Organizational Change After Failure

            BP has failed the world in the last two decades, between oil spills, refinery explosions, and pipeline leaks, showing carelessness for human safety and the environment, while constantly cutting costs and ignoring best-practices.  Through these incidents, they have had a revolving door of Chief Executive Officers, which have all been similar:  saying they will make change and promote safety, while they are behind on maintenance and ignoring their contractors’ recommendations and OSHA’s findings.  The culture at BP is corrupt and sick to encourage this behavior.

BP’s Corporate Culture

            The oil and gas giant BP was responsible for the largest oil accidental oil spill in history with the Deepwater Horizon disaster in 2010, where nearly five million barrels of oil spilled into the Gulf of Mexico over the duration of twelve months (Ingersoll, 2012, p.2).  The Harvard Business Review noted the state of BP’s “organizational and cultural mess” and the lack of leadership shown by Tony Hayward, BP’s Chief Executive Officer through the incident (Kanter, 2010).  In the face of disaster, leadership needs to show extreme ownership and accountability while navigating the company and its stakeholders through radical transformation.  Tony Hayward did none of the above, but instead blamed Transocean and Halliburton for the rig and the well (Kanter, 2010).  In fact, it was noted that Hayward had a tactless approach to his congressional hearing in June of 2010, where he lacked grace, accountability, and humility (Blake, 2010).

            “They have had incidents in Texas, Alaska, now two mishaps in the Gulf – this is more than some string of coincidences,” Pickering said. “There has to be something about the way they are running the business that causes them to run into so many issues. I’d say it’s the intense focus on cost cutting,” said Dan Pickering, co-president of Tudor, Pickering, Holt & Company (Blake, 2010).  In previous years, BP put Tony Hayward in the Chief Executive Officer position following a record-high fine from OSHA of $87 million after a refinery explosion in 2005 and $20 million in criminal penalties following a pipeline leak in Alaska in 2006 (Kanter, 2010).  Regardless of the Chief Executive Officer that the board puts in place, there is a systemic problem at BP regarding ignoring safety, cost cutting despite recommendations, and creating ruinous and criminal situations where there is loss of life and tremendous environmental impact.

            This has established that the company culture from the Board of Directors down through the ranks at BP are corrupt and broken, focusing on cost-cutting rather than safety, failing to take responsibility, and replacing one CEO with another CEO after every incident.  Bob Dudley, who took Tony Hayward’s position in September of 2010, said “There are lessons for us relating to the way we operate, the way we organize the company and the way we manage risk” (Heineman, 2011).  There is a key problem which is never addressed in the congressional hearing:  the Board of Directors is never held accountable.  The board, which has the overall responsibility for the activities at a corporation, gets to appoint their next scapegoat as CEO while absolving themselves of responsibility.  As the Harvard Business Review reported:  “We need a much broader and deeper understanding of the role of the board and senior management in a large, complex corporation” (Heinemen, 2011).  For a company that has tried to present itself as environmentally conscious and concerned about health and safety to the public, BP’s failures show the public that there is lack of internal governance at the company to enforce proper policies and procedures regarding best practices and safety (Robbins Geller Rudman & Dowd, 2012).

Necessary Leadership Changes

            The Board of Directors, the Chief Executive Officer, the Vice Presidents, and the leadership throughout the company need to make a radical transformation to create and enforce policies that are made based on human and environmental safety first, and that those policies cannot be circumvented by cost-cutting efforts.  Furthermore, any executive bonus programs need to be modified such that bonus is not granted in the event of any OSHA fine, spill, explosion, or significant event.  Leadership is responsible for the behavior of their managers and all of their employees.  If they cannot create a governance program that will create a basic baseline of safety, then they do not deserve any executive bonus.  What does it take to turn a company around from a culture of trading the environment and human lives for profit?  It takes an inspirational, transformative leader to move people from the status quo.

            A logical leadership style is important to lead BP in planning the appropriate policies, procedures, best practices, standards, and governance programs to implement in order to make the necessary changes.  Logical leadership is also needed to take extreme ownership and accountability in the face of a company in the midst of a public relations nightmare.  This logical leader would be instrumental in developing and communicating the plan to the company (Reardon, p.132-134).  At this point, BP needs a plan that makes sense to protect the environment, protect human health, and protect the communities and economy, while following guidelines set forth by the American Petroleum Institute and OSHA regarding best practices and safety standards.  Whereas Exxon Mobile has had no remarkable incidents in over twenty five years and put in their own Operations Integrity Management System following the Exxon Valdez spill and has continually improved leadership, accountability, design, emergency response, and safety, BP has made no such effort (Heineman, 2011).

            Once the logical leadership has developed and communicated the plan, BP needs inspirational leadership and commanding leadership to inspire and direct the work of the transformational change and the execution of the plan (Reardon, p.132-134). A transformational, inspirational leadership style is important to lead BP in this situation in order to build that level of trust and respect in the team (Indeed, 2020).  Without being inspired to follow this new logical plan through this disaster and adversity, the team will stay to their ways.

            Not only does this change need to be made at the chief executive officer, but this leadership needs to be seen from the entire board of directors as well as the C-suite executives, down through the ranks.  In order to take hold and make this broad transformation, BP needs people that will inspire change in their employees.  There needs to be an entire change in mindset.  It needs to be completely unacceptable to compromise on safety, reliability engineering, or the environment in order to save some money.  In this new leadership, the company needs to be utterly inspired to protect people and protect the environment.  Moving forward with those two tenets, they should be able to make wise leadership decisions.

Moving from Oil to Renewable Energies:  Pure Conjecture

            BP, a company deeply rooted in harvesting, refining, and distributing petroleum products is facing changes ahead.  The people, the market, and the environment are all driving for less fossil fuels and more renewable energy.  With such a company as BP, this poses a lot of risk.  In a SWOT analysis, renewable energy probably appears as a threat to BP rather than an opportunity.

Planning Phase

            A creative but logical leader would need to build a case for diversifying the company with renewable energy.  If BP purchased square miles of desert land in Nevada and Arizona (which happens to be very inexpensive), they could build solar farms, generate electricity, and sell it.  If BP acquired battery, solar panel, and wind generation companies they could be in the supply chain for solar and wind generation.  If BP purchased (or leased) land for windmills in the Midwest, they could build wind farms, generate electricity, and sell it.  If BP invested in innovative hydroelectric companies with cutting-edge ocean tidal solutions, then they could change the world with ocean power.  A logical leader would being these options into a plan of diversification against the change in the petroleum market.

Enabling Phase

            A logical leader would discuss the safety and environmental pitfalls of their current course.  They would need to discuss the money lost to incident after incident and public outrage against the petroleum giants.  They would need to discuss money lost as the market moves to renewable energy.  This leader would need to inspire BP to see that it is important to diversify their portfolio with a strong move to renewable energy.

            Once this plan is laid and communicated, the inspirational leadership needs to take its place and inspire the entire company and the board of directors to follow this plan.  This is no small feat for a company rooted in oil, but they are even more deeply rooted in money, so diversification in the face of market change makes sense.  Still, a large amount of inspiration is needed.

Launching Phase

            Once the team is inspired, a commanding leader is needed to execute on the vision and the plan, along with more inspirational leadership.  This is probably the hardest phase, as it can be arduous to keep people focused and aligned while keeping them inspired.  A leader that can keep a firm grip on the reins while keeping everyone excited is needed in this phase.

Catalyzing Phase

            Until there is a lot of momentum, it is difficult to make sure that the company stays the course.  In this phase, a supportive and inspirational leader is necessary in order to make sure that BP continues to focus on solar, wind, hydroelectric, and innovations in renewable energy rather than continuing to overinvest in oil.

Maintaining Phase

            As BP has diversified in renewable energy and is profitable in both markets, it takes continual inspiration, logical planning, and supportiveness to continue to keep the company aligned with its people-first, environment-friendly vision.  As a large corporation, they have a tendency to follow the money.  Oil money is easy money, so it will be the role of this leader to help BP grow and innovate in ways that help the world.

Conclusion

            In order to change and accommodate the environment, human life, and the economy, BP has some drastic changes to make.  They need to gut and rebuild most of their leadership practices, their culture, and the policies and procedures that they have in place.  They need strong leaders that care about people and care about the environment.  BP absolutely needs to remove any hint of profit-hungry cost-cutting culture that would endanger their progress toward revamping their careless culture.

References

Blake, Rich. (2010). Ousted BP CEO Tony Hayward’s Biggest Blunders.  Retrieved from https://abcnews.go.com/Business/ousted-bp-ceo-tony-haywards-biggest-blunders/story?id=11253285

Heineman, Ben. (2011). How the BP Commission Dropped the Ball. Retrieved from https://hbr.org/2011/01/dropped-ball-on-bp-governance

Indeed. (2020) 10 Common Leadership Styles (Plus Ways to Develop Your Own). Retrieved from https://www.indeed.com/career-advice/career-development/10-common-leadership-styles

Ingersoll, C., Locke, R., & Reavis, C. (2012).  BP and the Deepwater Horizon Disaster of 2010. Cambridge, MA. Retrieved from https://mitsloan.mit.edu/LearningEdge/CaseDocs/10%20110%20BP%20Deepwater%20Horizon%20Locke.Review.pdf

Kanter, Rosabeth. (2010). BP’s Tony Hayward and the Failure of Leadership Accountability. Retrieved from https://hbr.org/2010/06/bps-tony-hayward-and-the-failu.html

Reardon, K. K., Reardon K. J., & Rowe, A. J. (1998). Leadership styles for the five stages of radical change. Acquisition Review Quarterly, 2.  Retrieved from https://my.uopeople.edu/pluginfile.php/923150/mod_book/chapter/244914/reardon.pdf

Robbins Geller Rudman & Dowd. (2012). The High Cost of BP’s Lack of Corporate Governance. Retrieved from https://www.rgrdlaw.com/news-item-BP-Corporate-Governance-110512.html

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