The McKinsey Reports in Shell de Venezuela: Restoring Equality and Logic of Line and Function Authority in a Latin American Oil Firm during the 1950s

Alejandro E. Caceres

This paper analyzes the efficiency study performed in Shell de Venezuela, a Latin American subsidiary of oil multinational Royal Dutch Shell Group, by management consultancy firm McKinsey & Co. during the second half of 1956. Main focus is to study the coordination issues faced by oil multinationals during their geographical expansion and how they attempted to solve them. These efforts should be viewed as a continuum of attempts by its management to solve coordination issues rather than isolated events. This paper argues that Shell de Venezuela, an organizational and cultural microcosm of Royal Dutch Shell Group and its largest oil exporting operation, experienced coordination issues regarding its line-staff-function organization since 1940s. By performing organizational adjustments starting in 1945, and finally implementing the recommendations of McKinsey in 1956 and 1957, Shell de Venezuela was able to improve its line-staff-function organization with clear-cut accountability and responsibility, and solve inequalities arising from interpretation of line and functional authority.