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Bp Oil Crisis
- 1. Alex Angelov Thomas Huggins Malgorzata Glowa-Willemse Clarice Da Silva Pawel Rogalewski
- 9. (King and Johnson 2010)
Hinweis der Redaktion
- So, who’s to blame for this disaster? The truth is that all these people and organizations are responsible for it, including those that we aren’t aware of i.e. all BP shareholders. Tony Hayward was framed for the spill and was mocked and condemned hypocritically by his competitors and by the media. What about BP’s corporate culture and the influence people like Peter Sutherland (Global Policy Journal)or John Browne had on the company’s activities? By the way, Tony Hayward actually improved the company’s safety record during the last 2 years prior to the oil spill (Mouawad 2010). John Browne the former CEO of BP initiated the controversial ‘cost-cutting scheme’ that most probably compromised health & safety and led to major accidents such as The Texas City Refinery Explosion in 2005, killing 15 people and injuring 100 more (Bower 2010). He’s been accused that his cost-cutting plan led to the Deepwater Horizon disaster as well (Bower 2010). We can be critical of Barack Obama’s lack of urgency at the beginning of the spill, pointing the blame towards BP but not towards himself and his administration, too. So how did these 3 giants- BP, Halliburton and Transocean get a permission for the Gulf of Mexico drilling?
- First of all attempts to rescue environment could improve his personal reputation. This reason is connected with Obama’s previous attempts to set up new offshore drilling in the US, which had to stop immediately after explosion of oil rig. Solved situation will also look better in his next election campaign. But the most important reason is that the BP as a well-known multinational company that is one of the biggest energy producing companies in the world is able to afford to pay enormous amount of money to rebuild theirs reputation.
- As Buchanan and Huczynski (2004, p. 828) say: ‘These are broad and vague concepts that have proved difficult to define or to measure, with precision and without ambiguity’. Power is a relational property describing the extent to which a given actor can control the behaviour of another actor by manipulating rewards important to the other. It follows from this view that the statement that an individual is powerful is meaningful only as shorthand for saying that the individual is powerful relative to certain others, so CEO power means the power that the CEO has over other members of the organization. Power is essential for producing strategic change because decisions to alter organizational strategies and structures affect internal actors with vested interests, and implementation likewise involves mobilization and deployment of resources controlled by multiple managers (Pfeffer and Salancik, 1978). Buchanan, D. and Huczynski, A. (2004). Organizational behaviour: An introductory text 5 th ed. Harlow: Prentice Hall. Pfeffer, J. (1992). Managing with power: Politics and influence in organizations. Boston: Harvard Business School Press. Pfeffer, J. and Salancik,G. R. (1978). The external control of organizations: A resource dependence perspective. New York: Harper and Row.
- How did this disaster happen in the first place? Minerals Management Service , the American Bureau of Ocean Energy Management, Regulation and Enforcement regulates offshore oil and gas production and collects reports on spill as small as a single barrel. MMS was so confident of the system that in fact exempted BP from filling an environmental impact statement for the Macondo operation (it technically allowed the oil industry to obey them on a voluntary basis). MMS collects about $10 billion in royalties annually and is one of the government’s largest sources of revenue other than tax (Savage 2008). During the George Bush administration days, this agency was found to be ‘dysfunctional, riddled with conflicts of interest and unprofessional behaviour’ (Savage 2008). Lucy Dennett, the then associated director of minerals revenue management was found to steer a lucrative consulting contract, violating competitive procurement rules. In September 2009, the Interior Department shut down an oil royalty program run by the agency after audits found that MMS was undercollecting millions of dollars worth of royalties (Coy & Reed 2010). By the way, BP was one of the three finalists for the agency’s annual awards for offshore producers. The ceremony which was scheduled for 3 rd May 2010 was postponed. Dick Cheney was a CEO of HALLIBURTON between 1995-2000 (Hoffman & Jennings 2011 p.5) and is still associated with the company. TRANSOCEAN , just like BP has a history of accidents: A Scotsman was killed aboard a drilling rig in North Sea in 2002 (BBC News 2002); in 2007 the Bourbon Dolphin supply boat sank off the coast of Scotland killing 8 people (Offshore shipping 2008); in 2008 2 people were killed on Transocean vessels (Smith & Casselman 2010) and the DEEPWATER HORIZON DRILLING RIG EXPLOSION IN 2010.
- The Interior Departments – Mineral Management Service BP PLC and other big oil companies based their plans for responding to a big oil spill in the Gulf of Mexico on U.S. government projections that gave very low odds of oil hitting shore, even in the case of a spill much larger than the current one, however, government models, which oil companies are required to use have not been updated since 2004, the models assumed that most of the oil would rapidly evaporate or get broken up by waves or weather. In the weeks since the Deepwater Horizon caught fire and sank, real life has proven these models, prepared by the Interior Department's Mineral Management Service, wrong. BP – Under heavy fire from congress and environmental groups BP has come under heavy fire from Congress and environmental groups for its lack of readiness to handle a worst-case spill. But that criticism has overlooked a key fact: BP was required by federal regulators to base its preparations on Interior Department models that were last updated in 2004 and they have not been tested sufficiently for water that is very deep. In 2001, the then-head of the MMS environmental division wrote a paper that warned "the oil spill trajectory models currently used by the oil industry for the preparation of oil spill response plans may not be adequate for deep water." – then you have to wonder why BP were allowed to drill as this was the deepest oil well in history at a vertical depth of 35,050 ft– this is the largest drilled well in history, because of this there is a high possibility this is one of the reasons the government and BP were not prepared to stop the spill as it was at a depth where an accident has never occurred before and the governments Interior department failed to update their models.
- Researchers have spent the past decade trying to improve modelling of oil spills. The biggest challenge: to update the models to reflect the new reality of deep-water oil drilling. Spills thousands of feet below the surface behave very differently than spills on the surface. Underwater currents, for example, can grab plumes of oil and transport them far from the scene of the initial spill, scientists say. One thing to think about is that if the government did update their models and give an accurate forecast and BP were able to tackle the problem faster would the environmental damage have been a lot less? Would the oil have reached the shores of the 4 states affected by this disaster in this map? – Even though BP takes the main responsibility of the spill, should they be paying for the full cost of the environmental damage when the government has provided bad statistical data to help them tackle the crisis? Or should the government have some responsibility to fund towards this environmental disaster?
- The government were not prepared The great fear of every political leader is events, especially unexpected ones, and especially unexpected ones that are beyond the power of politicians to control. This event has no precedent: a British company drilling a mile beneath the surface of the Gulf of Mexico punctures the earth’s skin, unleashing a plume of oil that nobody seems able to stop. Although responsibility for the accident plainly lies with BP, a slick of recrimination now laps around the White House too. Governments have not readied themselves to plug holes on the ocean floor. But what if an oil companies’ engineers cannot undo their mistake? Mustn’t the government step in? – Yes admits Obama. He continued “I take responsibility. It is my job to make sure that everything is done to shut this thing down.” But mark the date on his remarks (May 27 th ) the blowout at the Deepwater Horizon rig took place more than a month earlier, on April 20 th . It is not just his political critics and media foes who say that the president’s forthcoming acceptance of responsibility has arrived woefully late. Colin Powell, Mr bush’s former secretary of state and former chairman of joint chiefs of staff, implied that Mr Obama’s reaction has been sluggish. When dealing with “something like this” that had gone beyond the capacity of the private sector or local authorities to solve, Mr Powell said, “I think the federal government has to move in quickly and move in with … decisive force.” Of Mr Obama’s claim to have been on top of things from the start, Mr Powell said: “That impression was not conveyed to the American people”. Government officials need to think carefully before taking actions Government officials need to react with more heartfelt sincerity, show human emotions and to be more careful what they say to the media as it can have many negative effects. Barack Obama supported the idea of suspending the quarterly dividends for shareholders – this has provoked anger among many business people and pensioners in the UK, many of whose pension funds have investments in the oil giant.” – This was clearly not a good thing to say, as it has angered a lot of the stakeholders affected by this crisis. "You attack the dividend and you are attacking millions of British pensioners," said Tom Watson, a member of the opposition Labour Party
- Make sure that statistical oil spill data models from the Minerals Management Service used are up to data and accurate After this crisis we can clearly see the government were not prepared for the environmental consequences of a spill at levels this deep, oil companies should never be given the permission to drill in deep waters which have not been properly analysed by statistical data and been thoroughly checked by government departments so they know exactly what to do if another crisis is to happen. Show more consideration to the stakeholders involved in the crisis Barack Obama seemed to forget that there were many people such as business people, pensioners etc. that have had money in the oil giant after agreeing that the quarterly dividend should be suspended angering many people, the government officials need to be properly advised and check every stakeholder who can be possibly involved after a crisis happens and by doing this it ensures a much higher chance that no similar problems can happen again in the future. – The government should know all stakeholders involved before and after a disaster happens, by doing this they will be more prepared for any similar future disasters and should have a better idea how to respond. Make sure that oil companies drilling have oil containment equipment ready Owen Kratz, chief executive officer of Helix Energy Solutions, one of the company's working to contain the spill for BP, said that the industry needs to have more oil containment equipment positioned to handle a blowout – instead of building containment systems after an accident. – I agree but I believe the U.S government should be taking action to make sure the oil companies have adequate oil containment equipment in preparation of a spill before allowing them to drill as these waters that are being drilled in don’t belong to the oil companies, and the U.S government are overall responsible for the wellbeing of their states and their residents. If another spill happens and the oil company cant fix it, the government must step in to take action.
- Unlike what happened with Exxon Valdez the oil giant British Petroleum has suffered an avalanche of news media, since the platform Deepwater Horizon exploded April 20. The TV news channels, radio and newspapers joined the bloggers, social media groups using Twitter and Facebook to criticize BP, for what is being widely considered as its inadequate response to the environmental crisis. "As a company, the first thing you have to understand is the amount of conversations in the online world, Companies aren't talking enough to hear what people are saying about them … and when something is related to the environment, health or safety, it is something that will not be secret for long.
- Zaleznik relates the perception of whether the actions are perceived are ‘political’ or self-interest depend on the resources possessed by individual. Others might act in the same manner, but believe that it is in the best interest for the organisation. Drory and Romm (1988) argued that those in the managerial positions are less likely to those in non-managerial positions to recognise their actions as political. It can be related to BP and their internal situation; CEO Tony Hayward might have perceived his action as non-political whereas workers from the platform and engineers probably recognised the political influence the situation caused. It is also related to micro versus macro ‘picture’ of the disaster. Variation between positions in the company and individuals can also be looked from power (possession of position and/or resources) point of view. According to Pfeffer (1992) power can stream from three sources: control over information, formal authority to act and control over resources. It is important to have awareness of each group’s interest, to be able for the organisation to work towards same objectives. As Mintzberg (1983) argues, if too many individuals pursue their own personal agenda (...) it can turn the whole organisation into political cauldron and divert it from its main task. (not just within BP, worth mentioning are the fisherman who fight each for their own and against one another to protect themselves and survive). BP’s first public statement, in which the blame for the accident was put towards Transocean, was an example of avoiding responsibility without consideration of influence it can have on future relationship with stakeholders.
- When analysing BP’s stakeholders we can consider those who are recognised and thought of if the drill went as planned and no accidents happen. However the process was not successful so that the list of parties involved and influences increased. Apart from BP and the firms who cooperated in the drilling process many other (unconsidered prior the incident) got harmed. The situation had a great impact on the community of Gulf of Mexico (fishers, everyday residents who lost not only money but the heritage which will not be replaced).
- BP was "already defining what would pay before had an idea of what they were dealing with.“ In addition, the CEO, Mr Hayward was not in the location of the disaster until a few days after the sinking, which led the understanding that the CEO of BP was off and complaints of people who live and work along the Gulf Coast. "Companies often fail to not think as consumers" during a crisis situation, meaning that companies only focus on what is at risk for them, more than those affected by crises. "BP seemed somewhat arrogantly in conducting this situation and not gets any support from the Government of the United States. Moreover, it seems essential to examine the importance of the communication in politics as well as different interest or groups might have when it comes to dealing with such problem.
- According to businessinsurance article several PR professionals were asked what went wrong with BP's plan, including BCM President Jonathan Bernstein, who had this to say: “BP is crisis planning on the fly,” When trouble rears its ugly head, it quickly becomes clear whether an organization has prepared a crisis management plan or not. In BP's case, failing to plan for a tragic but predictable crisis has caused damage to its reputation and the environment that the company will be battling for years to come. The reputation is essential to organizations as well as individuals and BP’s reputation underwent considerable damages.
- BP has proclaimed the importance of safety for its vast worldwide operations. Yet despite the improvement in injury and spill rates during that decade, BP has caused a number of disastrous or potentially disastrous workplace incidents that suggest its approach to managing safety has been on individual worker occupational safety but not on process safety. These incidents and subsequent analyses indicate that the company does not have consistent and reliable risk-management processes and thus has been unable to meet its professed commitment to safety. BP’s safety lapses have been chronic.
- Why was BP allowed to continue its offshore drilling?
- In order to provide more insight to what these numbers truly represent, it is helpful to view them in perspective to comparable incidents. It is worthy to note that whereas the Exxon Valdez spill was limited in capacity to the vessel in which it was contained, the Deepwater Horizon well, for obvious reasons, is not. However, the Exxon Valdez accident shares many traits with the BP spill. The company was highly criticized by the government and media for lack of a quick response time and refusal to acknowledge the extent of the problem and this led the public to infer they were not taking the accident seriously. The image of Exxon was irreversibly stained and there was a stigma attached to the brand that is still present today. The one good thing that came from the Valdez oil spill was perhaps the Federal Oil Pollution Act of 1990, the law states that companies must have a "plan to prevent spills that may occur" and have a "detailed containment and clean-up plan" for oil spills. The law also includes a clause that prohibits any vessel in any marine area, from operating in Prince William Sound, and Exxon introduced its Operations Integrity Management System (OIMS) in 1992.
- BP’s has been criticised for its safety through the media and US government, but we cannot forget that oil spills happen around the world. In many cases companies deny their involvement or reach a settlement out of court which barely compensates the victims. As an example: Exxon originally denied its guilt in the 1989 Exxon Valdez oil spill in Alaska and subsequent successfully appealed a federal court decision for the pay of $2.5 billion in damages. Shell has also not been held accountable for the environmental destruction and political upheaval arising from oil leakages in the Niger Delta. Against this backdrop of corporate inaction within the oil industry, the public must realize that more is being done in the BP case than one would think.
- BP realized that accepting responsibility and finding ways to restore order is the best approach. The list of activities BP is carrying out to save its reputation is long and include among other things new markets research, new merges with other companies (like the recent partnership with the Indian Reliance Industries and the Russian Rosneft), the selling of poor managed or unprofitable assets to cover the losses with compensation schemes (refineries, etc.). Other high scorers include restoring better leadership in the company, ensuring that higher quality control protocols are put in place to ensure better safety standards, as well as greater investments in rebuilding communities impacted by the spill and make the most of its rebranding campaign started in 2002 “Beyond Petroleum”. The fact remains that the company has made inroads by admitting responsibility for the spill and has taken the first course of action to not only end the spill but also to investigate the matter further. Until the relief effort is completed, it's natural for the public to want to see BP carrying out more corrective action. This statement has been coupled by the U.S. government's determination to mend the problem and a national commission has been established to probe the cause of the disaster and recommend additional safety and environmental standards.
- A range of models have been developed to help business owners prevent and deal with crises. Perhaps the most flexible is the four-phase approach. 1. Managing issues . Business owners can often identify issues that have the potential to cause a crisis. For example, if you rely on your online presence or web services, an extended period of downtime or a data loss could result in a crisis. The first phase involves identifying these issues and, where possible, changing the way you do things in order to find systems that are less vulnerable. 2. Planning and prevention . Having identified relevant issues, you should then consider ways that you can minimise the risk. Where it is not possible to remove the risk altogether, you should plan ahead to ensure you can manage any resulting crisis efficiently. This might involve drawing up plans to minimise business disruption, manage press interest, and reassure your clients or customers. 3. Managing the crisis . In the event of a crisis, the plan you have formulated should be followed carefully. All relevant parties should have been briefed in advance. Remember, though, that circumstances can change and unexpected events can occur. Make sure that you are flexible enough to deal with these events. 4. Post-crisis . Having navigated the crisis, you should make sure that you learn any relevant lessons. What could you have done better? Could the crisis have been prevented? If so, what systems do you need to change?
- Lesson 1: Crises expose dysfunctional organizational cultures. With its army of media advisers and PR professionals, BP made the mistake of trying to spin its way out of this crisis rather than tackling it head on. Tony Hayward should have realized — or been advised — that there are some crises that cannot be spun. Instead, he has done untold damage to BP's reputation with his gaffes and apparent inability to understand public reaction to his comments. He appears weak, petty, defensive and lacking a grip on the situation he has been moved aside to make way for Chairman Carl-Henric Svanberg. Lesson 2: Leaders must recognize when a crisis can't be spun. While Hayward is rightly being held to account, what can be said about the other leaders' roles in the crisis? In my view, Barack Obama has not lived up to his early promise as a reflective and thoughtful leader who can mediate effectively in times of crisis. The President might have intervened earlier (it was 50 days before he met BP's leaders), highlighting the bigger issue of environmental damage and emphasizing the necessity of all sides working together to stem the damage. Instead, he reacted politically, responding to criticisms of his own slow response by deflecting blame unequivocally on BP and unleashing the nation's rage on the company, which at times was extremely ill-judged . As for the other key players, we have heard little from the leaders of Transocean, a company that was clearly no minor player in the disaster since it leased the rig to BP and was responsible for its safety. Lesson 3: Leaders need to work together rather than scoring points or deflecting blame. In some ways, a clearer comparison can be drawn between the Gulf of Mexico oil spillage and the banking crisis than with 9/11. In both the oil and banking industries, risk management came a poor second to innovation, profitability and market demand. The duty of leaders, politicians and investors to adhere to regulations was pushed aside in the drive to build successful businesses, create jobs, and deliver shareholder profits. They forgot (or refused to remember) that true leaders are stewards of their organizations and must lead for the longer term. If BP goes out of business as a result of the Deepwater Horizon crisis, then its leaders have failed on a monumental scale. Similarly, if U.S. politicians are shown to have put party or national concerns before matters of global importance such as the environment, they will ultimately be failing their nation and people. Lesson 4: Leaders are there to serve their companies, people and communities. While leadership has been visibly lacking at BP and among political leaders during this crisis, there has been no shortage of leadership among community members and volunteers in the region who have mobilized themselves in an effort to mitigate the effects of the spill. As with 9/11, ordinary people have shown remarkable leadership capabilities, volunteering to clean up the oil and help the stricken wildlife, without thought or care for their own health and safety. Unlike the elected leaders, they see the bigger picture and recognize that the environment and the livelihoods of local people are more important than corporate profitability or political maneuverings. If the leaders in this crisis had followed their example, they might have made more progress in dealing with the crisis. The pictures of local people working to clear up the spill should be put before Hayward, Obama, and Jindal every day to remind them that leadership is not vested solely in those at the top of organizations or political parties, and that they should remember they can learn from everyone around them, whatever their position or role. Lesson 5: True leadership exists beyond title and office — elected leaders should remember this. These are just a few thoughts about the situation unfolding in the Gulf of Mexico and some of the parallels that can be drawn for leaders. What are your thoughts? Do you have any constructive suggestions? And if you could send one message to the leaders in this crisis, what would it be? As ever, I look forward to, and appreciate, your views.
- Crisis management can seem rather abstract, particularly for smaller businesses. But firms of every size face potential crises every day – so how can you adapt some of the more complex elements of crisis management to help you deal with these problems? • Don’t ignore it. When faced with a crisis, the worst thing you can do is bury your head in the sand. You need to act quickly and decisively, tackling the crisis head-on. • Learn when to ask for help. It may well be that there are elements of a crisis that you simply cannot deal with in-house. Big technological failures, for example, might require you to bring in external professional help. Make sure you can identify when you need another pair of hands. • Manage the media. Many small firms underestimate the importance of media relations. In the worst cases, a crisis can completely destroy your brand – and that it is a crushing blow for a business of any size.