Posts Tagged ‘Deepwater Horizon’

How long should it take to change a corporate culture? BP has been struggling to change its safety and risk management culture since at least 2005. The BP board was right to ouster Tony Hayward, because it’s taken too long, with the results we’ve seen in the Gulf of Mexico. The reality is that changes can be almost immediate if the CEO and board back up and support the people in the organization who see what is required to make the change. They have to be ruthless in punishing unacceptable behavior and in rooting out holdouts. They also have to promote and reward supervisors, managers and executives that believe in the new orientation. They must literally lead the charge to change practices and beliefs in the organization, even to the point of correcting minor mistakes and micromanaging initiatives that are critical to the strategic change. That isn’t what is taught in MBA courses on strategic management and leadership, but that is what is required for truly deep strategic change to be successful.

© 2010 Richard Martin. Reproduction and quotes permitted with attribution.

Listen to the podcast: On Target 14-06-2010

BP CEO Tony Hayward’s performance in the Deepwater Horizon disaster in the Gulf of Mexico leads us to ask if companies can better prepare their executives for crises. At times, Hayward has seemed exhausted and despondent. His comments about wishing he could go back to life as usual and his occasional musings minimizing the ecological impact of the disaster clearly show someone who is out of his depth. This is to be expected in someone with little or no training in crisis leadership and decision-making.

I know of only one organization that truly prepares its leaders for crisis leadership, and that is the military. Compare Hayward’s discomfort with the coolness and reserve of Admiral Thad Allen. His command and leadership skills have been honed over a career in progressively demanding positions, including that of directing US federal relief efforts after Hurricane Katrina. His statement a few weeks ago that “We need to start under-promising and over-delivering” was at once refreshing and indicative of someone who has respect for the public and shows prudence in dealing with uncertainty. There is currently nothing comparable in the business world.

It is time for companies to emulate the military and to better prepare their senior executives and middle managers for crisis response and leadership under stress. Companies must select managers with excellent business acumen, but they also have a fiduciary responsibility to prepare and train them for disasters and crises, particularly when their actions and operations have such momentous risks.

© 2010 Richard Martin. Reproduction and quotes are permitted with proper attribution.

In this short clip, I was interviewed about some of the challenges and decision factors that high-level leaders such as Obama and BP CEO Tony Hayward might be facing as a result of the oil spill crisis in the Gulf of Mexico.

© 2010 Richard Martin

I was quoted on 10 June 2010 in an article by the Canadian Press on the massive risks confronting BP in the months and years to come. It’s a piece on finance and investment, but it’s an interesting read nonetheless.

© 2010 Richard Martin

BP’s woes in the Deepwater Horizon disaster in the Gulf of Mexico are consistent with its longstanding culture of risky behaviour and gambling. BP has had many costly accidents and incidents, with major losses in both money and lives. This is nothing new for BP. The company started in the early 20th century as the Anglo-Persian Oil Company, to exploit Iran’s oil resources. It has historically operated in the most dangerous and risky areas of the globe. After the fall of communism, BP invested heavily in Russia and has had numerous disputes with Russian partners and the Russian government. This shows just how persistent a corporate culture can be. BP’s strategy is to be at the forefront of the riskiest exploration and production plays in the world, presumably in order to access the biggest rewards.

Well, you can’t make high-stakes gambles consistently and not lose a few along the way. That is why BP has been dogged by controversy over the years, most recently with the Gulf of Mexico crisis. Most global companies with this much at stake are much more risk averse. They ensure that risky undertakings and outright gambles are only a small part of the business, or can at least be sequestered from their other operations and results. However, BP’s high-stakes culture means it has one of the highest corporate risk appetites in the world, and certainly in the already risky oil business. The rewards can be great, but eventually the cowboy mentality and cultural machismo of riskiness can catch up to you. I for one see major risks in the immediate future for BP, and ultimately when the full consequences of this disaster play out.

© 2010 Richard Martin