are especially relevant in managing
uncertainty.
Increasing Complexity
The traditional Aramco organizational systems were adapted for oil and could not be
fully prepared for the complexity associated with renewable energy projects. For instance,
renewable projects may need more cross-functional collaboration and adaptability than
extracting oil. The rigid structure of the company made things a little more difficult initially, as
the departments were not used to cooperating on such a wide range of initiatives. Further,
introducing new systems, such as project management with digital platforms and collaboration
tools, helped mitigate some of this complexity (Deszca et al., 2020). However, the scale of
Aramco’s operations meant integrating new systems into old structures was a slow process.
Reducing Uncertainty
Despite the complexity challenges, Aramco’s hierarchical structure minimized
uncertainty in clearly articulating the direction of senior management. Once top management
committed to the renewable energy strategy, such a choice eliminated ambiguity about the
company’s long-term goals. Employees could focus on aligning their efforts with the higherorder objectives of the organization even as day-to-day operations were facing radical
transformation.
Conclusion
Saudi Aramco’s journey toward renewable energy underlines the challenges and
opportunities of organizational change within a large hierarchical company. The structures laid
over the years aided the traditional operations of oil but, on the other hand, created some
resistance and complexity against the new move toward sustainability. The company’s
hierarchical structure, with a distinct line of authority, helped the organization minimize
uncertainty, while the matrix system allowed the interaction or collaboration of cross-functional
teams.
References
Albalwi, W. M. (2022). Corporate Social Responsibility and Impression Management:
The American Arabian Oil Company (Aramco), 1932–1974.
Theses.ncl.ac.uk.
Aramco. (2024). Our leadership. Www.aramco.com.
Deszca, Ingolis, & Cawsey. (2020). Organizational Change: An Action-Oriented Toolkit.
Chapter 5: Navigating Change Through Formal Structures and Systems. SAGE
Publishing. 4th Edition
Fu, Q., Rahman, A. A. A., Jiang, H., Abbas, J., & Comite, U. (2022). Sustainable Supply Chain
and Business Performance: the Impact of Strategy, Network Design, Information
Systems, and Organizational Structure. Sustainability, 14(3),
1080.
Krane, J., Wallace, S., & Wilson. (2021). The Bottom of the Barrel: Saudi Aramco and
Global Climate Action.
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