EFFECTIVE LEADERSHIP: STYLES AND PATTERNS OF LEADERSHIP BEHAVIOUR
CASE STUDY: BP IN DEEP WATER
PRESENTED TO: MS. FLORENCE MUINDI
BILIA L. KAMBARA D61/67870/2011
GRACE MAINA D61/72648/2012
JANET MWENGA D61/73222/2012
JOYCE KAMURUA D61/72861/2012
KELLER S. LISANZA D61/68473/2011
LAWRENCE MULANDI D61/72121/2011
THOMAS M. KANDA D61/79306/2012
TABLE OF CONTENTS
2.0SUMMARY OF THE CASE 3
2.1 Mission of the Organization 3
2.2History of BP 3
2.2 Leadership at BP 4
2.3 Leadership Styles at BP 5
3.0QUESTIONS THAT NEED TO BE ANSWERED BY THE BP CASE 7
4.0ISSUES DISCUSSED IN THE CASE 8
4.1 Leadership Issues 8
4.2 Environmental Issues 10
4.3 Industrial Issues 11
4.4 Ethical standards 11
5.0LESSONS LEARNED 11
6.0COMMENTS AND CONCLUSION 13
6.1 Organizational Leadership 13
6.2 Organizational Culture and Change Management 14
Leadership is the art of inspiring subordinates or followers to perform their duties willingly, competently and enthusiastically. It is known as a social influence process in which the leader seeks voluntary support from the subordinates in order to achieve organizational objectives.
Leadership has also been said to be the process of getting things done through people. The quarterback moves the team toward a touchdown. The senior patrol leader guides the troop to a high rating at the camporee. The mayor gets the people to support new policies to make the city better. A leader is "a person who influences a group of people towards the achievement of a goal
There are various forms of leadership behavior combined with different styles and patterns that this paper seeks to highlight and deeply discuss through analyzing “BP in Deep Water”, a case study of British Petroleum (BP) company,one of the largest vertically integrated oil and gas companies in the world, headquartered in London, the United Kingdom (UK), with main operations in Europe and the United States of America (USA).
According to Datamonitor’s BP report (2011), BPs operations primarily include the exploration and production of gas and crude oil, as well as the marketing and trading of natural gas, power and natural gas liquids. The report states that BP employs about 79700 people, with 68% of its fixed assets invested in the Organization for Economic Co-operation and Development (OECD) countries, 42% located in the USA and around 20% in Europe.
As part of the September to December Semester, course work group Assignment for DSM 504, Leadership and Organizational Behavior, this particular group is considering the case study titled “BP in Deep Water”. This paper will therefore analyze the case looking into the summary of the case study, the questions that need to be answered by the case study, under the topic“Effective Leadership,” not forgetting to highlight the issues being discussed. The lessons learnt and the group members’ comments will form part of the conclusion of the paper.
SUMMARY OF THE CASE
The case study titled “BP in Deep water”is an overview of BP and the various leadership styles exhibited by its leaders since its inception. It highlights the main challenges faced by the company including the catastrophic Gulf of Mexico oil Disaster and how these leaders managed to overcome them.
2.1 Mission of the Organization
These leaders were forging forward to achieve the mission of the company which stated as follows;
BP wants to be recognized as a great company — competitively successful and a force for progress.
We have a fundamental belief that we can make a difference in the world
We help the world meet its growing need for heat, light and mobility.
BP is progressive, responsible, innovative and performance-driven.’
2.2History of BP
BP had operated like an arm of the British Empire since its founding in 1909 as the Anglo-Persian Oil Company. The government became its biggest shareholder, and the Middle East provided virtually all its oil. However, BP was eventually excluded from Arab countries and the days of easy access to bottomless reserves were over. BP found two new sources of crude to replace a fraction of what it had lost, but in far riskier environments. These were Alaska’s Prudhoe Bay and the North Sea. Competitors later derided BP as a two-pipeline company due to its overdependence on these two areas.
In April 2010 BP became involved in the worst environmental disaster in the USA when their Deep-water Horizon oil rig off the coast of Louisiana exploded, killing 11, injuring 17, and spilling 4.9 million barrels of oil into the Gulf of Mexico.
The US President Barack Obama set up the National Oil Spill Commission which found that poor management and communication within and between BP and its contractors as well as a number of fatal errors led to unnecessary and unrecognized risks being taken.
It was found that all three companies involved in the rig had made errors of judgment and communication and there remained a lot to be done in fixing the attitudes and practices of the industry as a whole in order to eradicate a systemic failure.
Although BP had experienced other accidental oil spills in the past the most damaging factor was the mismanagement of the public issue by BP’s leadership which led to a public outcry, resignation of the CEO and elevated what could have been a local issue into a global issue and cost BP billions of dollars in claims ($42 billion as at November 2012).
The focus of this case study therefore is not on the technical causes of the oil spill but on the leadership actions during the incident, consequences as well as patterns of BP’s leadership styles before, during and after the disaster and how they have shaped BP to date.
After taking over as CEO in 1995, John Browne imposed a tough bottom-line mentality ever focused on cutting costs, annual performance contracts, aggressive profit and productivity targets where each of the top managers was personally accountable to the CEO. As a deal maker, Browne helped BP to grow into one of the six ‘super-major’ companies of the oil and petroleum industry with operations in 80 counties worldwide and helped grow the image of BP as the first ‘green’ oil company.
Tony Hayward CEO (2007 -2010)
When Tony Hayward became CEO in 2007 he promised to focus on safety and reliability, change the company's corporate culture and restore confidence in BP’s safety in operations. Where the previous CEO had been known for his celebrity lifestyle, the new CEO reduced a bloated company by stripping out layers of management as cutting on costs which improved the market position and led to big savings in the firm. However the mismanagement of the oil spill forced Hayward to step down from the position.
2.3 Leadership Styles at BP
Participative leadership style
In this leadership style, opinions are sought from all team members. The team members get better job satisfaction and get an opportunity to develop their leadership skills.
BP has substantial experience in capacity-building, training local communities and suppliers, and the provision of micro-financing. Its operation in West Papua, Indonesia is exemplary for participatory decision-making regarding indigenous people and relocation.
John Browne delegated operating authority to his managers, who presided over their fiefdoms like mini-CEOs, but he made each of the top 250 managers sign an annual performance contract that set out aggressive profit and productivity targets. Browne then held them personally accountable.
One of the main benefits of participatory leadership is that the process allows for the development of additional leaders who can serve the organization at a later date. Because leaders who favor this style encourage active involvement on the part of everyone on the team, people often are able to express their creativity and demonstrate abilities and talents that would not be made apparent otherwise. This seemed to have been the idea Browne had in mind at BP as it is said that the 250 managers “were given operating authority and did preside over their fiefdoms like mini-CEOs”.
Charismatic leadership style
The charisma of the leader is the driving force which inspires all team members to deliver above par performance. The leader is universally respected and admired. Charismatic leaders invoke the trust of their followers. Mahatma Gandhi is a great example of a charismatic leader who inspired an entire nation to successfully fight for independence.
For BP, John Browne exhibited charismatic leadership attributes by trying out new ways of controlling the company through imposing a tough bottom-line mentality, ever focused on cutting costs. He delegated operating authority to his managers, who presided over their fiefdoms like mini-CEOs. He made each of the top 250 Managers sign an annual performance contract that set out aggressive profit and productivity targets. Browne then held them personally accountable.
This is one of the top notch leadership styles. In this, the leader consistently inspires the team members with a shared vision of the future. The stress is on value enhancing initiatives. Nelson Mandela and Abraham Lincoln are examples of great transformational leaders. Mandela led a revolution against the culture of apartheid in South Africa. Lincoln successfully united the various states of America by leading his men to victory in the American Civil War.
AT BP, John Browne uses transformative leadership by inspiring his workmates and taking the company a notch higher. It is stated that he had taken BP so far he didn’t look downwards or look back. He was constantly looking for the next thing. The next thing always, by definition, had to be bigger than the last thing.
Browne also transformed BP.s image, recasting it as the first green oil company.After Tony Hayward took over from Browne as group CEO in 2007, there was an evident shift away from John Browne’s leadership of “Beyond Petroleum” towards the traditional values of oil production.
Tony Hayward’s pull away from the United States Climate Action Partnership (USCAP), which calls for reductions in carbon emissions was a move seen as further evidence of a retreat from the support for alternative energy championed by Lord Browne.
Tony Hayward’s appointmentsat BP reflected, in part, a desire by the company to get back to basics. He was seen as an old-school oil man, down to earth and happier to mingle with rig workers than with celebrities, prime ministers and presidents. Words such as informal, quiet or easy-going are often used to describe Tony Hayward’s manner.
QUESTIONS THAT NEED TO BE ANSWERED BY THE BP CASE
The case study has tried to answer a few leadership and organizational behavior questions that have been addressed in different topics within this paper.
Some of the key Questions include;
What are the different styles of leadership adopted by the different leaders?
How different leadership qualities affect the organization?
The issues being discussed can be summed up as leadership challenges that the BP Company faced and how its leaders managed to use their leadership capabilities and skills to overcome them.
4.1 Leadership Issues
Dysfunctional organizational culture
It emerged that lack of an effective structure compromised operations at the rig where the right people with technical skills should be given the authority to make the right decisions; this was lacking and severely affected safety during the incident. In the critical moments after the explosion there was confusion about who was in charge whether BP or their subcontractor, this led to inaction instead of clear decisive actions that could have limited the damage that followed.
In the case, we are informed that senior employees, known as “tray men‟, got their afternoon tea and biscuits on a tray of their own. Bureaucracy ruled and operating costs were sky-high. As a result BP‟s profit per employee was half that of Exxon, their competitors.
The initial reaction by the leadership was to deflect blame that the accident was not BP’s responsibility as the drilling rig was sub-contracted. Even with disclosure about the lack of crucial safety devices, resistance to follow government safety protocol, and permit violations, BP’s leadership still maintained that it was not at fault.
Full disclosure would have been the best strategy in such a crisis instead of refusing to accept responsibility instead, BP made the mistake of trying to talk its way out of the crisis rather than tackling it head on. The CEO did more damage to BP’s reputation by adopting a defensive approach and his inability to understand public reaction to his comments especially under the media spotlight and PR professionals.
Leaders deflect blame instead of working together
Given the three companies operating the rig all the leaders involved rushed to exonerate their respective companies from blame instead of working together, they each adopted a defensive and finger-pointing approach.
Lack of accountability
During the investigations into the accident, it was discovered that the BP staff and the sub-contractors did not have well defined roles, shared goals and clear communication on who was ultimately responsible for what part of the operations.
When the accident happened blame was passed around between all three parties. It was also found that regulatory bodies including government agencies had granted exception to some rules which had allowed riskier operations to continue but still within the law.
Lack of sensitivity
With the loss of lives and massive loss of jobs caused by damage to the marine life, BP’s leadership should have been more sensitive to the local people and more careful of the remarks and actions taken during the time.
The CEO’s comment, stating that he only wanted his life back came off as insensitive and selfish to grieving people. Also it became known that he took a break, travelled to the UK and participated in a yacht race with his son during the heat of the moment, this angered Americans who felt that he was not sympathetic.
Learning from past mistakes
BP failed to learn from its past mistakes in mismanagement which had resulted in similar accidents such as the one of 2005 which had resulted in 15 deaths.
4.2 Environmental Issues
Impact of the oil spill to the environment
Deep-water Horizon disaster has had a considerable effect on public opinion. BP suffered from a number of serious accidents in its USA operations. The most serious was an explosion and fire at the Texas City refinery in America where 15 workers were killed and 150 were injured. The report states that poor management and communication within and between the companies, as well as a number of outright errors, led to unnecessary and unrecognized risks being taken.
On the basis that the contractors in question work in more or less every offshore field in the world, the commission found, this amounts to a systemic failure in the industry.
Transocean conducted its own internal investigation and released a report which largely blamed BP. The report states that the Deep-water Horizon disaster was the result of a succession of well design, construction, and temporary abandonment decisions that compromised the integrity of the well and compounded the risk of its failure. Transocean said many of the decisions were made by well owner BP in the two weeks before the incident.
Greenhouse gas emissions
BPs direct greenhouse gas emissions, which had fallen from 78 million tons in 2005 to 61.4 million in 2008, rose during 2009 to 65 million.The business has also come under criticism from environmental protestors about its Canadian oil sands development project, which produces more carbon dioxide than conventional techniques.
4.3 Industrial Issues
The criticism of Transocean and Halliburton is not just a problem for those companies; it is the foundation of the report’s assertion that the oil industry has a systemic problem. As the commission’s co-chair, William Reilly, has pointed out, there are oil companies with exemplary safety records.
BP might just be a bad example, but the fact that all three of the companies working on the Deep-water Horizon rig made fatal errors in their management and communications indicates that there is much to be fixed in the attitudes and practices of the industry as a whole.
4.4 Ethical standards
BP is also seen as a multinational organization that works to maintain ethical and humanitarian standards within global business. Along with the UK and US governments and various NGOs (including Amnesty International and Human Rights Watch), BP helped to develop the industry standard Voluntary Principles on Security and Human Rights (VPSHR, commonly referred to as the VPs) in 2000, and its business behavior is guided by them.
The company’s compliance and ethics programme is modeled on and benchmarked against seven elements of an effective compliance programme, developed by the firm in the USA.
From the case study “BP in Deep Water”, there are various lessons that leaders and prospective leaders can take home from studying the leadership styles and issues arising.
Mr. Brown set goals and objectives that needed to be met by the different managers. John Browne clearly articulated his mission and vision to the staff. They signed performance contracts that were used by John Browne to monitor, and follow up on the performance of the management. This led to better performance for BP and as a result, they became the 3rd largest oil company in the world.
Mr. Brown was also good at conflict resolution. After the incident of Texas he did not hit back to the US government on their accusations but instead he appointed Mr. Malone, an American as the chairman of BP America who was well connected American with a reassuring ascent to provide political cover. That appointment was strategic and was aimed at putting back BP operation in America in to its feet.
Brown was effective in delegating at his time, his managers used to be referred to as mini CEOs. He had delegated operating authority and given them performance contracts and he held them accountable. Even when BP was in crisis when an explosion and fire occurred at Texas City, refinery in America, Brown did not blame anyone instead he took it as his responsibility. He gave Malone a unilateral authority to shut down ay USA operation at the hint of a safety problem.
There is need for leaders to identify and focus on the goal or vision and expend high degree of energy. Leaders should always focus on the future not only on the current issues at hand. John Browne was constantly looking for the next thing. To John Browne “the next thing always, by definition, had to be bigger than the last thing”.
There is need for leaders to understand and master their emotions(and those of others) in a way that instills confidence. Tony Hayward’s reaction to the oil spill and his reluctant manner, not forgetting his outbursts with the media really affected the reputation of BP as a company.
This is the act of evoking trust from others and placing trust in others – balancing commitment and empowerment. Leadership is about followers and people willing following you without coercion.
Conceiving and selecting innovative strategies and ideas while seeing the big picture – the forces, events, entities, and people involved in a salutation at hand
Connecting processes, events, and structures – a balance of process orientation and mental discipline.
An organization exist to maximize wealth for its shareholders but for it to do so, it must strive to survive the turbulent environment that if not well monitored could lead to closure of the organization. The leadership of an organization usually tasked with cheering the direction and leading the workforce toward achieving the organizational objective. It is also tasked with optimum allocation of resources.
Organizations plan strategies on how they excel in the market ensuring maximum returns in which the effective implementation of this plans or strategies highly depends on the leadership of the organization which in turn determines the success rate of the organization.
The ultimate goal of a firm is to survive in the market and for it to do so, it must trade profitably. The management must ensure maximum use of the company resource and more so the human capital. Human capital has lately proven to be the factor that is determining the success of many organizations in the 21st century. For the workers to be highly productive, they need to be treated with care and motivated to give it their best in their areas of work. A good leader is a manager who knows how to lead the company or group ensuring that the company objective are achieved as intended.
6.2 Organizational Culture and Change Management
The events as they occur in the case study have shown that despite BP’s impressive mission statement, core values and code of conduct, the reality on the ground in terms of operations has shown a culture of risk where actual behavior and results do not reflect what is in paper. This is demonstrated in the explosions in oil rigs attributed to alleged cost-cutting measures instituted by BP leadership.
As clearly indicated in the findings of the national commission, the greatest omission that resulted in the accident and compromised BP’s position in the public eye was the lack of a culture of leadership responsibility. This culture had permeated every level of the organization to the point that operating standards and procedures were compromised and left the firm exposed to extreme risks especially given the sensitive nature of the industry. To turn things around, BP must initiate and execute a change in organizational culture in order to re-invent its image, clear its name and grow as a competitive force as one of the big names in the oil industry.
Initially the CEO Tony Hayward came in as a man on a mission to change the corporate culture of and leadership style because it was "too directive and doesn't listen sufficiently well." Unfortunately he failed to produce positive change related to cost-cutting, safety, and environmental sustainability.
BP suffered from a failure of leadership, communication, risk management and character which combined to result in the accident with devastating effects to the company’s bottom line and public image. In the end, Tony Hayward demonstrated resilient leadership by defending his company and ethical leadership for taking the ultimate accountability, by stepping down from his job.
Robert Dudley (CEO 2010- to date) replaced Tony Hayward after the Horizon oil spill and following a public outcry in the USA. BP has since been divesting and intends to sell about $38 billion worth of non-core assets by 2013 to compensate its liabilities related to the oil spill accident.
The new CEO had a tough time ahead of him to reverse organizational culture, instill accountability in all levels of BP’s operations, deal with huge payoffs in forms of claims and clean up the poor public image of BP.
In the analysis of the leadership at the BP, Browne and Hayward having joined the organization as apprentices before rising through the ranks, to be the CEOs, highlights the success that an organization can achieve through effective leadership.
Performance and good leadership go hand in hand in doing a sustainable business.
Different leaders’ qualities affect the performance of an organization.
A good leader should be transparent, should allow information access to the workers and other environment.
There is a need for transparency reporting rather that marketing effort.
Team work is important in every organization as in the case of John Browne Era where the organization was involved in working groups thus good performance.
Security and human right is a major consideration that a good leader should invest in in any organization.
In conclusion, we can state that, for effective leadership to be experienced in any given organization or team, the following factors must be considered.
Participative and human relations e.g. supportive communication and team building
Competitiveness and control (e.g. assertiveness, power and influence)
Innovativeness and entrepreneurship (e.g. creative problem solving)
Maintaining order and rationality (e.g. managing time and rational decision making)