Full Project – The impact of stakeholders’ participation in decision making and organizational commitment

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CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The development of any nation depends on a very large extent of the business activities being carried out therein and the business activities are owned by certain individuals which in turn depends on their employee’s performance and effective managerial decision making process. Decision making is a central aspect of virtually (almost) every management and business activity. Important decisions are not only made by managers and entrepreneur, but also by the consumers of goods and services, and by the business rivals, partners and employees.

The ability to understand how decisions are made and to predict, guide and improve those decisions will be an invaluable part of every manager’s tool box. In any decision situation, the decision maker is concerned with choosing from among the available alternative course of actions. If the consequences of each choice are known with certainty, the decision maker can easily make decisions. But most of real life problems, the decision maker has to deal with situations where uncertainty outcome prevail and live with the consequences. Decision making does not have to be done in the dark that is why this study seek to examine the application of linear programming in enhancing decision making.

With the basic understanding of stakeholder, it can be defined/explained as a group that has a benefit in an organization and can either affect the operation of the business or be affected by the operation of the business at a certain environment at a certain time.

Bustos (2019) stated that a stakeholder is defined as an individual or group that has an interest in any decision or activity of an organization. He further pointed that stakeholders can be internal or external to an organization. He asserted that internal stakeholders are people whose interest in a company comes through a direct relationship, such as employees, ownership, or investors. External stakeholders are those who do not directly work with a company but are affected somehow by the actions and outcomes of the business. Suppliers, creditors, and public groups are all considered external stakeholders and even government.

Fernando & Brock (2018) explained that a stakeholder is a party that has an interest in a company and can either affect or be affected by the business. The primary stakeholders in a typical corporation are its investors, employees, customers, suppliers, communities, governments, and trade associations. They further explained that a stakeholder is an individual or a corporation that has a vested interest in a company and can either affect or be affected by a business’ operations and performance.

Bateman & Strasser (2014) defined organizational commitment as “multidimensional in nature, involving stakeholders involvement, employees’ loyalty to organization, willingness to exert effort on behalf of the organization, degree of goal and value congruency with the organization, and desire to maintain membership”. Organizational commitment is defined as a view of an organization’s member’s psychology towards his/her attachment to the organization that he/she is working for. Organizational commitment plays a pivotal role in determining whether an employee will stay with the organization for a longer period of time and work passionately towards achieving the organization’s goal. If an organizational commitment is determined it helps predict employee satisfaction, employee engagement, distribution of leadership, job performance, job insecurity, and similar such attributes (Duglio, 2018). An employee’s level of commitment towards his/her work is important to know from a management’s point of view to be able to know their dedication to the tasks assigned to them on a daily basis.

As Armstrong (2008) suggested, organizational commitment plays an important part in Human Resource Management philosophy. Human Resource Management policies are designed to maximize employee commitment, flexibility and quality of work. A committed stakeholder has a strong desire to remain a member of an organization and accept its values in addition to readiness to exert considerable effort on behalf of the organization.

Kaza (2008) portrayed the need for stakeholder involvement: “With involvement comes understanding, with understanding comes public support and commitment.” Participation by parties with a stake in the resource not only increases the level of understanding and support for marine protection, but also reduces potential conflicts and the need for heavy enforcement. Participation also leads to increased legitimacy. If participants feel the process was fair and their inputs were used, it will ultimately enhance their compliance. In fact, it has been demonstrated that the perception of legitimacy is linked to the participants’ views of the fairness of the process. Furthermore, participants who view the process as legitimate generally feel a strong obligation to comply with the results, even if the mandates contradict their self-interests (Sutinen & Kuperan 1999).

1.1.1 Background of WRPC

Warri Refining and Petrochemical Company Limited (WRPC) was incorporated as a limited liability company on the 3rd of November 1988 after the merger of the then Warri Refinery and the Ekpan Petrochemical Plants. The Warri Refinery, the first Nigerian government wholly owned refinery was commissioned in 1978. It was built to process 100,000 barrels of crude oil per day but was later de-bottlenecked to process 125,000 barrels per day in 1987. It was essentially built to add value to some of the refinery by-products such as propylene rich stock and decant oil (www.nnpcgroup.com).

The operability of these plants is contingent on the availability and reliability of the following facilities:

Electric Power and Utilities: These are produced within WRPC and are critical to the steady processing of crude oil into petroleum and petrochemical products. They include among others steam, electricity, various types of water quality such as (firewater, process water, portable water, boiler feed water and cooling water), instrument and plant air and nitrogen. The company has a design potential to generate 125MW of electrical power from 3 Gas Turbine Generators (GTG) and 3 Steam Turbo-generators (STGs). Design capacities of the facilities are:
2 ´ 15 MW extraction/condensing STG (STG-1 &2),
1 ´ 15 MW condensing STG (STG 3),
1 ´ 20 MW GTG located in the petrochemical facilities,
2 ´ 30 MW GTGs with 55 tonnes/hr waste heat boilers.

Some of the utility generating facilities within WRPC include:

Water treatment plants
Two Nitrogen Plants,
Compressed air systems and Refinery and
Petrochemical Effluent Water Treatment Plants.

The company focuss on business perspectives such as;

Technical Highlight WRPC on behalf of NNPC is designed to refine daily allocated local Crude of 125,000 barrels per day to petroleum products. It also produces PP and CB.
Commercial Highlights
- The refinery receives crude for processing from PPMC which is the agent of NNPC CHQ.
- It refines the crude into products at agreed processing fee and yield for off-take by PPMC which is the single processee and off-taker of the products.
- WRPC adds value to some of the petroleum products produced.
  - It uses propylene rich feed to produce polypropylene pellets and uses fuel oil to produce carbon black .
- The refinery leases the refining and petrochemicals assets from CHQ for a fee.
- The refinery also pays CHQ overhead charge (www.nnpcgroup.com).

1.2 Statement of Research Problem

Nigeria is blessed with abundance natural resources, and Oil and Gas have been among the key ones and have occupied the center stage of the nation revenue earning since the mid twentieth century when they were first discovered in commercial quantity. The following problems have risen because of lack of stakeholders’ participation in the decision making in the oil and gas sector of Nigeria:

Hindered organizational growth: Growth in the sector has not been commensurate with the level of revenue derived from it over the years due to reduced participation of stakeholders in the sector.
Rampant hostility experience: The lack of proper stakeholders’ participation in decision making has brought about increased hostility in oil producing communities
Reduced development: The improper decision making process that excludes the involvement of stakeholders have reduced host community development
Low profitability: Due to lack of poor stakeholders’ participation in decision in the oil and gas sector, profitability have drastically reduced

This study focuses on stakeholder participation and commitment on Warri Refining and Petrochemical Company (WRPC) boards as part of board diversity and discusses their impact on organizational development and profitability. In light of the above, this research work is being carried out by the author to look at the impact of stakeholders’ involvement and commitment to decision making and the growth of the Warri Refining and Petrochemical Company as case study.

1.3 Objectives of Study

The general objective of this study is to analyze the impact of stakeholders’ participation in decision making and organizational development of the Warri Refining and Petrochemical Company. The following specific objectives will be achieved:

To identify the current level of stakeholders’ direct participation in decision making and organizational commitment
To determine the extent to which stakeholders’ participation influences organizational commitment

To examine the problems and prospects of stakeholder’ participation in decision making

To establish if there is hope of improvement in the oil industry with regard to effective stakeholders’ participation in decision making process.

1.4 Research Questions

A couple of questions that the research seeks to answer includes:

What is the current level of stakeholders’ participation at the Warri Refining and Petrochemical Company?
Is there any significant impact of poor participation of stakeholders in the company on the level of revenue derived from it over the years?

Does lack of proper stakeholders’ participation in decision making significantly increases hostility in oil producing communities?

Does the exclusion of stakeholders in the decision making process reduce host community development?
How can stakeholders’ participation be improved?

1.5 Research Hypothesis

The study will be guided by the following hypotheses:

H₀: Stakeholders’ direct participation in decision making does not significantly affect their organizational commitment.

H₁: Stakeholders’ direct participation in decision making significantly affects their organizational commitment.

H₀: The exclusion of stakeholders in the decision making process does significantly reduce host community’s development

H₁: The exclusion of stakeholders in the decision making process significantly reduces host community’s development

H₀: There is no significant impact of poor participation of stakeholders in the company on the level of revenue derived from it over the years

H₁: There is a significant impact of poor participation of stakeholders in the company on the level of revenue derived from it over the years

1.6 Scope of the Study

This study was carried out in Warri Refining and Petrochemical Company, Delta state, and the conclusions reached were limited to the availability of data used from the case study.

1.6 Significance of the Study

Business managers of various enterprises need to understand the various predictors of effective stakeholders’ involvement and participation with an aim of achieving their organizational goals. The findings of this study will enhance various business managers by educating them on the importance of encouraging stakeholders’ participation in decision making process. It will also serve as guided platform for further studies.

1.8 Limitations of the study

In carrying out this research many factors served as constraints:

Financial Limitation: as there was no enough money to train and employ more hands in the aspect of covering a wider scope of the stakeholders.
Negative attitude of respondent: the problem facing the researcher with regards to the respondents relates to the non-cooperation and uncompromising attitude some respondents in giving out relevant information or facts.

1.9 Definition of Terms

Stakeholder: A stakeholder is defined as an individual or group that has an interest in any decision or activity of an organization.

Decision: This is a choice that you make about something after thinking about several possibilities or a conclusion or resolution reached after consideration.

Decision making: Decision-making is regarded as the cognitive process resulting in the selection of a belief or a course of action among several possible alternative options, it could be either rational or irrational.

Stakeholder’s participation: Stakeholder participation is the process by which an organization involves people who may be affected by the decisions it makes or can influence the implementation of its decisions.

Organizational commitment: Organizational commitment is an individual’s psychological attachment to the organization.

Production pads (PP): A temporary drilling site, usually constructed of local materials such as gravel, shell or even wood.

Core barrel (CB): a tube inside a drill pipe and supported by a bit to receive the core in core boring

Corporate Headquarter (CHQ): A corporate headquarters (HQ) is a place where a company’s executive management and key managerial and support staff are located.

Petroleum Products Marketing Company Limited (PPMC): This is a subsidiary Company of the NNPC responsible for the Marketing and Distribution of Refined and Imported Petroleum Products through a network of Pipelines, Storage Depots and Marine movement of petroleum products.

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Full Project – The impact of stakeholders’ participation in decision making and organizational commitment

Full Project – The impact of stakeholders’ participation in decision making and organizational commitment

Full Project – The impact of stakeholders’ participation in decision making and organizational commitment

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