BP and the Gulf of Mexico Oil Spill:
Individual Case Analysis of Organizational Culture Introduction There are many issues that can be observed and assessed in the case which has come to be known as the largest oil spill in History. BP’s Gulf of Mexico oil spill incident brought attention to the kind of culture that U.S. government officials, industry regulatory agencies, and all oil-drilling firms created and fostered. With an industry climate that cared more about production rather than safety and environmental protective efforts, it was easier for drilling companies to make a great deal of flawed decisions in their business practices. If efforts to change the industry culture and implement better standards of operations do not come into play, the likelihood of such a similar event could happen again. As we look in to BP’s earlier years and identify their decision making pattern that were established while adapting to endless changes in their external environments, we will be able to better assess what the organizational culture was like at BP. Looking at the industry as a whole, we can assess how the actions of political parties and regulatory agencies influenced and shaped the culture for many firms operating in that industry. BP was always trying to cut costs wherever possible, worked hard to meet demands, and continuously exploring deeper water drilling opportunities. This type of behavior allowed BP to be an industry leader. With new environmental issues arising, new leaders, were influenced to adopt a greater sense of value in regard to work safety and environmental protection. BP’s CEO Tony Hayward, along with former BP leaders, had begun to put a little more value in to these safety and environmental issues, yet in times of critical decision making, it was easy to see that the company valued production and profit goal over safety. Hayward did not use many of the embedding mechanism necessary to establish consensus on what thing were and how things need to be. Observations on Hayward performance as a leader can help assess the company’s safety culture, and things that he should have done.
Who is at Fault? Fault lies in both BP and the industry. BP’s actions and behaviors are a reflection of what the industry climate has become over time. If we view the other industry member such as politics, regulatory agencies and other oil-drilling companies as external environments to BP. It is easier to see how, overtime, BP’s culture expressed similarities of a utilitarian organization typology (Schein, 2010). This typology refers to organizations that tend to abide and operate by the rules that allow them to meet production and performance goals. As (Schein, 2010) explains, every group must continuously adapt to changes in their external environment in order to survive. In the BP case, workers were required to meet the growing demand from the U.S. government’s need of energy independence. Performance was measured by production and profits. Thus, driving BP management to adhere to strict time schedules and production goals, while keeping costs and expenses as low as possible. BP’s position as an industry leader had made it easier for employees to assume that BPs way of doing things, worked well. As time went on, demands from another type of external influence, regulatory agencies, insisted that BP make changes to their ways of operations because of the increasing concerns for worker safety and environmental protection. Since BP origin up until this point, it was understood throughout the company that safety issues and unsafe practices were a norm and came with the job of providing the nation with energy. Even with more safety regulation standards set in place by regulating agencies, it was hard for BP to change the way they had learned to survive in the industry. After BP had experienced further refinery accidents, serious injuries and deaths, regulators issued fines to the company in means of punishment. This method of allocating punishment didn’t seem to influence much change in BP’s actions because they knew that if they got caught for not meeting standards, they could afford to pay the fine continue operations. BP’s basic assumption was that if things weren’t done properly, and it went unnoticed, they were doing all right. In summary the industry is at fault in regard to the type of climate it had created for operating firms. The growing demands from government officials and the lack of harsher punishments/ improved regulation standards from regulators, influenced the way that BP and many other organizations perceived the means to grow and survive. Looking into BP Company, fault can be put primarily on leader Tony Hayward and management. All of BP’s past leaders have mentioned their ideas of making changes and putting more emphasis on safety concerns. However, many of them did not follow through with actions. As noticed in the case, when critical decision making situations arose during the building of the Macondo well, there was very little effort that BP leaders put into the weighing of options. Although they were aware of possible safety issues that could arise in certain construction decisions, it was a basic assumption that the decision that saved the most time and costs, was ultimately the best option. When OSHA requested that that BP add a non-executive member to their board of directors, specifically one with greater knowledge and expertise in refiner safety operations. OSHA’s intention of adding this member to the board, was to give BP the necessary tools needed to make more educated decisions, and prevent further accidents from occurring. BP chose to ignore the recommendation and is at fault for making risky unsafe decisions.
Most Significant Flawed Decisions. Due to the damages that a hurricane had done to the original rig that BP had planned to use, they had to switch to a more expensive rig. This initial issue had already, pushed BP off their time schedule, and over their proposed budget, which led to a series of flawed decision making. Throughout the construction of the drilling site BP made critical changes to their original plan to save time and costs. In order to save time, BP ordered drilling to stop shorter than proposed, stop cement columns at half its original length, ignored multiple test results, and sent home Schulmberger personnel instead of allowing him to administer testing. In efforts to save costs, BP chose to use the “string-line” system. It was noted that this system was cheaper but les durable to harsher drilling conditions. They also opted to use only 6 centralizers instead of the recommended 16, they used a cheaper, lightweight cement mixture that they didn’t have much experience with. During the separation of mud and seawater, BP decided to use a different spacer than they normally would have. The spacer consisted of unusual leftover fluids found on the rig. BP chose to use this fluid as the spacer so that they could of dispose of it before they faced any hazardous waste regulations when they returned back to land. These series of flawed decisions made during the Macondo well drilling, ultimately lead to the rig explosion and oil spill. BP should have place safety and environmental protection over profits and meeting production time. All members working on the well, shared the same basic assumption that it was very important to meet the deadlines and keep costs low, even if it meant taking risks that could result in a variety of harmful accidents. In the case it was noted that crewmembers chose to turn automatic alarms systems on the rig to “manual” mode because of the frequent false alarms negatively affected their performance. This decision reflects the basic assumption amongst workers, that performance was more important than safety.
History and Culture Shaping Decision
In BP’s earlier years, the case provides a series of critical events that helped to shift and shape the company’s culture. Every organizational culture is a result of shared patterns in behavior, thoughts, feeling, values and actions. These shared patterns develop as the group strives to adapt and grow. (Schein,2010, p. 73) Throughout the growth of BP, it was common for accidents to occur. It was assumed that the level unsafe environments and risks came parallel with the level of return and profits. In 1995 John Browne, BP CEO (at the time), made a great deal of return and profits for the company and investors. Although he stated that the company would be placing more emphasis on safety and environmental issues, he invested a lot of their research into deeper water drilling explorations, rather than, addressing current safety issues and concerns. This was reflected by the continuous amounts of deaths and injuries that had occurred during his time as CEO. Tony Hayward moved from head of explorations and production to CEO. As stated by (Schein, 2010 p. 32), “Leadership is the source of beliefs and values that get the group going”. Coming from the exploration and production division of BP, Hayward had already built a sense of subculture within that department. The subcultures main mission was built on exploration and production, which also leads to the formation of shared basic assumptions of goals. The decision to move someone from that department, to CEO indicates how BP culture, regardless of their claims to change safety culture, continue to act in favor of cost saving and risk taking.
Political and Regulatory Environment In the case it was noted that the need for energy independence initially started the growing demand for offshore drilling. As consumption grew, demand increased and pushed oil drillers in to the exploration of deeper water offshore drilling. (Schein,2010, p75) explains that the key to survival is to keep balance between all major stakeholders of the organization, and that the balance ultimately reflects the organizations mission. Some of BP’s major stakeholders included, the governments, regulatory agencies, and investors. Since the government needed BPs production to increase, they supported risky explorations in order to increase U.S. goals for energy dependence. Other investors of the company expected a good return on investments, which meant BP needed to have high production, at the lowest costs possible.
The regulatory environment played a major role in shaping the culture the BP as well. Mineral Management Services (MMS) was created to monitor and regulate industry practices and promote safety. Its intentions, to regulate and improve safety standards for the industry could not keep up with the speed of oil-drilling technology advancements. They didn’t have enough of a workforce with the capabilities and expertise to create necessary safety operating standards. The industry regulators also couldn’t stop operations in firms that disregarded the rules and standards, because the U.S. still needed these firms to meet demands.
When looking at the whole industry as an organization, it is noticeable that there isn’t a shared assumption on how performance is measured, as well as shared assumptions about remedial and repair strategies. In BPs perception, profits and production measurements justified performance, with little regard to safety risks. The regulators’ perspective on performance measurements, placed heavy emphasis on safety matters over other aspects. It was difficult for regulators to influence better safety practices and environments because the only thing they did was issue fines. BP was generating enough revenue to pay those fines and continue to operate in the manner it was. The regulators perspective was that issuing fines as a form of punishment meant that, the firm was in trouble, and need to fix something. BP’s perspective on the matter was that, if they pay the fine and “say” that they will fix it, everything will be okay.
Safety Culture BP did not have an appropriate safety culture because of the basic assumptions the company members shared about what safety is, how it is measured, and how important it was. Meeting deadlines and keeping costs low were the primary means of meeting organizational goals. It was a basic assumption that taking risks meant higher reward. Thus, perception and meaning of what safety was, differed from those in regulatory agencies. It was also noted earlier that leadership aboard the Deepwater Rig had switched the automatic alarms system to manual because of the frequent false alarms affecting sleep and productivity of workers. The leaders could have invested in fixing the automatic alarms but chose not to. This portrays BP’s shared assumption that it would cost too much to provide a safer environment for their own selves and valued production cost saving strategies more. When workers decided to disregard all test results and sent testing personnel home without administering tests, it became evident that the shared assumption about information and truth was more pragmatic than moralistic. BPs’ view on information and truth, was that information didn’t have as much validity as their own personal experience and rationalization for decisions created the meaning for truth.
Evaluation
What mistakes did Hayward make? When looking at the various flawed decisions made in this case, along with the observation that no management or workers stood up to oppose them, it comes to realization that BP’s culture has become so strong that it chooses its leaders and workers, and deters any efforts from external environments that could affect change. The main mistake that Hayward made was that he did not follow through with his statement to enhance safety measures and environments. Since the organization was large and decentralized, Hayward should have used a variety of embedding mechanisms to implement is perception on the values, beliefs, and assumptions to safety. He need to make sure that he communicated clearly what the new mission and goals were for the company, and how these changes were critical to further growth and survival of the company. As the event unfolded, Hayward had no explanation and pointed blame at the industry rather than taking responsibly.
Lessons learned
The first lesson learned is that during critical moments and crisis, the organizations reactions reveal their culture, and culture is a reflection of their leaders’ beliefs and values. We can identify key artifacts and patterns that reflect what culture is. The leaders’ actions ultimately create the climate for which the culture is formed. It is important to know that the leadership team should be working together to assess issues in order to fix them and build a more responsible and sound culture. Another big lesson learned is that the ultimate key to growth and survival is to continuously balance the need of all stakeholders. Since an organization can have more than one stakeholder, leaders must identify what the latent functions are of the group in order to set a clear mission. As leader try to shape an organization, they must understand what the effective primary and secondary embedding mechanisms are, and the importance of their implementation. References
Schein, E. H. (10th ed.) .(2010). Organizational Culture and Leadership. Chap. 1-15.