The fuel company allowed shortsightedness in pursuit of profit—as demonstrated in its choosing cheaper casing seal
Posted on Harvard Business Review: June 8, 2010 8:23 AM
I've been watching BP carefully long before anyone heard of a "top kill" or "Lower Marine Riser Package Cap."
I lived in Cleveland in 1979, when BP was acquiring Standard Oil of Ohio and worried for my friends who worked there. But I got reassurance at the time from Marvin Bower, a founder of McKinsey & Co. He told me BP wanted Standard Oil's expertise in Alaska, along with their North American distribution system. Marvin emphasized that BP had a very human, non-hierarchical culture, respect for Standard Oil's people and careful style of doing business. "The executives at British Petroleum," he said, "are people of integrity."
Now, 31 years later, in 2010, that culture seems to be lost. Culture is an organization's operating system, the values that everyone lives by. The operating system helps humans communicate and make decisions. The operating system will not allow communication or decisions that could harm the values or purpose of an organization. It is like a translator.
In the case of BP, the culture didn't work effectively and now its failure is on full display. It is possible that the error messages were so frequent that everybody chose to ignore them. A good culture would, by default, close all the possible doors to viruses or malware. A good culture or operating system is always going to respect priorities that keep the system working with integrity. Has the culture given way to a voracious need for corporate profits or is the problem simply arrogance? Did management become so cocky that they forgot that drilling in 5000 feet of water means pushing the edge of technology?
BP's culture allowed extreme shortsightedness in pursuit of profit at the cost of safety or environmental stewardship. As the drill was planned, BP chose a cheaper casing seal, which reportedly contributed to the blow-up. Also, the company intentionally cut corners on procedural and safety. For example, last June, exceptions to BP safety standards were taken to senior executives who approved them. And according to a rig survivor interviewed on "60 Minutes," BP ordered partners to cut corners because their absurdly ambitious drill schedule was off by several weeks. Hours before the explosion, multiple warnings arose; yet all were ignored. So much for the values of Standard Oil and BP. Incredibly, these penny-pinching moves were made as BP racked up record-breaking profits!
Even worse, the broken values appear to appear to go on, thanks to the company and the government. Consider BP's attempt to disperse oil with Corexit, the dispersant already banned for 10 years in Europe. It's highly toxic, but it does get the oil to sink below the surface, where it can't be seen, thus decreasing the visual horrors as the goo comes ashore. It pushes the oil below the surface into the ocean column where it kills underwater sea life, and breaks it up into such tiny morsels that it can actually be absorbed into the skin of ocean and marsh-dwelling beings. BP snubbed the Environmental Protection Agency's suggestion to stop using Correxit. In response, the EPA blandly called for a "study" of other dispersants.
This fiasco has become more about public relations than public's right to know. Rather than releasing realistic figures of the volume of oil flowing into the environment, BP knowingly cited a very conservative estimate. They initially put up a video loop instead of live feed, until Rep. Ed Markey of Massachusetts forced a change. Their website excluded information about damages to fish and wildlife. Remember the Tylenol tampering scandal? James Burke and his team led a company culture that admitted the problem and set out to rectify it without pinching pennies. Along the way, they retained customers' loyalty. And they did the right thing. That's an example of a comapny culture leading the way forward and stands in stark contrast to what we see coming from BP today.
In the last couple of days, I called my old friends from Standard Oil of Ohio. One had retired, and lamented that the company's values had disappeared in the wildcatter '90s. The other just said, "It isn't Standard Oil anymore." How true.