Posted: May 25th, 2022

British Petroleum Leadership 12 pages

leadership is crucial for organizational success in a competitive marketplace. Gaps in leadership or conduct that could be interpreted as ineffective could have adverse effects on the reputation and overall competitiveness of a company. One company that suffered the adverse effects of poor leadership was British Petroleum, during and in the years leading up to the 2010 explosion and oil spill in the Gulf. Research has since shown that dysfunctions in the company’s organizational culture had a hand in the entire crisis. This text explores the events that led up to the disaster, and the specific weaknesses in leadership and organizational culture that had a hand in exacerbating the crisis.

Introduction

From a general perspective, organizations have a responsibility to serve the common good of the communities within which they operate. This they do through a range of standard business practices that include giving towards charity and environmental-conversation programs, protecting the environment, supporting communities, providing goods to consumers, sustaining retirement plans and pension funds, developing technology and research, and creating employment among a host of other practices. All these practices are beneficial to stakeholders and contribute to the concept of corporate sustainability. However, when an organization does not operate according to the ethics of the ‘common good’, it becomes broken and the mutual trust that sustains stakeholders drops, leading their belief in the company to dissipate. The organization then becomes unable to serve the interests of stakeholders, and its overall ethical purpose is abandoned. The BP Gulf oil spill presents a perfect example of how lack of corporate sustainability (occasioned by negative organizational behavior) can lead to leadership failure, and consequently, failure to serve the interests of stakeholders. At the center of the BP issue is dysfunctional crisis leadership — this text demonstrates how leadership failures and negative organizational values at BP exacerbated the situation at the height of the oil spill disaster, and suggests the possible changes in organizational behavior that could be implemented to prevent a repeat of the same. Before embarking on the main discussion, however, it would be prudent to first present a brief overview of the BP oil crisis.

Brief Overview of the BP (British Petroleum) Oil Spill Crisis

BP is one of the largest petroleum companies in the world, with a history dating back to the very early years of the 20th century. Since its formation in 1903, the company has committed itself to satisfying man’s need for petroleum by extracting natural resources from beneath the surface of the earth (Heller, 2012). It commits itself to delivering value over money through the core values of courage, excellence, respect, and safety (BP, 2015). Offshore oil drilling was introduced in the 1930s in the Louisiana coast, and later moved to the Gulf of Mexico, where oil deposits were pursued up to over 3,281 ft below the surface of the ocean (Heller, 2012). The deep-waters exploration investment seemed to yield sufficient returns for the company, up until the night of 20th April, 2010, when a gas surge occurred within the company’s semisubmersible Deepwater Horizon oil drilling rig, causing a large explosion that burnt up the drilling platform, and claimed the lives of eleven workers (Heller, 2012). The drilling rig, which had been leased to the company by Transocean Inc., sank, burned, and tore from the sea floor the pipe that sank down to the large Thunder Horse Field oil Deposit (Heller, 2012). Four days later, it became apparent that oil was leaking from the ruptured oils well drilled into Thunder Horse (Heller, 2012).

The company embarked on a mission to cap the oil leak, but by then, investigations had already been initiated against it by the Department of Homeland Security. The National Oil Spill Commission, which was put in place by President Obama in the wake of the crisis to identify the roles and contributions of the various parties to the same, found that lack of communication between the company and its contractors, and poor management had led the company to take unnecessary risks that significantly compromised the safety of the public (Arnold & McKay, 2013). The commission established that both Transocean Inc. And BP had made judgment and communication errors that increased the risk of a large-scale disaster occurring. However, since the latter had experienced other accidental oil spills before, it took all the blame as many interpreted Transocean as a simple case of collateral damage (Arnold & McKay, 2013). The ill management of the issue by BP’s leadership only worsened the situation, leading to a public outcry that literally forced the CEO, Tony Hayward to resign. This study is not focused on the technical aspects of the tragedy, but on the dysfunctions of the company’s leadership at the height of the crisis.

Leadership at BP

Simply stated, leadership is the art of using people to get things done by exercising social influence and charisma. A leader is someone who is able to inspire people to perform their duties enthusiastically, competently and willingly, which he does by motivating them, implementing plans, and providing direction. The specific strategy that the leader uses to achieve this is their leadership style (Daft, 2014). Three different leadership styles are evident in BP’s leadership. For purposes of brevity, we will focus on the company’s leadership over the last two decades (John Browne (1995-2007); Tony Hayward (2007-1010); Bob Dudley (2010-present).

Participative Leadership

Daft (2014) defines participatory leadership as a leadership style where the opinions of subordinate parties are considered in the decision-making process, and subordinates, therefore, get an opportunity to develop their own professional and leadership skills. Decision-making is decentralized, and subordinates are given the autonomy to make decisions and take actions on behalf of the organization, although they are held fully accountable for the same. Evidence has shown participative leadership to be a crucial component of leadership at BP. Employee participation often takes the form of delegation of authority — John Browne, for instance, delegated authority to his managers, and gave them autonomy and independence to maintain control over their respective departments (fiefdoms) like min-CEOs. As a way of increasing accountability in decision-making, however, he had the managers sign a performance contract that helped to ensure that all decisions made by managers were in the best interests of the organization. The primary benefit of participative leadership in the organizational setting is that it assists in the grooming of new leaders, which basically goes to ensure that there are no talent gaps in the organization once the current breed of leaders leaves.

Tony Hayward does not, however, appear to be so much of a participative leader — he is seen to lead mostly through directive leader behavior. Unlike John Browne, who makes the company’s goals, vision and expectations known to employees, and then grants them the independence to choose their own way of getting the job done, Hayward leads by making the goals known, giving direction and guidance, and scheduling work for his subordinates (Griffin, 2011). Such a case was witnessed during the oil spill, when Hayward, despite having no knowledge in crisis management, and the American way of doing things, relocated to Houston and took personal control of the crisis situation, instead of delegating the same to Bob Dudley, who had been responsible for overseeing the company’s activities in the United States for a year and who was, therefore, more familiar with crisis management in the American context (Lahiri, 2010). Whilst it is rather understandable that as the company, CEO, he needed to be visible to the watching public, the decision to locate himself in Houston, field media interests and do all the communication with the U.S. media, rather than leaving the same to Dudley was an uncalculated move; and most Americans actually felt that he talked too much, and listened very little (Lahiri, 2010).

Transformational Leadership

Transformational leadership is the use of a shared vision to drive performance. A transformational leader develops a common vision and then uses their self-discipline, competency, wisdom, and passion to get his followers to identify with that vision, and work voluntarily towards its achievement (Daft, 2014). Both John Browne and Tony Hayward exercised transformational leadership at BP. Browne, for instance, articulated a vision to reduce the level of greenhouse emissions at BP and the oil industry as a whole (Cooper, et al., 2007). He introduced the ‘Beyond Petroleum’ campaign, which advocated for the use of responsible approaches for limiting the amount of environmental damage caused by the company (Cooper et al., 2007). Well, obviously, this would increase the company’s overall costs and reduce its competitiveness in the industry considering the fact that the campaign was the first of its kind; however, Browne used wisdom to drive his vision — he reasoned that the campaign aligned with the moral conscience of society, and would obviously have the approval of the greater community (Cooper et al., 2007).

Worryingly, transformational leadership may not always be beneficial to society. This is particularly so if it gets to the point of blinding the leader from evidence that things are going wrong on the ground. Hayward is a perfect demonstration of this — well, he had a good vision of increasing the company’s competitiveness by reducing its operational costs; however, his quest for the actualization of the same blinded his judgment. For instance, Hayward ignored warnings from his employees and contractors, and chose cheaper and low-quality drilling options that increased the well’s risk of bursting (Arnold & McKay, 2013).

An effective transformational leader, as the path-goal theory of leadership suggests, is one who is able to fit his vision into the needs and interests of the stakeholders involved such that profit is not given preference over prudence. By overlooking the safety of the community and that of his workers just so his vision could be realized, Hayward demonstrated ineffective leadership.

The Leadership Problem at BP

There is sufficient evidence to suggest that the oil spill in the Gulf in 2010 was caused by technical issues in the drilling system; however, there is also evidence to suggest that the same could have been avoided if the company’s leadership was more effective in the pre-crisis stage. Ineffectiveness was also inherent in the acute crisis stage, with the then CEO being brought under intense criticism for his irresponsible conduct and ineffective crisis communication at the height of the disaster. Numerous studies have been conducted to show how dysfunctions in the company’s top leadership made it a subject of criticism in the wake of the 2010 oil spill; however, most of these have focused on either the pre-crisis or the acute crisis stages. For purposes of objectivity, the current study combines the two aspects to show how dysfunctions in leadership during the crisis and in the years leading up to it contributed to its downfall. In this case, dysfunction in leadership was symbolized by multiple aspects in the organization including:

A Dysfunctional Organizational Culture

Organizational culture is the glue that unifies and holds the organization together. It is represented, in its simplest form, by the values by which people in the organization are governed, and to which they are adhere in the conduction of their duties. BP’s culture was dysfunctional because it allowed for extreme risk-taking and shortsightedness at the cost of environmental stewardship and public safety (Edersheim, 2010). Risk-taking is a positive component of organizational behavior; however, when it compromises the greater good, then it is no longer plausible. We see a culture of extreme risk-taking right when John Browne introduces the ‘Beyond Petroleum’ campaign (the first of its kind in the industry), up until when the company decides to venture into the deep waters of the Gulf. In fact, in a 2009 public interview, the company’s exploration and production chief blatantly admitted to the company’s extreme risk-taking culture — in his words, “we do not do simple thingswe are prepared to work on the frontier and manage the risks” (Arnold & McKay, 2013, p. 20).

Well, whereas some of these extreme risks ended up being beneficial to the company, others ended up being the source of its negative reputation. A good organizational culture ensures that any risks taken by the company does not compromise the system’s integrity — that is, however, not the case with BP; the culture encourages broken values – the hiding of facts, being ignorant about warnings, and the compromise of the safety of the greater good just as long as profits are being realized. It has emerged, for instance, that the company chose a cheap casing seal for its drilling system despite receiving warnings from its chief contractors. The casing’s low-quality is believed to have contributed to the blast (Edersheim, 2010). Moreover, Tony Hayward continually ignored the EPA’s request not to use Corexit, an oil dispersant which had already been banned in Europe, in the Gulf owing to its adverse effect on marine life (Edersheim, 2010). To him, Corexit was a plus because it caused oil to sink below the surface, where it could be easily seen; the effect of the same on marine life was the least of his concerns (Edersheim, 2010). Reports have also shown that the company’s top leadership received warnings about a potential explosion hours before the same occurred; however, it ignored the same, costing 11 workers their lives (Edersheim, 2010). This is an outright indication of a culture that does not look out for the well-being of its internal stakeholders.

Despite emphasizing broken values, BP’s culture at the time also seemed to be one that emphasizes a clear separation between leaders and followers. It is likely that BP’s employees knew and understood the problems associated with the values adopted and decisions made by the organization. However, as Somaiya (2010) points out, they could not voice the same out with their managers, first because of the glass barrier that existed between leaders and followers, and secondly, because the whistleblower policy was ineffective, and those who took the risk were either fired or pressured out. This only helped to span a culture of impunity, arrogance, and unguarded risk-taking (Somaiya, 2010).

Failure to Learn from Past Mistakes

The 2010 oil spill was not the first that BP had been involved in since its inception in 1903. In 1989, the company took responsibility for the Exxon Valdez oil spill owing to its 50.9% ownership in the Alyeska Consortium, seven countries that were collectively responsible for the Trans-Alaska Pipeline System, in which the spill occurred (Arnold & McKay, 2013). The Alaska Oil Spill Commission, instituted by the state government to investigate the Exxon Valdez oil spill, found neglect and complacency to have had a hand in the spill (Arnold & McKay, 2013). The company, however, seemed not to learn from its mistakes; and in 2005, it again came under fire for an explosion at its refinery in Texas, which left 15 people dead and scores others injured (Arnold & McKay, 2013). A year later, the company’s pipeline in Alaska ruptured, with investigations later revealing that the rupture was as a result of the extreme cost-cutting methods and improper safety measures undertaken by the company (Arnold & McKay, 2013). The history of corporate neglect continued, and recently in 2012, the company found itself in another crisis — 1,600 kg of gas and 125 barrels of oil had leaked out of its installation in Ula Field, causing adverse effects on the locals (Arnold & McKay, 2013). All these cases of the same nature are perfect indications of an organization that encourages arrogance, and does not take time to learn from past mistakes. Profit-maximization comes before the safety of the very community that the company has a corporate duty to protect and empower.

Lack of Empathy

Empathy is one of the basic qualities of an effective leader — followers are motivated when they perceive the leader as sharing in their feelings and emotions (Daft, 2014). BP’s leadership blatantly failed to demonstrate empathy at the height of the crisis. CEO, Tony Hayward, for instance, declared in an interview that he wanted his life back — a comment that symbolized helplessness and not wanting to identify with the aggrieved parties (Ulmer et al., 2010). In another instance, Hayward was pictured engaging in a yacht race in England, as the residents and fishermen of Gulf Coast suffered from the effects of the explosion (Ulmer et al., 2010).

Deflecting Blame and Refusal to Admit Mistakes

Immediately after the blast occurred, BP CEO, Tony Hayman, moved to remove his organization from blame by claiming that since the company had leased the drilling system from Transocean, the latter ought to bear full responsibility for the explosion and the victims thereof (Arnold & McKay, 2013). This argument, the CEO made even as evidence pointed to the company as being in violation of crucial safety permits, and failing to possess safety equipment (Arnold & McKay, 2013). Court proceedings instituted against the company in the wake of the explosion revealed that the company had not implemented the operating management system (OMS), which federal regulations recommended as an additional safety measure, on the Deepwater oil rig (Blackden, 2013; Heller, 2012). Despite these inherent limitations in the safety protocol, the company still insisted that it was not to blame for the explosion; and this only made its leadership appear petty, weak, defensive and lacking a grip on the prevailing crisis.

The situation was made worse by Hayman’s attempt to keep the company’s external stakeholders in the know about the state of the crisis (Heller, 2012; Arnold & McKay, 2013). It turns out disclosure was a real problem for BP. First, the company’s top leadership fails to disclose the ultimate truth to the company’s owners when they raised question about the safety of its deep sea operations (Arnold & McKay, 2012). As the principals in the principal-agent relationship, the company’s owners had a right to receive full information on the same; yet the company’s leadership does not disclose the safety concerns raised by agencies, contractors, and employees (Arnold & McKay, 2012). The second, and perhaps most unforgivable management error was the company’s decision to lie about the extent of the crisis in terms of leaked barrels of oil. The company’s leadership first makes an unsubstantiated claim that no oil had spilled as a result of the explosion; then it gives a false estimate that only 1,000 barrels were leaking per day; only for federal government officials to later establish that over 60,000 barrels of oil were spilling into the Gulf on a daily basis (Heller, 2012). Email evidence showed that the company’s leadership was well aware that the flow rate exceeded 100,000 barrels a day when they made the statement (Arnold & McKay, 2013). Such occurrences symbolize an organizational culture that does not value the concept of stakeholder trust (Arnold & McKay, 2013). Stakeholders, particularly external stakeholders, relate with the company through mutual trust; they expect to be treated honestly, decently, and fairly (Arnold & McKay, 2013). Failure to make truthful disclosures shatters stakeholders’ trust, and paints the image that the top leadership has no grip over the crisis situation.

True leadership calls for owning up to one’s mistakes — a perfect illustration is the dialysis filter crisis, where 50 patients died in Croatia and Spain as a result of Baxter Co.’s use of malfunctioned dialysis filters (Bali, 2011). Once the crisis came to light, Harry Kraemer, Baxter CEO immediately owned up to the mistake, apologized on behalf of the organization and took full responsibility, asking the board to initiate effective standards for preventing a repeat of the situation, and reduce his bonus to cater for the victims’ families (Bali, 2011). This is a perfect illustration of true leadership, and taking charge of a crisis situation; the same was expected of BP’s top leadership.

Possible Solutions: What BP Needs to do to Minimize the Risk of Such Disasters

There is no doubt that there are enormous and obvious value deficiencies in BP’s organizational structure that increased the risk of the disaster occurring. There are huge shortcomings in the way the organization deals with regulations, profits, risk, sustainability, and safety. There is no doubt that BP has the power and influence to remain in the market for as long as possible; however, it is prudent that the company take measures to ensure that it does not fail its stakeholders again through such disasters. The only way to do this, as Arnold and McKay (2013) point out, is to change the organizational culture, and consequently, organizational behavior. The specific corrective strategies would include:

Encouraging the Naming of the Elephants in the Organization: the term ‘elephant’ in this case basically refers to the ‘hot’ topics and issues in the organization that are never made explicit or discussed because employees prefer to leave them as they are. In the case of BP, the elephants are the safety issues in the organization (Arnold & McKay, 2013). As mentioned earlier on, it is possible that BP employees clearly understood the safety risks and dangers associated with the values that governed the organization; however, these were never made explicit, and hence, they were never adequately-discussed (Arnold & McKay, 2013). BP could minimize the risk of repeat disasters by encouraging employees to come forth and name these ‘elephants’. This they could do through the three-step procedure advanced by Hammond (2011). First, they need to identify the elephants by gaining insight from the media as well as past and current studies that have pointed out their corporate weaknesses. Once they have accurately identified these, they need to identify and bring to light the underlying assumptions that people hold about the organization. This they could do through a multi-stakeholder approach focused on obtaining the views and assumptions of the different stakeholders in the organization (Hammond, 2011). This would enable them have a more accurate picture of what exactly they are fighting against, and what exactly they need to correct. Finally, the organization needs to put up an effective framework for constructive dialogue among the bottom-level, middle, and top employees, and external stakeholders, who include federal agencies, private and public entities, the community, investors, and so on.

Encouraging New Learning: BP has not been able to learn from its past mistakes because it has not opened itself up to learn new ideas and new philosophies. Arnold and McKay (2013) make it clear that if a “disaster has not been managed with a view to new learning, then the old patterns of behavior return” (p. 20). Towards this end, it is prudent that the organization transform its culture into that of a learning organization. This, the organization can achieve through i) learning from past experience, and ii) learning from others (Garvin, 1993). Learning from past experiences basically involves reviewing one’s failures and successes, systematically assessing the same, deriving crucial lessons, and then putting the lessons learnt up in a manner that employees can easily access and understand (Garvin, 1993). A perfect example of an organization that was able to learn effectively from its past mistakes is Boeing — after encountering difficulties with its 747 and 737 brands, the company went on a mission to ensure that past mistakes were not repeated in its future development (Garvin, 1993). It formed a high-level group of employees (locally referred to as Project Homework) to compare the development processes of the 747 and 737 brand with those of the 707 and 727 brands (two of the most successful brands) (Garvin, 1993). They were to come up with lessons learnt, which the company could use in its future developments. The recommendations of the team were then used in the development of the 767 and 757 start-ups, which ended up being the most successful and error-free brands in the company’s history (Garvin, 1993).

Learning from others, on the other hand, would involve a multi-stakeholder approach geared at obtaining views from stakeholders and other players within the industry so as to learn new perspectives. This could involve holding conversations with customers, regular meetings with employees, and shareholders, and so on (Garvin, 1993). Xerox has been able to use this strategy effectively – the company uses Digital Equipment’s ‘Contextual Inquiry’ interactive process to observe the behavior of customers through the production process, take note of the problems they encounter, and then use insights learnt thereof to improve their subsequent projects (Garvin, 1993).

Focus on Crisis Planning: research has shown that BP’s organizational culture was dysfunctional largely because it encouraged short-sightedness, with no consideration for the long-term effects. There is need for organizations to instill a culture of looking ahead — John Browne was a perfect example of a leader who looks beyond the current age, and recognizes that the organization has a future that goes way beyond the current situation. Crisis planning is a crucial aspect of ‘looking ahead’ in the organizational setting (Heller, 2012). BP needs to put in place an effective framework for assessing the risk of, and dealing with crises as they occur (Heller, 2012). This it could do by conducting a corporate-oriented environmental scan in their external and internal environments on a regular basis (Heller, 2012). Such a scan, which is geared at collecting relevant data and information on the competitive, technology, government, social, and economic developments over time, would help the organization identify trends in the environment, and predict the possible impact of the same on its operations (Heller, 2012).

Conclusion

Evidently, dysfunctional and ineffective leadership had a hand in BP’s damaged reputation at the height of the 2020 oil spill in the Gulf. However, the ineffectiveness of the organization’s leadership did not just begin during the crisis; there is sufficient evidence to prove deficiencies in leadership long before disaster struck. At the center of all of BP’s problems during this time is a dysfunctional organizational culture, which emphasizes short-sightedness risk-taking at the expense of public safety and stakeholder trust. To minimize the risk of such a disaster occurring again, BP needs to change its organizational culture and the specific values that govern its operations. This text recommends three strategies for doing so — i) encouraging the naming of elephants; ii) encouraging new learning, and shifting focus towards crisis planning. With the right organizational culture, BP could evade the constant oil spills that continue to damage its reputation, and it could most definitely be a more competitive force in the industry

References

Arnold, DH & McKay, R. (2013). Sustainable Enterprises: Crisis Management and Culture Transformation for BP. Business and Management Research, 2(3), 16-24.

Bali, V. (2011). Leadership Lessons from Everyday Life. Leader to Leader Journal. Retrieved August 13, 2015 from http://www.leadertoleaderjournal.com/sample-articles/leadership-lessons-everyday-life.aspx

Cooper, B.K., Sarros, J.C., Santora, J.C. (2007). The Character of Leadership. Ivey Business Journal. Retrieved August 12, 2015 from http://iveybusinessjournal.com/publication/the-character-of-leadership/

Daft, R. (2014). The Leadership Experience (6th ed.). Belmont, CA: Cengage Learning.

Edersheim, E.H. (2010). The BP’s Culture Role in the Gulf Oil Crisis. Harvard Law Review. Retrieved August 11, 2015 from https://hbr.org/2010/06/the-bp-cultures-role-in-the-gu

Garvin, D.A. (1993). Building a Learning Organization. Harvard Law Review. Retrieved August 13, 2015 from https://hbr.org/1993/07/building-a-learning-organization

Griffin, R. (2011). Fundamentals of Management (6th ed.). Mason, OH: Cengage Learning.

Hammond, S.A. (2011). The Thin Book of Naming Elephants: How to Surface Undiscussables for Greater Organizational Success. Bend, OR: Thin Book Publishing.

Heller, N.A. (2012). Leadership in Crisis: An Exploration of the British Petroleum Case. International Journal of Business and Social Sciences, 3(18), 21-32.

Lahiri, R. (2010). Leadership Lessons from the BP Oil Disaster. Vincero. Retrieved August 13, 2015 from http://vincero.co.uk/leadership-lessons-bp-oil-spill-disaster/

Ulmer, R., Sellnow, T.L. & Seeger, M.W. (Eds.). (2010). Effective Crisis Communication: Moving from Crisis to Opportunity (2nd ed.). Thousand Oaks, CA: Sage Publications.

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