Learning from the BP Crisis
Professor David Grayson and Dr David Denyer
Steve Macaulay Hello, I am Steve Macaulay. Three months ago, little did people realise that
an oil spill accident the Gulf of Mexico would have such big ramifications.
Now, to look at these issues we have got two people from Cranfield School of
Management, who have got particular areas of interest and we would like to
explore those today. First of all there is Professor David Grayson; and Dr
David Denyer.
Now let’s have a look at these issues; first of all through the eyes of Professor
David Grayson. David, you have been following this issue very closely from
beginning. What are your conclusions?
David Grayson
Well, I think it is a little bit early to say on the morning that Tony Hayward has
announced his resignation from BP and we have seen that BP has already
made provision for $30bn of costs. For me, I think the immediate message is
that many of the issues that perhaps in the past people have thought of as
being the soft issues for business – like the environment or working with
stakeholders and with non profit organisations, and so on – have suddenly
become hard issues for business. They are hard to manage, they are very
hard to ignore and they are incredibly hard if you get them wrong.
And I think that, like previous incidents such as Exxon Valdez or Brent Spa or
the Bhopal incident, I think that this is going to really create a major debate
about the way that business conducts itself and what it means for boards and
for senior management teams in how they prepare to understand their
environmental and social impacts.
Steve Macaulay Now David Denyer, you have been looking particularly at an organisation
level at some issues around risk and about safety; what is your perspective
on this?
David Denyer
Well I think the key issue for BP right now is how it responds to the crisis.
Most organisations that suffer serious events crisis like these often don’t
implement the changes that are required to prevent such an incident
happening again. And if you look back over BP’s history it has actually got
quite a poor safety record. What I would be interested in discussing a bit
further with you is some of the issues around what BP has learnt from
previous incidents like Texas City, and indeed events on the Deepwater
Horizon itself and why it has failed to learn some of those lessons; and
moving forward what changes will actually be implemented.
Steve Macaulay Well, I think we should certainly pick those up. But let’s first of all come back
to you and say let’s explore some of these issues about society, about
responsibility, about lessons learnt and so on. There has been a lot of
hysteria in all of this, a lot of blame, a lot of shouting, a lot of finger pointing.
But let’s look a bit beyond that.
Professor David Grayson and Dr David Denyer
David Grayson
I think first of all you are quite right, Steve; there has been a lot of all of those
things and we shouldn’t underestimate the pressures on the Obama White
House, we shouldn’t underestimate competitor rivalries and also a sense of
the fact that this is in the run up to the American Mid Term Elections. All of
those things are really very powerful.
I think one of the very important points for businesses, and for any
organisation in terms of the way that they have to manage their affairs going
forward, is that we are now in this era – whether we like it or not – of 24/7
news cycles, the internet and particularly social media. If Face Book was a
country, it would now be the third largest country in the world in terms of
population. And all of those factors that mean that everything now is for the
record.
One of the very significant turning points in this whole crisis was when BP
was forced to put up the live feed from the wellhead by the American
Congress and that was put up there on the internet and very quickly you had
experts all over the world – nothing to do with BP, nothing to do with this
immediate crisis – who were starting to make their calculations and saying,
you know what, the figures for how many barrels of oil a day are being leaked
from this wellhead is far more than is being publically stated at the moment.
And that kind of swarming of information from lots of different sources, and
the way in which other experts start to come in and challenge the veracity of
companies, means that it is very important that companies are on the front
foot in terms of providing a lot more information.
Now BP understood that, but only after well after a month into the crisis. So
I think there are some important lessons in terms of crisis management, how
you relate to different stakeholders, as well as obviously the very
fundamental issues that David has just referred to in terms of the crucial
importance of safety which is one of the most critical factors in terms of
being a responsible organisation.
David Denyer
Yes. And just picking up on your point there, you mention blame. I think
the issue of blame is an interesting discussion point at this point in time,
particularly because there are so many organisations involved. Everyone at
the moment is actually looking towards BP and the finger pointing is going in
that direction. But let’s not forget that there are other organisations
involved in cementing the wellhead and in operating Deepwater Horizon
itself. And it would appear that there is some degree of joint blame across
this for this event. The nature of what actually caused this event has yet to
come out and will be subject to an investigation panel that itself is being
influenced by the Obama Administration.
You have got heavy involvement of US political power in this – the Obama
Administration is very clear that Obama doesn’t want this to be his Katrina –
as it was for Bush – and that, I think, is influencing the whole process.
Steve Macaulay Let’s pick up the question that you asked earlier on – why did BP not learn
the lessons from previous crises? Why wasn’t it inbuilt in their system that,
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Professor David Grayson and Dr David Denyer
hang on, there is a potential catastrophe here – we know how to deal with
this, we can anticipate it, we can set up an organisation which obviates the
need for this kind of thing to ever happen?
David Denyer
A lot of organisations struggle to learn and change after serious events. Let’s
not forget that issues like Texas City are a different system to the oil rig, the
system in itself, as I say, is very different. The Baker Report that came out
following Texas City identified a whole set of recommendations. Those in
themselves are difficult to turn into a change agenda and actually implement
across a completely different part of an organisation.
BP, as I have mentioned before, has got a fairly poor safety record. Other
events have occurred in the organisation and indeed, you might ask why
events that have actually happened on the same oil rig in the Gulf of Mexico,
weren’t picked up on – back in 2008 the rig was listing and people were
evacuated from the oil rig. So it is not just events that occur within the
organisation, but actually much closer to that particular rig itself.
There is a whole set of issues which I think will need to be addressed after
the event to ensure that the changes are embedded into the organisation,
which probably didn’t happen before. Many times the recommendations
themselves are not implementable in that particular context; some
recommendations aren’t actually implementable, but also that changes to
prevent such events require fundamental changes across the organisations.
They require individuals to act in different ways, they require teams and
groups to operate differently and the organisation itself to embed a new
culture and often this requires fundamental changes.
And then even beyond the organisational level, and thinking about that, the
organisation within its context – this is an organisation that still has
fundamental tensions between efficiency and safety which a lot of
organisations do. There is a heavy pressure for the organisation to deliver to
its shareholders which often requires a drive towards efficiency gain, cutting
costs, waste removal and that is a core tension with the need to be safe.
Until any organisation fundamentally addresses that issue and puts safety as
its number one priority, but truly means that safety is its number one
priority, then unfortunately we will probably see accidents like this in the
future.
Steve Macaulay So David, lots of complex and overlapping and really quite difficult issues?
David Denyer
Yes, indeed and I think there is a real danger moving forward that an outside
body comes in and does an enquiry report – an investigation – and comes out
with the forty or the fifty key things that BP needs to change, the industry
needs to change, and that in some ways loses the complexity of these issues.
What I have seen before in lots of other industries and organisations is then
there is a tendency to over design, over control the organisation, put more
policies – another procedure – in place in a hope that that will prevent future
accidents. What I think is really required is for BP to take the opportunity to
sit back and really think about how it wants to create a highly reliable
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Professor David Grayson and Dr David Denyer
organisation that doesn’t have these kinds of crises in the future.
Steve Macaulay David Grayson?
David Grayson
Yes, I mean the reality is that this is quite frontier technology, this deep water
drilling. And I think what BP has achieved since April 20th in terms of trying
to tackle the consequence of the explosion is technologically really pretty
phenomenal. But in terms of how do we make sure that the very best brains
of the industry, and indeed beyond, are really pulled together to get the best
practice principles? It has been very noticeable that throughout the crisis the
rest of the industry has been pretty let’s keep our distance, we don’t want
our brand being tarred by association. I think it might have been possible at
certain stages for BP to have invited the rest of the industry, to say, look this
could have happened to any of us, to a certain extent, and we all need to
pool out best brains and knowledge to try to develop our own industry best
practices.
You saw after Bhopal and the problems with GE in the Hudson River, the
establishment of responsible care in the chemical industry. There are now
about 300 different codes and voluntary self regulatory initiatives around the
world in different sectors and I think what we now need, in addition to good
enquiries and perhaps some further regulation, is some kind of industry best
practice standards which the industry itself develops and makes sure is being
enforced around the world. Because if this could happen again in some part
of the world where CNN doesn’t have such a strong presence on the ground,
where you haven’t got American Mid Term Elections and so on, then we may
have some terrible pollution all over again unless we make sure that this is
not just national laws, but this becomes best practice for the industry.
Steve Macaulay Gentlemen, I guess ten years from now things may look very different, but
for now thank you very much.
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