The Suite Spot
Grabbing a Bite: Refined Views
Oil refining didn't look like a great bet in 1998 when Tesoro Chief Executive Officer Bruce Smith decided to stake his company's future on what's known as the "downstream" end of the petroleum business. Now that once lackluster profit margins in the industry are soaring, San Antonio-based Tesoro is sitting pretty as the second-largest refiner in the American West (behind Chevron).
Of course, that success (a 54 percent increase in profit for the first quarter of 2006 to $43 million) also has meant being at the center of the national uproar over sky-high gasoline prices. Over gazpacho soup at the Sequoia waterfront restaurant in Washington, D.C., Smith reflected on his company's transformation and what he sees as the misperceptions about the business.
He says Tesoro sold off its small crude oil exploration and production business in 1999 because it was clear the company would never have the scale to compete against the supermajors. However, in part because government antitrust regulators were requiring newly merged Big Oil companies to spin off assets, refineries were available at below-market prices. Tesoro began gobbling them up and now has six facilities in Alaska, California, Hawaii, North Dakota, Utah, and Washington State. Efficiency improvements resulted in a 10 percent increase in production to about 497,000 barrels per day.
Tesoro is spending $670 million this year on capital improvements, double last year's figure. It will upgrade outdated technology at its Martinez, Calif., facility to reduce air pollution and overhaul the Anacortes, Wash., refinery so it can better process the uniquely heavy crude from Canada's oil sands. Yet these projects won't do what Washington policymakers want--produce more gasoline so pump prices will come down. Smith says that most likely will come in the next wave of projects--and take time. "There's a hue and cry to get new refinery capacity on," he says. "Well, it didn't change overnight one way, and you can't build a refinery overnight. So we think we're five years from a solution."
Book Nook: The Dugout Rules
"Managing," said Casey Stengel, the longtime manager of the New York Yankees, "is getting paid for home runs someone else hits." Sounds like a cozy gig. But as Jeff Angus makes clear in his new book, Management by Baseball: The Official Rules for Winning Management in Any Field, a surprising number of business leaders still manage to blow the opportunity. "Especially in American society," writes Angus, a management consultant and member of the Society for American Baseball Research, "the title 'manager' rarely denotes rigorous training in the discipline." Leaders often become leaders by default. Companies are run on guts alone. Too many corporate managers never examine their own most cherished assumptions.
Angus has the answer, though: baseball, which he calls "the perfect simple lab to test management theories." Trying to do more with less? Don't bother, he says. You would never expect a baseball team to win after it replaced an all-star with a scrub. Angus's management stalwarts are not Peter Drucker or Steve Jobs but Joe Torre and Earl Weaver. And while his writing may be excessively jock-inflected--the epiphany for the book, he writes, hit him "as hard as a Randy Johnson inside fastball"--he does throw out a few gems. More companies, he argues, should emulate baseball's practice of signing top talent to long-term contracts. If it's good enough for Yankees owner George Steinbrenner, shouldn't it be good enough for the rest of us?
This story appears in the May 22, 2006 print edition of U.S. News & World Report.