BP Oil Spill: Leadership Failures and Organizational Culture

Introduction

Effective leadership is crucial for organizational success in a competitive marketplace. Gaps in leadership, or conduct that could be interpreted as ineffective, can have adverse effects on a company's reputation and overall competitiveness. One company that suffered the adverse effects of poor leadership was British Petroleum (BP), during and in the years leading up to the 2010 explosion and oil spill in the Gulf of Mexico. Research has since shown that dysfunctions in the company's organizational culture played a significant role in the entire crisis. This paper explores the events that led up to the disaster and the specific weaknesses in leadership and organizational culture that exacerbated it.

From a general perspective, organizations have a responsibility to serve the common good of the communities within which they operate. They do this through a range of standard business practices that include charitable giving, environmental conservation programs, protecting the environment, supporting communities, providing goods to consumers, sustaining retirement and pension plans, developing technology and research, and creating employment, among many other practices. All of these practices benefit stakeholders and contribute to the concept of corporate sustainability. However, when an organization does not operate according to the ethics of the "common good," it becomes broken, and the mutual trust that sustains stakeholders erodes, causing their belief in the company to dissipate. The organization then becomes unable to serve the interests of its stakeholders, and its overall ethical purpose is abandoned.

The BP Gulf oil spill presents a clear example of how a lack of corporate sustainability — occasioned by negative organizational behavior — can lead to leadership failure and, consequently, failure to serve the interests of stakeholders. At the center of the BP crisis is dysfunctional crisis leadership. This paper demonstrates how leadership failures and negative organizational values at BP exacerbated the situation at the height of the oil spill disaster, and suggests possible changes in organizational behavior that could be implemented to prevent a recurrence.

Brief Overview of the BP Oil Spill Crisis

BP is one of the largest petroleum companies in the world, with a history dating back to the early years of the 20th century. Since its formation in 1903, the company has committed itself to satisfying the demand for petroleum by extracting natural resources from beneath the earth's surface (Heller, 2012). It has committed itself to delivering value through the core values of courage, excellence, respect, and safety (BP, 2015). Offshore oil drilling was introduced in the 1930s along the Louisiana coast and later moved to the Gulf of Mexico, where oil deposits were pursued at depths exceeding 3,281 feet below the ocean surface (Heller, 2012).

The deep-water exploration investment appeared to yield sufficient returns for the company until the night of April 20, 2010, when a gas surge occurred within the company's semisubmersible Deepwater Horizon oil drilling rig. The surge caused a large explosion that destroyed the drilling platform and claimed the lives of eleven workers (Heller, 2012). The drilling rig, which had been leased from Transocean Inc., sank, burned, and tore from the seabed the pipe that connected to the large Thunder Horse Field oil deposit (Heller, 2012). Four days later, it became apparent that oil was leaking from the ruptured well drilled into the Thunder Horse formation (Heller, 2012).

The company embarked on a mission to cap the oil leak, but by then, investigations had already been initiated by the Department of Homeland Security. The National Oil Spill Commission, established by President Obama in the wake of the crisis to identify the roles and contributions of the various parties, found that a lack of communication between the company and its contractors, combined with poor management, had led the company to take unnecessary risks that significantly compromised public safety (Arnold & McKay, 2013). The commission established that both Transocean Inc. and BP had made judgment and communication errors that increased the risk of a large-scale disaster. However, since BP had experienced other accidental oil spills previously, it bore the brunt of public blame, while Transocean was largely treated as collateral damage (Arnold & McKay, 2013). The poor management of the crisis by BP's leadership only worsened the situation, leading to a public outcry that ultimately forced CEO Tony Hayward to resign.

Leadership at BP

Simply stated, leadership is the art of using social influence and charisma to get things done through people. A leader is someone who is able to inspire others to perform their duties enthusiastically, competently, and willingly by motivating them, implementing plans, and providing direction. The specific strategy a leader uses to achieve this is called their leadership style (Daft, 2014). Three different leadership styles are evident in BP's recent history. For brevity, this discussion focuses on the company's leadership over the last two decades: John Browne (1995–2007), Tony Hayward (2007–2010), and Bob Dudley (2010–present).

Daft (2014) defines participative leadership as a style in which the opinions of subordinates are considered in the decision-making process, allowing them to develop their own professional and leadership skills. Decision-making is decentralized, and subordinates are given the autonomy to make decisions and take actions on behalf of the organization, though they are held fully accountable for those decisions. Participative leadership has been a notable component of BP's management. Employee participation often takes the form of delegated authority — John Browne, for instance, delegated authority to his managers and gave them autonomy and independence to maintain control over their respective departments like mini-CEOs. As a measure of accountability, he required managers to sign performance contracts designed to ensure that decisions made were in the best interests of the organization. The primary benefit of participative leadership is that it assists in grooming new leaders, thereby ensuring there are no talent gaps when the current generation of leaders departs.

Tony Hayward, however, does not appear to have been a participative leader — he led primarily through directive behavior. Unlike Browne, who communicated the company's goals and vision and then granted employees independence to determine how to achieve them, Hayward led by setting goals, providing specific direction and guidance, and scheduling work for subordinates (Griffin, 2011). This was evident during the oil spill, when Hayward — despite lacking expertise in crisis management and unfamiliarity with the American context — relocated to Houston and took personal control of the crisis, rather than delegating to Bob Dudley, who had spent a year overseeing the company's U.S. operations and was far more familiar with American crisis management (Lahiri, 2010). While it is understandable that, as CEO, Hayward needed to be visible to the watching public, his decision to base himself in Houston and personally handle all media communications — rather than leaving that role to Dudley — was poorly calculated. Most Americans felt that he talked too much and listened far too little (Lahiri, 2010).

Transformational leadership involves the use of a shared vision to drive performance. A transformational leader develops a common vision and then uses self-discipline, competency, wisdom, and passion to inspire followers to identify with that vision and work voluntarily toward its achievement (Daft, 2014). Both John Browne and Tony Hayward demonstrated elements of transformational leadership at BP. Browne, for instance, articulated a vision to reduce greenhouse emissions at BP and across the oil industry as a whole (Cooper et al., 2007). He introduced the "Beyond Petroleum" campaign, which advocated for responsible approaches to limiting environmental damage caused by the company (Cooper et al., 2007). While this campaign increased the company's costs and reduced its short-term competitiveness, Browne reasoned that it aligned with the moral conscience of society and would earn the approval of the wider community (Cooper et al., 2007).

However, transformational leadership is not always beneficial. It can blind a leader to evidence that things are going wrong on the ground. Hayward is a clear illustration of this problem — while he had a credible vision of increasing the company's competitiveness by reducing operational costs, his pursuit of that vision impaired his judgment. He ignored warnings from employees and contractors and chose cheaper, lower-quality drilling options that increased the well's risk of failure (Arnold & McKay, 2013).

An effective transformational leader, as path-goal theory suggests, is one who aligns his vision with the needs and interests of stakeholders so that profit is not prioritized over prudence. By overlooking the safety of the community and his own workers in order to realize his vision, Hayward demonstrated fundamentally ineffective leadership.

Conclusion

Evidently, dysfunctional and ineffective leadership played a significant role in BP's damaged reputation at the height of the 2010 oil spill in the Gulf. However, the ineffectiveness of the organization's leadership did not begin with the crisis itself; there is ample evidence of leadership deficiencies long before disaster struck. At the center of all of BP's problems during this period is a dysfunctional organizational culture that emphasizes short-sighted risk-taking at the expense of public safety and stakeholder trust. To minimize the risk of such disasters recurring, BP needs to change its organizational culture and the specific values that govern its operations.

This paper recommends three strategies for achieving that change: encouraging the naming of organizational elephants, fostering new learning, and shifting focus toward proactive crisis planning. With the right organizational culture, BP could avoid the repeated oil spills that continue to damage its reputation and position itself as a more responsible and competitive force in the industry.

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