Management Approaches to the Deepwater Horizon Oil Spill

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INTRODUCTION

The Deepwater Horizon Oil Spill is adjudged one of the largest oil and gas calamities in the history of United States (US) particularly the Gulf of Mexico. The rig was leased to and operated by the British Petroleum (BP) along with the workers on board from Transocean, a Switzerland- based specialist in deep water drilling equipment. On 20th April 2010, there was an explosion on the rig causing the death of Eleven (11) crew, seventeen (17) injured and about Seven Hundred Thousands (700,000) gallons of oil on board at the time of explosion burst into combustion. Such a disaster was in no means expected to involve a company such as BP who had prided itself on its commitment to safety. Due to this, a series of investigations was conducted to ascertain the causes of this tragedy in 2010. Among the causes to this tragic disaster could be grossly associated to lack of due diligence with some of the staff in a way to skip certain procedures to get the work done in minimum time and on the side of management to cut cost. A concise outline of the verifiable advancement of British Petroleum is exhibited.[1]

BACKGROUND OF CASE STUDY

BP Case study has been viewed as the biggest oil spill in the historical backdrop of the oil business. The total discharge assessed by the U.S. central government was 4.9 million barrels. After being amended the amount of Oil Spill several time by the “Federal Service and Engineering team” they finally disclosed that this Oil spill size was almost the same to the amount of Oil spill which combusted in 1989 “Exxon Valdez” case.[2]It also created the consequential Impact on the wellness of People living around. Which has resulted as a decline into industry of fishing and tourism. This Oil Spill which has also left a stigma on the rapport and goodwill of the organization.[3]

BP had the power to monitor the Macondo well and rented that rig alongside its team, from other company. Among 126 individuals on board the profound water skyline, 79 were from “Transocean”, seven came from “BP” and the remaining were from different Organization. The chief officer of Transocean in technician field, had the knowledge about the regular process of leaping from a 33,000-ton oil rig, which demonstrated to be significant learning when an emergency declaration was issued over the P.A apparatus. Minutes after the declaration, by a crash and murmuring sound, sought after by the fire of one of the engines. By the time he realized it, two blasts took place and strained him and the other team individuals to leap into half burning ocean. It was shocking to numerous examiners how such a catastrophe could occur, especially including an organization like BP, which was committing freely itself on its responsibility of wellbeing of everything. The open discussion started promptly on whether the consequences of these choices showed operational and board issues on the rig, and whether these issues were prevalent to the oil business, or settled under the BP.[4]

PROBLEM ESCALATION

BP was slow to recognize the issue at first. It consistently underestimated the extent of the spill by admitting to being "out of the loop" about choices and procedures on the rig. What's more, the organization neglected to feel for the situation of those most promptly influenced by the spill - the groups of the individuals who lost their lives and those whose occupations are undermined. In these ways, senior administration inadvertently burrowed itself a gigantic credibility hole. And consequently, it has attracted an extraordinary amount of outrage[5].

 Poor Management and lack of performing duties in the organization including other Partners of Macondo well led to Oil Spill Disaster. The continual of making poor decision was also one of the reasons of this disaster. Good Management could have averted the Oil spill disaster. Investigation experts stated that three organizations were majorly found accountable for poor Management. They did not disclose the information with public and had no confidence of risk whilst tackling the Oil Spill Crisis.[6]

DECISION MAKING PROCEDURES

Before the appointment of Tony Hayward in May 2007, decision making in BP was very bureaucratic requiring about fifteen initails to approve the slightest proposal. This resulted in slow decision making characterized by extreme cautiousness. However, in the wake to increase the speed of decision making and modify BP’s culture to be more risk averse, Hayward gave the authority to heads of business units to make swift decisions. Whiles encouraging entrepreneurial spirits in employees to own their sections and contribution to the overall task, compensation and rewards were tied to employee’s performance thus there was little motivation among staff to discuss and share current practices on risk management. Moreover, in such a sector where risk management is key factor to the success of the project, it was not completely safe not to have regional body to supervise the performance of the various units on the oil rig. Expertise advice and oversight was necessary to improve on safety performance as well as avert certain actions which led to the disaster.[7]

Environment

The Oil spill had massive impact to the environment being the second largest oil spill in the world. The oil spread over 1300miles from Texas to Florida shoreline (Ebinger, 2016) and flowed several miles away due to the heavy water currents from the point of explosion. The spill resulted in the death of several wildlife that have their habitat in the oceans. It was also later discovered that the people who showed up to clean were often found to be ill due to the contact with the chemicals and other substances used in the cleaning process. Moreover, due to the wetlands along the Gulf of Mexico, the oil sank into the soil and being a season for shrimps, alligator, and other animal and grass species along the coast, most of these animals and their offspring were destroyed. The entire beaches and other properties along the coast will be affected, resulting in the decrease of tourism along the coast. According to Charles K. Ebinger, a former brookings expert, there was a comfortable relationship between the BP management and the regulators from the US Department of the Interior’s Mineral s Management Service (MMS) which led to the poor and deficient oversight of the environmental regulatory agency.[8]

MANAGEMENT APPROACH AND IMPLEMENTATION

  • ROLE OF CEO IN BP CRISIS MANAGEMENT

A crisis is an anomalous event, something that occurs against the will of the CEO. However, in the present unstable world, the recurrence of such events is expanding significantly. In this era, almost every CEO will face the crisis at least once in his or her term. Sailing the organization through such moments is the task which only a CEO can achieve. The foundation of solid crisis management is accountability, transparency and authenticity. Right when Tony Hayward was selected as the CEO of BP in 2007, replacing Lord John Browne, he was assuming responsibility for an association in disrupting impact. Around then BP was at the same time recovering from a 2005 fire at its Texas city refinery that killed 15 individuals is yet one of the most dreadful industrial disaster[9].

Hayward who was a talented geologist and a dedicated BP lifer guaranteed to unite the organization’s rambling worldwide activities. The majority of all, Hayward would change BP’s thoughtless corporate culture; he promised in an early discourse to center “like a laser” on safety. On April 20, 2010, the BP’s Deepwater horizon oil rig blasted.  It had been observed that, “BP’s response to this mishap had turned into an instance of not managing the situation of Crisis on time.[10] Bp committed so many mistakes prior and post disaster.

  • CRISIS MANAGEMENT APPROACH

Crisis Management is a potential section of an organization. If it is not well managed, then can lead into loss of goodwill and stakeholders. It is an action designed to protect the organization from loss of reputation and rapport from the market.[11]

In the case of BP, the way in which the executives of British petroleum dealt with the crisis is surely a perfect example of failure. Tony Hayward, the CEO of BP was completely in the denial mode and made an insensitive Statements. Which sparked anger and aggression in the U.S. which led to number of protests outside the BP office in America thereby reducing the sales of BP to even 10% at some offices. Haywards response clearly teaches us that denying a problem at the time of crisis instead of recognizing and analyzing is completely a wrong approach[12].

Furthermore, British petroleum is an organization that is familiar with disasters and has a long history of neglecting security mainly in united states. because of some ecological and communal impacts of its activities. It was clear that BP was not prepared to deal with such crisis. Approximately one month after the disaster Hayward admitted that “BP” did not have the technology to stop the leak and should have done more to be prepared for such an emergency. BP had also been accused for its neglecting behavior to deal with the underlying reaction of the calamity and submitted numerous blatant slip-ups. It took four days to understand that the well itself was spilling. The company even failed to handle media and PR operations successfully.

BP also delayed the flow of information. The executives even refused to give the interviews and sometimes the media personnel were not even allowed to accompany the BP employees or executives.Then, to regain their lost image, BP launched an advertising campaign in which haywards was shown apologizing for the incident and they even tried to capture the print as well as digital media for the same. The company also replaced CEO Tony Hayward with the American CEO Robert Dudely in October 2010.

After the incident BP also published its internal reports in which it blamed its engineers, contractor Halliburton and rig operator Transocean for the accident. This report was extensively criticized by experts as well as people who accused BP for playing the blame game. Experts said that BP should focus on improving the situation rather than blaming people for the calamity. They even filed a charge against Halliburton, Transocean, Cameron and is seeking at least $ 40 billion from them as compensation. All these incidents clearly show how faulty BP was in handling the crisis and there were many failures at various phases in managing the crisis.

  • IMPACT ON ORGANISATIONAL STRUCTURE

BP had encountered various changes in a short time span. It has changed from a state processed association to a private business in 1987. It has been following max weber's model, had a bureaucratic structure, portrayed by tall progressive systems and restricted ranges of control. Robert Horton, the organization CEO in 1989 took sensational cost slicing measures. to comprehend their budgetary obligations. Horton attempted to change the solid bureaucratic, mechanistic structure of the organization towards a progressively adaptable, natural structure. The hierarchical divisions were changed into smaller, flexible teams.[13]

Horton was then replaced by David Simon in 1992. Simon pursued the similar cost cutting methodology. In 1995 Simon was replaced by John Browne. Browne followed growth in equality strategy. He empowered workers at all levels in BP. In 2005 under the leadership of Browne, the Texas city refinery accident took place in which more than 200,000 gallons of oil have been spilled in Alaska’s Prudhoe Bay. It was largest oil spill in Alaska’s history. The main cause of the spill was poor security and maintenance of the pipeline. The accident could also be blamed for a wide range of failures. The effect of this incident includes fatalities and injuries, facility and equipment damage, offsite damage, post-incident emergency response and economic losses. Browne accepted the full responsibility of the incident and helped to regain the organization’s tarnished reputation.[14]

In May 2007, tony Hayward replaced John Browne whose main goal was to improve the safety. Haywards changed the hierarchical structure of the organization which included elimination of four levels of management. In May 2010 then, under the leadership of Hayward the Deepwater oil spill explosion took place in the Gulf of Mexico. The denial and careless approach that Hayward followed towards the incident led to the anger amongst the public of the states. Due to which Haywards was then replaced by American CEO Bob Dudely in 2010.Dudely accepted his responsibility towards the company and stated that “ In this change of roles, I particularly want the people of gulf coast to know that my commitment to remediation and restitution in the region is not lessened. I make a promise to keep it right and I will keep that promise”.[15]

STRUCTURE OF FLOW OF INFORMATION

From the very beginning it has been analyzed that safety was never a priority of BP and they have also never been prepared for emergencies. The CEO of BP even stated that “BP’s contingency plan were inadequate” and that they were not prepared for the Gulf of Mexico calamity. In fact, it has also been reported that BP neglected the warnings before the Deepwater tragedy.  Pre – crisis phase is an important phase for any organization in crisis and BP’s improper planning and preparation to deal with an emergency led to elevation of the problem.

BP’s communication failure started with the irresponsible reaction of the CEO Tony Hayward. Instead of sympathizing with the victims and their families Hayward gave insensitive statements that he wants his life back and he even refused to answer the reporters. Such comments developed an outrage amongst the public which tarnished the reputation of the organization. BP has also been blamed for being too slow in acknowledging the crisis. It took four days for them to realize that the well was leaking. Such behavior brought down the sales of the company and ruined their image worldwide.[16]

CONCLUSION

It has been practically quite a while since the Deepwater horizon catastrophe in the Gulf of Mexico took 11 lives and transformed into the greatest oil spill in the world history. The crisis discharged a storm of investigation against BP, which worked toward the ocean oil rig. Unlimited intellectuals, authors and political pioneers bludgeoned the organization for how the organization performed whilst in Crisis. The fierceness over BP’s job in the gulf spill successfully ended the advancement which BP had made on the corporate obligation fronts in the earlier decades. Sometime before huge numbers of the world’s biggest organizations started considering the social and environmental impacts of their work, BP was then a pioneer in it. Although after the Deepwater disaster BP has learned from its mistakes and is still a major player within the global energy sector. It is now a regular reporter on the corporate social responsibility front. The oil giant empowers its specialty units dispersed over the globe to distribute their very own manageability reports.

BP has come and a long way after the disaster. They have successfully changed their methodology of the tasks that they accomplish and have become a socially responsible organization. They have built trustworthy relationships with their stakeholders now. Their site fills in as an enormous file of contextual analyses, from guaranteeing work rights to empowering understudies in its nation of origin to seek after career in science.

RECOMMENDATION FOR MINIMIZING FUTURE RISK

Several leadership styles exist however, it is mostly agreed that the temperament and personality traits of a leader most often than not determines the style of leadership style to expect from an individual. That notwithstanding, the leadership styles of an individual is dynamic depending on the situation at hand and how effective the leader can handle it. A leader understanding of situation and past experiences contributes how effective and efficient he/she can be at handling issues. With the disaster experienced by the BP Company on the Deepwater rig under its operation; many experts have shared insights as to better practices BP could have ensured.If we found ourselves in the position of CEO for BP, below would be some of my considerations under the specified headings.

Strategic Leadership Style

Strategic leadership style is one that involves mainly strategic thinking. Such a leader is essentially heading the entire company and do not only limit his supervision to the top executives of the organization. The emphasis of this leadership style is to create a high performance and improves team. The strategic leader is an expert in the industry in which the business operates. He provides practical sets of habits to be exhibited in the organization and can deliver what is generally expected of a leader. This leadership style I believe is suitable for BP in that, expert leader will ensure that the standard of industrial practice is not overlooked. In the case of BP, the leader emphasized of timeliness and cutting cost which led the staff to undermine certain safety measures. Also, for a leader who is carefully thinking about its projects will spot the deficiencies in the management systems and address them accordingly. For a strategic leader, once a challenge is identified, the root cause will be traced to address same. It was noted that after the compensation model was changed to include performance target, the staff of BP became conscious of meeting timeline than challenging reports and model results to fully understand the effect of their actions if safety standard are not maintained.

LEADERSHIP PRINCIPLE

Clear flow of communication

Brand values will be amended to include emphasis on operational and process safety as well as personal safety. Company values will be handed over to each newly recruited employee to fit adequately in the team. Also, managers will be trained to communicate effectively to the staff under their supervision to ensure the direction of the business is understood by everyone in the team.

Auditing of Standard Procedures

Company policies will be reviewed to have external auditors visit the rig to check on all the procedures followed by the employees on board. This will help to monitor on staff who are continuously overlooking standard practices and cutting corners to reach their set objectives. Review reports will be requested from employees to ascertain the action plans they have outlined themselves to follow.

BUSINESS ETHICS

Proper business practices must be ensured because it contributes to the underlying returns of the business, thus standard applicable procedures in the industry need to be abide by. As a CEO, intermittent safety training will be organized to keep employees familiar with industry trends and cases of happenings with industry competitors. As it happened with Exxon, BP could have used that case to emphasize the need to ensure safety at all stages in the operation of the rig. Openness and shared vision will be encouraged among employees to offer advice and assistance to each other when required. Openness toward regulatory bodies is also essential to advice on the requisite requirement for such an operation.

ORGANIZATIONAL BEHAVIOUR

The culture of an organization depicts the dominant habits and values to which delivery is expected from employees and management. Components of a company’s values: safety, as essential as it is in the industry in which BP operate was not emphasized in the brand values of the organization. As can be inferred, since the company emphasized on innovation, creativeness and entrepreneurial capabilities, the employees focus on these at the expense of safety. Personal traits of leadership: it was clear that openness was not exhibited at the managerial levels in that, in the course of acquiring the requisite permits for its operation, there were some cover ups of their previous cases of accidents. The CEO Tony Hayward made it clear in his speech in the BP 2009 annual report that they are able to do what others cannot do because of their close relationship with government. This we believe that certain actions were made to seek the favor of the US government at the time. This can be buttressed by the delay of President Obama’s reaction at the time of the accident though citizens requested for same.

Bibliography

  • Alexander, Paula. Corporate Social Irresponsibility. 1. publ. New York [u.a.]: Routledge, 2015.
  • Ebigner K, Charles. “6 Years from the BP Deepwater Horizon Oil Spill: What We’Ve Learned, and What We Shouldn’T Misunderstand.” Brookings, April 20, 2016. Accessed June 29, 2019. https://www.brookings.edu/blog/planetpolicy/2016/04/20/6-years-from-the-bp-deepwater-horizon-oil-spill-what-weve-learned-and-what-we-shouldnt-misunderstand/.
  • Essay UK. “The Deepwater Horizon Disaster of 2010 Management Essay.” Uni Assignment Center, November 2013. Accessed June 25, 2019. https://www.uniassignment.com/essay-samples/management/the-deepwater-horizon-disaster-of-2010-management-essay.php?vref=1#reference.
  • Goldenberg, Suzanne. “BP Oil Spill Blamed on Management and Communication Failures | Business | the Guardian.” Accessed June 28, 2019. https://www.theguardian.com/business/2010/dec/02/bp-oil-spill-failures.
  • IPR (Institute for Public relation. “Crisis Management and Communications | Institute for Public Relations.” Accessed June 27, 2019. https://instituteforpr.org/crisis-management-and-communications/.
  • John R Klmberly. “How BP Blew Crisis Management 101 - CNN.Com.” Accessed June 25, 2019. http://edition.cnn.com/2010/OPINION/06/21/kimberly.bp.management.crisis/index.html.
  • Kanso, Ali M., Richard A. Nelson, and Philip J. Kitchen. “BP and the Deepwater Horizon Oil Spill: A Case Study of How Company Management Employed Public Relations to Restore a Damaged Brand.” Journal of Marketing Communications 85, no. 4 (2019): 1–29. doi:10.1080/13527266.2018.1559218.
  • Lustgarten, Abrahm, and Ryan Knutson. “Years of Internal BP Probes Warned That Neglect Could Lead to Accidents.” ProPublica, June 2010. Accessed June 25, 2019. https://www.propublica.org/article/years-of-internal-bp-probes-warned-that-neglect-could-lead-to-accidents#.
  • Reavis, Cate, Locke, Richard M and Ingersoll, Chiristina. “Microsoft Word - 10 110 BP Deepwater Horizon Locke.Review.Doc.” 2012, 1–28. Accessed June 24, 2019. https://mitsloan.mit.edu/LearningEdge/operations-management/BP-Deepwater-Horizon-Disaster/Pages/BP-and-the-Deepwater-Horizon-Disaster-of-2010.aspx.
  • Wolf,Daniel De and Mejri,Mohamed. “Crisis Communication Failure The BP Case Study.” 2 (2013): 48–56. Accessed June 15, 2019. https://pdfs.semanticscholar.org/5812/c05e679bd9a2d2a513dd98ff6df5a5071b11.pdf.

[1] Reavis, Cate, Locke, Richard M and Ingersoll, Chiristina, “Microsoft Word - 10 110 BP Deepwater Horizon Locke.Review.Doc,” 2012, accessed June 24, 2019, https://mitsloan.mit.edu/LearningEdge/operations-management/BP-Deepwater-Horizon-Disaster/Pages/BP-and-the-Deepwater-Horizon-Disaster-of-2010.aspx.

[2] Ibid.  

[3] Ali M. Kanso, Richard A. Nelson, and Philip J. Kitchen, “BP and the Deepwater Horizon Oil Spill: A Case Study of How Company Management Employed Public Relations to Restore a Damaged Brand,” Journal of Marketing Communications 85, no. 4 (2019), doi:10.1080/13527266.2018.1559218.

[4] Reavis, Cate, Locke, Richard M and Ingersoll, Chiristina, “Microsoft Word - 10 110 BP Deepwater Horizon Locke.Review.doc”

[5] John R Klmberly, “How BP Blew Crisis Management 101 - CNN.Com,” accessed June 25, 2019, http://edition.cnn.com/2010/OPINION/06/21/kimberly.bp.management.crisis/index.html.

[6] Suzanne Goldenberg, “BP Oil Spill Blamed on Management and Communication Failures | Business | the Guardian,” accessed June 28, 2019, https://www.theguardian.com/business/2010/dec/02/bp-oil-spill-failures.

[7] Reavis, Cate, Locke, Richard M and Ingersoll, Chiristina, “Microsoft Word - 10 110 BP Deepwater Horizon Locke.Review.doc”

[8] Charles Ebigner K, “6 Years from the BP Deepwater Horizon Oil Spill: What We’Ve Learned, and What We Shouldn’T Misunderstand,” Brookings, April 20, 2016, accessed June 29, 2019, https://www.brookings.edu/blog/planetpolicy/2016/04/20/6-years-from-the-bp-deepwater-horizon-oil-spill-what-weve-learned-and-what-we-shouldnt-misunderstand/.

[9] Essay UK, “The Deepwater Horizon Disaster of 2010 Management Essay,” Uni Assignment Center, November 2013, accessed June 25, 2019, https://www.uniassignment.com/essay-samples/management/the-deepwater-horizon-disaster-of-2010-management-essay.php?vref=1#reference.

[10] “Reavis, Cate , Locke, Richard M and Ingersoll, Chiristina 2012”,p, 3

[11] IPR (Institute for Public relation, “Crisis Management and Communications | Institute for Public Relations,” accessed June 27, 2019, https://instituteforpr.org/crisis-management-and-communications/.

[12] Wolf,Daniel De and Mejri,Mohamed, “Crisis Communication Failure The BP Case Study,” 2 (2013), accessed June 15, 2019, https://pdfs.semanticscholar.org/5812/c05e679bd9a2d2a513dd98ff6df5a5071b11.pdf.

[13] Paula Alexander, Corporate Social Irresponsibility, 1. publ (New York [u.a.]: Routledge, 2015).

[14] Abrahm Lustgarten and Ryan Knutson, “Years of Internal BP Probes Warned That Neglect Could Lead to Accidents,” ProPublica, June 2010, accessed June 25, 2019, https://www.propublica.org/article/years-of-internal-bp-probes-warned-that-neglect-could-lead-to-accidents#.

[15] Reavis, Cate, Locke, Richard M and Ingersoll, Chiristina, “Microsoft Word - 10 110 BP Deepwater Horizon Locke.Review.doc”

[16] Ibid.

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