BP CASE STUDY STRATEGIC PLANNING AND LEADERSHIP by Student’s Name

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BP Case Study: Strategic Planning and Leadership
Abstract
British Petroleum is a multinational oil company located in London,
England and is the third largest petroleum company in the world and
fourth largest by revenue terms. From the perspective of strategic
planning and change, this paper will describe the recent events that
took place at the British Petroleum Deepwater Horizon offshore oil rig.
This paper will also discuss various strategies by the company before
the accident occurred through the use of appropriate strategic
frameworks. In line with the occurrence, this paper will discuss the
implications of the company’s strategy in regard to the public
perception and how they impacted upon their organizational performance
at the time and in the future. In the discussion, the paper will also
describe the ability of the company to maintain a balance between its
interests and expectations in relation to the adopted strategic
frameworks.
Strategy before the Accident
In reference to the concept of strategic planning and strategic change,
it is possible that British Petroleum Company could have minimized the
risk of the losses at the deepwater oil drilling incident. This could
have been done through better strategic planning and better crisis
management after the occurrence. The environmental crisis resulting from
the Deepwater Horizon drilling rig explosion is enormous in addition to
killing 11 workers, injuring 17 others, and a sea-floor oil gusher leak
of over 185 million gallons of crude oil into the Gulf of Mexico. The
immediate image crisis was the media filling the public with stories
criticizing BP for lack of proper precautions to prevent the accident
and for their public response after the occurrence (BBC News, 2011).
Relevant Theories and Principles
In this analysis, the major relevant management theories and principles
to be applied are strategic planning and leadership in the way they
relate to the discussed crisis management.
Strategic Planning
Strategic planning is a management processes through which organizations
define their key strategies and decision making in terms of allocating
resources to pursue that adopted strategy. This involves decisions
regarding organizational goals in line with long term operations, value,
and growth. Strategic plans are highly affected and influenced by
external forces which require various analytical tools to evaluate
different strategic approaches on the external factors. In relation to
the BP case, the company should have adopted tight strategic plans
before and after the tragedy to save the image of the company. This is
because the strategic plan the management chooses to adopt gives a
strong indicator of the company’s corporate values and ethical
climate.
While responsibility for strategic planning is vested in the senior
management, it is important they collaborate with tactical and
operational managers in the development of that plan. Strategic and
tactical planning adopts the vast strategic goals as specific action
plans for different departments within the organization. This is what BP
should have broken down into specific departments to strongly monitor
the adoption of precautionary measures at the lowest level of
operations.
Leadership
In order to effectively implement a strategic plan throughout the
operations of a company, managers must be good leaders with the ability
to influence others to attain organizational goals along with individual
goals. The management of BP has to envision a brighter future and have
the ability to communicate that vision to the public and their staff.
They should have the leadership to empower and motivate people to
contribute towards the achievement of those goals. For the purposes of
the analysis of the BP case, discussion on this principle will focus on
characteristics of effective leadership in relation to crisis
management.
Earliest Planning Stage
Before starting to undertake new oil or gas projects, the management of
BP claimed that they had taken the appropriate actions to minimize the
environmental impact of any eventuality of their ventures. Since the
1970s, BP has enlisted had the help of independent experts to evaluate
the environmental effect of a new project will (British Petroleum,
2012). Such thorough reviews took care of potential problems and the
best ways to address the eventuality of these problems.
In 2006, BP adopted a set of environmental and safety requirements for
all new projects (British Petroleum, 2012). The goal of the BP
management is to ensure that potential issues are thought through before
a project gets underway. Their plan was to continue with this
precautionary procedure throughout the project by watchfully monitoring
issues from beginning of the project to the end.
In 2011, a United Sates panel investigating the Gulf of Mexico oil spill
stated that all the activities and precautionary measures of the
companies involved were at fault. In addition, it was also found that
poor decisions were made to reduce the loss and save time during the
crisis management (BBC News, 2011). Such undesired business decisions
arose from poor leadership as a strategic principle. These decisions led
to the disaster specifically, the use of flawed design for the cement
that sealed the bottom which was faulty (BBC News, 2011).
The matter is a poor leadership decision leading to an incorrectly
judged success of a seal as the investigations indicated (BBC News,
2011). It is clear that this error should have been fixed appropriately
before the start of the project. This leads to the contradiction of the
strategic planning principle since the BP statements on precautionary
steps to avoid any disaster indicated otherwise.
Monitoring
The facility’s managers had to look daily at the environmental data at
the production facility control room which he used to make decisions
relating to the environmental effects of the facility (British
Petroleum, 2012). According to BBC News (2011), the investigating panel
established that this was a fundamental mistake made by the team
responsible for monitoring the sealing. It was found that there was
nothing to indicate that the engineering team of the company conducted a
disciplined analysis of the implications of the underlying risk factors
(BBC News, 2011).
Ethical Environmental Issues
Unless proper ethics are enforced, even companies that are run
effectively will avoid environmental ethics. It would seem that BP is
currently making a lot of efforts to ensure that future environmental
issues are prevented and handled before they become a tragic issue.
However, this is optimistic for the company that it operations will be
hopefully fine and measures will help to ensure environmental disasters
do not continue to occur.
Safety Concerns
There are many angles of approach adopted to investigate the
circumstances that had surrounded the Gulf Oil spill. These facets to
this catastrophe bring to light the safety concerns involved in regard
to equipment and procedures used by the British Petroleum in it entire
operations and in particular on the Deepwater Horizon rig. Drilling
offshore and onshore is regulated by legislation with many rules and
regulations set in place to govern the use of equipment and procedures
that in drilling for natural resources. Understanding that these rules
are firmly in place is one thing enforcing them uniformly is another. In
many cases, these rules are ignored and regulators sometimes overlook
these infractions.
Implications of BP’s Strategy
The ethical questions surrounding public health implications of the BP
spill are numerous. The cause of these implications is that there was a
unique obligation to offer the victims of the spill access to
specialized medical and health care. Other than the government or
insurance companies, BP had the greater responsibility falling upon it
over the effects of the spill due to the implications of the
management’s decisions. The following are some of the main
implications of the responsibility.
Effects of Exposure
Recent studies suggest that the coastal population that was exposed to
the spill pollution in a variety of different ways. According to The
Institute for Southern Studies (n.d), about 77 percent of the population
was exposed through contaminated air while 74 percent were contaminated
through contaminated water and 36 percent from eating contaminated food.
According to the Institute for Southern Studies (n.d.) most individuals
suffered less severe health problems. The most evident problems being
side effects of the exposure such as headaches, dizziness, cough and
fatigue (The Institute for Southern Studies, n.d.). However, few severe
health issues that caused damage to internal organs like the liver,
lungs, kidneys and respiratory system were recorded.
Other effects were mental health issues arising from the reaction to
financial and personal stress caused by the spill.
Health Care Cost
BP introduced an uncapped class-action settlement that cost about $7.8
billon to resolve litigation cases brought by over 100,000 individuals
and organizations. These individuals, organizations and groups are
claiming medical and economic damages from the oil spill (Baltimore &
Ingram, 2012).
Cost of Clean-up
The financial weight of clean up of the oil spill effects has been huge
for the company. Claims have been filed by various plaintiffs to include
economic loss to fishermen, natural resources damages, birds threatened
or harmed by the oil slick. Despite the burden, expensive restoration
projects were designed to speed up efforts to restore natural resources
in the Gulf that were affected by the spill. Through the settlement
efforts, a settlement with victims of the spill was made in 2012
amounting to 7.8 billion dollars which resolved most private claims for
economic loss and property damage. However, it does not cover suits
filed by the United States government and Alabama and Louisiana states.
BP loss settlement funds are currently supporting several community
based initiatives several efforts have focused primarily on support for
educational initiatives, community training, and community development.
BP also donates office equipment and supplies to community groups and
non-profit organizations in a number of community events along the Gulf
Coast and Alabama Coastal Clean-up (Korkor, 2012). The company has also
involved itself in the Project Rebound to provide mental health
counseling services such as food, clothing, transportation, and housing
assistance to victims of the spill. This project has now provided $1.8
million in BP funds to Alabama non-profit organizations.
Through the spill, tourism activities in the region were affected
leading to a halt in the promotion of the industry. However, in 2011, BP
committed $92 million over a three-year period to help bring back the
tourism economy in Alabama, Florida, Louisiana and Mississippi. This
funding is in addition to other tourism grants of about $87 million
dollars provided by BP to the states in 2010 (British Petroleum, 2012).
The monetary support provided by BP has been a tremendous in the
beginning, during the spill and after the occurrence was necessary due
to the economic impact the spill had on the environment and the
population. The scope of the BP’s financial assistance has ranged over
several areas of assistance ranging from communities, seafood market and
tourism. To BP, this is a moral obligation to provide such assistance
because the company took ultimately responsibility for the spill.
BP’s Balance on the Crisis
Crisis leadership is more concerned with the personality of the
management than just their capability to handle the situation. According
to Johnson (1992), learned crisis leadership overcomes the lack of
character or integrity. Effective crisis leadership must take action
deliberately, immediately and effectively with high moral values and
ethics.
To handle the interests of the public, BP were to adopt proper crisis
management and crisis communication. Failure to select the right
spokesperson following the rig explosion created a major problem for BP.
This is because the CEO, Tony Hayward, was definitely not received well
by the public due to the public opinion. Also, the CEO lacked the
ability to emotionally connect with people and inspire trust and
confidence in ability of BP to manage the crisis.
Regardless of the management’s personal characteristics the CEO was
not the best choice to engage the American public on behave of BP, a
British company. Far more damaging the image of BP to the public than
the British background were the careless remarks by the CEO to the
public such as claiming to get his life back which was insensitive to
the families of the explosion victims.
Another public interest blunders by the management, included the attempt
to shift some of the oil spill blame to other companies. The management
had also taken efforts of trying to minimize the environmental impact of
the incident, and making overly optimistic estimates of when the leak
would be contained. In an effort to promote public image, BP hired a
public relations firm for crisis communication advice, but a great
damage had already been done. Training of leaders in advance of an
emergency or such a crisis would have served them well. Leaders should
have routine training and practice drills on how to handle such crisis
so that they are well prepared to respond to such tragedy promptly and
properly.
Senior management should be responsible of establishing a corporate
culture that encourages employees to question and identify potential
risk factors facing the company. Through its strategic planning, the
management and employees should accept responsibility when the risk
factors cause tragedy or loss. BP should provide formal statements of
organizational values that will paint a picture for the desired company
image and ethical culture. In the case of British Petroleum, there is a
discrepancy between their publicly stated mission and values, and the
actions taken by their leaders. When managing the crisis, BP leaders
should have based their decisions and actions on the ethical principles
set in their public statements.
Conclusion
BP could have reduced the risk of the deepwater oil spill incident by
engaging in better strategic planning and leadership for preparedness,
mitigation and crisis management. The management should have established
crisis better management through greater upfront preparation. Their
strategic planning in the BP case was based on short term goals which
eventually sacrificed long term image and returns for short term profits
gains. Better crisis leadership planning and training would have made
the handling of the situation more effective. In addition, more careful
contemplation should have been taken in their corporate communication
with the public before, during and after the incident. This should be
done by taking care of the interests of the public while balancing on
the company’s recovery from the tragedy.
Reference List
Baltimore, C., & Ingram, D 2012, BP oil spill settlement:fine for
deepwater horizon disaster may be largest criminal penalty in U.S
History, Huffington Post, Retrieved from http://www.huffingtonpost.com
BBC News 2011, BBC News – US oil spill: `Bad management` led to BP
disaster, Retrieved from BBC News US & Canada Website:

British Petroleum 2012, Environmental Concerns, Retrieved December 27,
2012, from British Petroleum Website:
http://www.bp.com/sectiongenericarticle.do?categoryId=9021503&contentId=
7040000>
Johnson, G 1992, ‘Managing strategic change—strategy, culture and
action’, Long Range Planning, 25
Korkor, S. B 2012, Deepwater horizon explosion: challenges for
bioethics, Retrieved from
http://www.thehastingscenter.org/Bioethicsforum/Post
The Institute for Southern Studies .n.d., New survey bp oil spill’s
human health damages, Retrieved from http://www.southernstudies.org/2012
Weick K.E. and Quinn R.E1999, Organizational Change And development,
Annual Review of Sociology, University of Michigan Business School.
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