The oil business may be dominated by Big Oil behemoths like ExxonMobil and British Petroleum, but in an industry that large, some of the smaller players are pretty big, too. With $47 billion in assets, $15.9 billion in 2007 revenue and operations around the globe, Anadarko Petroleum is a leading independent oil company. Since 2003 it's been led by chairman and CEO James Hackett. In the latest in his series of interviews as part of the Kaplan-NEWSWEEK M.B.A. program, NEWSWEEK Chairman Richard M. Smith spoke with Hackett about his career and the challenges facing his industry. Edited excerpts:
SMITH: You've been involved in a lot of mergers and acquisitions. What are the strategies to making these deals work?
HACKETT: You've got to take very seriously the cultural characteristics of the combined enterprise. A lot of people underestimate what's going to be required to put groups of employees, managements and boards together. I teach a course on mergers and acquisitions, and it's a constant reminder, at least in the theoretical literature, that there's a much greater chance a merger will fail. So you've got to be very careful about not convincing yourself that something is magical when it truly isn't.
What's Anadarko's edge versus the integrated oil majors?
It's speed and creativity. We feel like our technology is almost equal to all of them. We can go in after a discovery and bring production on a bit faster and it'll tend to be less expensive.
You have a reputation as a good listener, but how do you ensure that people are telling you the truth?
The further you get up in an organization, the tendency is for people to tell you what they think you want to hear or that they should be promoted. This has a lot to do with values—if you hire people who don't view that as an important definition of self, you have a heck of a lot better chance of actually achieving what you want, which is that the organization comes first. We do 360-degree reviews of our senior management team, and I tell people the feedback they get from their subordinates is more important than the feedback from their peers or supervisors. You can fool your boss, but you can't fool your subordinates for very long.
Is it true you charge $5 any time someone is late to a meeting?
It's true. It's actually for my own benefit as much as anybody's. As you go up in an organization, you tend to think people should be able to wait on you. The truth is everybody's time is just as important. So we make people pay and then we buy pizza or we give the money to charity.
Do you remember your worst boss?
Absolutely. When I was probably 28 years old, he told me I was too nice to get ahead. I rejected the notion that being nice was unacceptable. He just wanted people to be tough and mean, and I don't accept that as a premise in how you lead—in fact, it works less well now than it did back then. But the good bosses I've had were phenomenal, and I've had a lot of them.
What's the toughest part of being a boss?
Letting people go. That's the toughest thing you ever do in life. I try to tell people who are learning to do it that we're all going to be faced with it inevitably. Often it's because the business outgrows an employee, or their personal situation changes and makes them less motivated. You can justify why someone who's not performing ought to be moving on, that it's better for them. But more importantly, if you don't eliminate that one person, nine others will suffer … So you have to let them go without destroying their ego, but by actually telling them some of the reasons this is not working out, and try to help them financially as best you can.
When most people think of the oil and gas industry, they think of big profits. How does that affect you as CEO of a major company?
I think what's happened in this country with regard to energy is an absolute travesty. I go around the halls of Congress and find that we're viewed the same way as the tobacco industry is. Nothing could be more diametrically opposed to what the truth is. Other than clean air, clean water and abundant food, there's nothing more important to the physical existence of humanity than energy. It's always been that way, and it always will be … We'd prefer for oil to be in the $40 range. We don't like what [high prices] do to consumption [or] to the politics of the world … But I think our industry doesn't get enough credit. We've got a lot of voluntary programs going on that address greenhouse-gas emissions. We're committed to doing things right environmentally. But at the end of the day it is an extractive industry. You're not going to get away from the fact that you're drilling holes in the ground to get at energy resources. That's the only option we have in the world today.