BP Case study.docx
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- Submitted by: Swarupa Kudale
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Name : Swarupa Kudale Roll No : 2k181151 Sub : Strategic Management Case Study BP and the Deepwater Horizon Oil Spill
Q1. BP originally made grave mistakes in implementing certain strategies, which are they, discuss about them? Ans: Building upon his predecessors’ efforts, Browne, who envisioned creating a spirit of entrepreneurship entrepreneurship among his staff, extended decision-making responsibilities to employees at more levels in the organization. Under the new strategy, decision-making authority and responsibility for meeting performance targets was no longer held by BP’s regional operating companies, but by onsite asset managers.14 Asset managers contracted with BP to meet certain performance targets and extended this practice among all employees working on a given site. Employee compensation was tied to asset performance and the overall performance of the site. The model, which was known as an “asset federation,” was later applied across the company after Browne took over as CEO in 1995. One tradeoff with the asset federation model was that because each. Another concern outlined in the report was that while BP had emphasized personal safety and achieved significant improvements, the company “has mistakenly interpreted improving personal injury rates as an indication of acceptable process safety, creating a false sense of confidence.” The report goes on to state the following: The Panel’s refinery-level interviews, the process safety culture survey, and some BP documents suggest that significant portions of the U.S. refinery workforce do not believe that process safety is a core value at BP. As many of the refinery interviewees pointed out, and as some BP documents and the process safety culture survey seem to confirm, one of the reasons for this belief is that BP’s executive and corporate refining management have not communicated a consistent and meaningful message about the importance of process safety and a firm conviction that process accidents are not acceptable. The inability of many in the workforce to perceive a consistent and meaningful corporate message about process safety is easy to understand given the number of “values” that BP articulates:
• BP’s 18 “Group values,” only one of which encompasses health and safety—the company’s broad, aspirational goal of “no accidents, no harm to people, and no harm to the environment.” • Four “Brand values,” which BP claims, “underpin everything we do”: being performance driven, innovative, progressive, and green. None of these relates to safety. These messages to the BP workforce on so many values and priorities contribute to a dilution a dilution of the effectiveness of any management message on process safety. This is consistent with a recent observation from the organizational expert that BP retained under the 2005 OSHA settlement relating to Texas City: There appears to be no one, over-arching, clearly-stated worksite policy at Texas City, regardless of respondents’ answers. The BP stated policy on health and safety, “no 16 James Baker et al., “The Report of the BP U.S. Refineries Independent Safety accidents, no harm to people and no damage to the environment” is not widely known at Texas City and points to a weak connection between BP Texas City and BP as a corporation. Safety communication is viewed more as a function of particular individuals in Texas City versus a BP-wide commitment. BP took several actions in response to The Baker Report and other reports, including one that was overseen by John Mogford, a senior group vice president of safety for BPX, on its safety. According to Appendix F, a supplement to The Baker Report, these actions included: • Leadership visibility. John Browne, BP’s group chief executive, met with the company’s top 200 leaders to stress BP’s commitment to safety and communicate his expectations regarding safety. Members of the new Safety and Operations organization visited BP’s U.S. refineries and gave presentations regarding the importance of process safety and the importance of the Mogford Report recommendations. Additionally, BP senior managers have attended town hall meetings with employees to discuss safety issues. The chief executive, Refining and Marketing, conducted meetings for all U.S. refining employees, and the president of BP America conducted meetings and sent written communications to BP America employees regarding safety issues. • Review of employee concerns. BP appointed retired United States District Judge Stanley Sporkin to hear and review BP employee concerns. • Auditing. The Safety and Operations organization is creating an enhanced audit function,including additional audit personnel and a number of external hires. BP has listed audit-finding closure as one element of a six-point plan for sustained
development. The new audit group is developing enhanced audit protocols to better assess actual operations against applicable standards.
Q2. How British Petroliem dealt with the crisis that left lasting serious negative impacts on its brand and its reputation? Ans: Things started to improve measurably in the mid-1990s. With a streamlined workforce and portfolio of activities, BP’s new CEO began implementing an aggressive growth strategy, highlighted by mergers with rivals Amoco in 1998, and ARCO (the former Atlantic Richfield) in 2000. Along with focusing on growth, BP began repositioning itself. In 2001, the company launched the new tagline “Beyond Petroleum” and officially changed its name to “BP.” The associated green branding campaign indicated that BP wanted to be known as an environmentally-friendly oil company. Over the next decade, the company launched an Alternative Energy division and was, for a time, the world’s largest manufacturer of solar cells and Britain’s largest producer of wind energy. BP invested $4 billion in alternative energy between 2005 and 2009. BP’s total company investment over the same time period was $982 billion. In May 2007, Tony Hayward, who had been chief executive of Exploration and Production (BPX), replaced John Browne as CEO. Hayward marked his appointment with a speech pledging to “focus like a laser on safety issues, put the brakes on growth and slash production targets.” Hayward was able to improve corporate performance, in part, by dramatically shrinking the Alternative Energy division and further reducing headcount at both managerial and lower staff levels. Between 2006 and 2009, BP’s workforce fell from 97,000 to 80,300. In addition to cutting four levels of management, Hayward also spoke publicly about his desire to transform BP’s culture to one that was less risk averse. He believed that too many people were making too many decisions leading to extreme cautiousness. “Assurance is killing us,” he told U.S. staff in September of 2007. Despite Hayward’s concern about the company’s risk averse culture, in a relatively short period oftime, BP had transitioned from a small, state-sponsored company to
one of the six largest non-state-owned oil companies in the world and, in the month before the Deepwater Horizon disaster, the largest company listed on the London Stock Exchange.
Q3.Discuss as in how company management employed public relations to restore a damaged brand. Regardless of what the ultimate causes are found to be, the conditions on the Deepwater Horizon, and the culture and organizational architecture of BP and its relationships with its contractors is worth examining. Each of the three decisions discussed above, as well as decisions on how to convey dangerous model results and earlier decisions about how best to structure incentive systems, may have played a role in the outcome. Throughout the decision making process, we see some actors who were advocates of caution over cost, for fixing problems even when inconvenient. Yet court testimony indicates that the three key decisions, and perhaps others as well, came down on the side of cost-reduction and expediency, over caution.