Organization Behavior Internet Exercise for Exxon Corporation & Exxon Valdez Oil Spill Crisis

Based On

www.crisisexperts.com www.crisis-management-and-disasterrecovery.com
And

Submitted by-

Chirag Chauhan Roll No.-303 MBA (Tech) Manufacturing Mumbai Batch of 2013
1

EXXON VALDEZ OIL SPILL CRISIS, 1989

What happened? 9.13 pm, March 24th 1989, the Exxon Valdez was bound for Long Beach in California. The shipping lane was at the time obstructed by icebergs, so the Shipmaster asked, and was granted permission to use the inbound lane. Around 11 pm, Shipmaster left the Third mate and another shipmate at the helm. The ship was on autopilot and about 12 pm, the Exxon Valdez struck Bligh Reef. Around 41 million liters of crude oil was spilled. The Exxon Valdez was a ship that was carrying around 200 million liters of crude oil. At around 12:04pm on March 24th 1989, the Exxon Valdez ran aground at Prince William Sound Bligh Reef, in Alaska and spilled around 40.9 million liters of this oil. What caused the accident? The Exxon Valdez encountered icebergs in the shipping lanes and Captain Hazelwood ordered Claar to take the Exxon Valdez out of the shipping lanes to go around the ice. He then handed over control of the wheelhouse to Third Mate Gregory Cousins with precise instructions to turn back into the shipping lanes when the tanker reached a certain point. At that time, Claar was replaced by Helmsman Robert Kagan. For reasons that remain unclear, Cousins and Kagan failed to make the turn back into the shipping lanes and the ship ran aground on Bligh Reef at 12:04 a.m., March 24, 1989. Captain Hazelwood was in his quarters at the time. Analysis of Issue Problem of international scope Intense scrutiny Exxon culpability re: alcoholism problem of Hazelwood Consequences on Exxon's visibility, reputation, legal future, financial base Analysis of Organization Exxon visible multinational corporation; largest oil company CEO Lawrence Rawl uncomfortable with public role Always a low-profile company Corporate suspicion of media Rigid & hierarchical internal structure Public environment included industry criticism on size & safety of super tankers General degradation of safety & oversight practices

Analysis of Publics Government & government agencies: Want investigation, regulation, restitution, cleanup, potential punishment Oil industry: Hope to save face, not jeopardize operations Exxon stockholders: Want continued financial profitability Media: Demand immediate information, full disclosure, culpability Environmental activists: Angry, seek restitution, participate in cleanup HOW LEADERS DEAL WITH CRISIS SITUATIONS? IN THE CASE OF EXXON VALDEZ OIL SPILL: Objectives of Exxon Corporation: Minimize criticism Maximize profits Minimize legal & financial consequences Action/Response Strategy adopted: Decided to handle response with no outside public relations consultants Ignored criticism Dismissed interest/involvement of environmental activists Refused to acknowledge extent of problem (abiding by legal advice) Refused assistance from local residents & environmental volunteers to help with cleanup Fear appeal: predicting increase in gasoline prices because of cleanup cost Shifting blame: Accused Alaska & Coast Guard of causing delay in cleanup Communication Strategy adopted: No designated spokesperson Refusal to communicate openly What did the Exxon Corporation do? The action to contain the spill was slow to get going. The company refused to communicate openly and effectively to the public about the incident. o The Exxon Chairman, Lawrence Rawl, was immensely suspicious of the media, and reacted accordingly. Poor Crisis Management: Media coverage escalated while Exxon dodged the media o The Chairman refused to be interviewed on TV and said that he had no time for that kind of thing. A company spokesman misrepresented the extent of the spill and clean-up efforts o This was in contrast to the footage of the ecological disaster shown on TV

IN GENERAL, HOW LEADERS DEAL WITH CRISIS SITUATIONS? Before Crisis: 1. Building a plan is very important to deal with crisis situations- It can be done by utilizing a comprehensive set of pre-written templates which makes crisis handling quite easy. In addition, an accompanying guidebook can also help to ensure crisis management. 2. Emergency preparedness- Emergency management is a critical element of the overall continuity objective. Media management, mailroom defence, bio chemical attacks and managing the emergency. 3. Role of risk analysis- Prior to the creation of a disaster recovery plan, it is essential to consider the potential impacts of disaster and to understand the underlying risks. Both business impact analysis and risk analysis are vital components of the contingency planning process. 4. Disaster recovery policies- Leaders stipulate continuity and recovery requirements within their own policies. They develop an approach to ensure that their policies are of the requisite quality and that they are properly deployed and implemented. 5. ISO 17799/BS 7799-It is an international security standard which covers disaster recovery and crisis management planning in detail. This standard is followed by all the leaders all over the world. 6. Contingency planning- Since crisis are uncertain, there is a planning definitely required for this. So, leaders generally do contingency planning so as to handle crisis. 7. Crisis communications consulting- It helps to reduce the likelihood of an internal business problem going "public" or minimize the reaction if disclosure of the crisis cannot be avoided. 8. Risk management consulting- Leaders should have a risk management consultancy facility. 9. Crisis research- In order to handle the crisis, leaders try to go into the depths of the causes of crisis. So they are able to deal it with great instinct. 10. Smouldering crisis worksheet- They are generally used to ensure that effective fact gathering, management notification and external communications are incorporated into existing contingency plan. 11. Coordinating stakeholder communication- At the time of any crisis, facilitating communications with the stakeholders i.e. with the people who will be affected most by the crisis, is one of the strategies followed by the leaders. During the crisis: 1. Bring the situation under control: Ensure the safety of those involved in the crisis. Always protect people first and property second. 2. Analyze the situation and gather all the facts: Once safety and security have been restored, gather the information of the incident and begin thinking of a solution to the problem. Don't blow the problem out of proportion before gathering all the facts.

3. Notify the families of those involved: Assign team member to personally and kindly contact the families of those involved to inform them about the situation. Never publicly release the names of dead or injured before contacting the family first. 4. Keep internal publics informed: Keeping your staff and volunteers informed will ensure that the right information is being released. Try to inform your internal publics before or at the same time that you are releasing information to the media. 5. Communicate with the media: The only way for your affected publics to be informed is by watching or listening to the media. Therefore, it is your duty to inform the media outlets as soon as possible about the situation. 6. Effective crisis management calls for open, honest communication between the company and its publics: It is almost human nature to try and minimize the problem when the reality is too difficult to deal with, but it is your duty to your publics to keep them well informed.

WHAT IS THE IMPACT OF STYLE OF LEADERSHIP IN MANAGING CRISIS SITUATIONS? 1. Autocratic style This leadership style lends itself to crisis situations and crisis management. This requires quick decision-making by one person to prevent a disastrous outcome. Examples of typical scenarios where this style is required are: Work place violence Breakdown of machinery and strikes Disaster relief management (floods, droughts etc) Product recalls (stopping the production of a certain product). 2. Participative style This leadership style is used when the process of decision-making needs to be applied. Management always has to make certain decisions regarding changes in the business environment. Such decisions are: New products and services A marketing strategy Financial decisions Training programmes for employees. 3. Free-reign leadership This style will be applied in the process of conducting research. The leader will provide strict guidelines and instructions but will then leave the rest to the group. The group then has full authority and takes responsibility for its own actions.

4. Charismatic leadership This style is applicable for a person who acts as a role-model for other people. This style requires specific characteristics such as vision for the future and excellent communication skills. People are keen to follow such a leader and therefore the examples he sets will guide other people. 5. Transformational leadership This leadership style takes specific actions to lead and guide people into a certain direction. This direction is also the leaders vision for the future and he/she always leads people in a direction from which everyone can benefit. In Exxon Corporation, the chairperson neglected all the criticism, didnt take quick action & showed little leadership. It may be said that the style of leadership in this company was of autocratic style since the CEO of the company did not act to the situation nor did he appoint anyone to deal with the problem. This resulted in the spill cost around $7 billion, including the cleanup costs & $5 billion of this was made up of the largest punitive fines ever handed out to a company for corporate irresponsibility. Also Exxon Corporation lost market share and slipped from being the largest oil company in the world to the third largest. The "Exxon Valdez" entered the language as a shortcut for corporate arrogance and damage.

FRAME ISSUES IN TERMS OF YOUR UNDERSTANDING OF IS AN AUTHENTIC LEADERSHIP? IS IT PRESENT HERE? SHOULD IT BE? The components of an effective leadership at the time of crisis are as follows:

OPERATIONAL RESPONSE Implement emergency response procedures Protect emloyees and business operations Assess the situations Brief headquarters

MANAGEMENT RESPONSE Mobilize crisis teams Confirm crisis severity Advise senior executives Adjust and implement crisis response plans Prepare for external communications

COMMUNICATIONS RESPONSE Employees at all locations Families of employees Supporters & advertisers Funding sources Government officials The news media

An authentic leadership was not present in case of Exxon Valdez Oil Spill because they did not address any of the three components. Operational Response: Two-week delay (in calm weather) before clean-up begins (now in rough weather). While Exxon stalled and attempted to cover up the problem, the clean-up operation was slow to begin. Management Response: Absence of an effective plan, apologized but refusal to accept responsibility. Communications Response: Ineffective Use of Communication Channels. After 6 days of spillage, CEO of Exxon Corporation, Mr. Rawl made statement to media. Eventually went on TV; unfamiliar with latest Exxon cleanup plans; claimed that, as CEO, it was not his responsibility to read such reports; blamed media for making a big deal of the spill.

The process starts with defining the organization's vulnerabilities to business disruptions and developing realistic workarounds and contingency plans. That's the basis of the business continuity approach that has emerged as companies, non-profit organizations and government agencies worldwide prepare for any type of business disruption including a pandemic. The contingency plans are in two parallel areas--operational and communication response. While the operational response team is focusing on resolving the problem as quickly as possible, the communication team is responsible for informing the organization's key stakeholder groups to ensure their understanding and support can be maintained. Having a look at this, it is clear that an authentic leadership must be present in order to handle a crisis situation. FRAME ISSUES IN CONTEXT OF FIEDLERS THEORY AND SPECIFIC CONTINGENCY MODEL OF LEADERSHIP? DOES THIS LEADERSHIP STYLE FIT THE SITUATION AS DEFINED BY FIEDLER? The Fiedlers Contingency theory of leadership is based on situation centric approach. According to this theory, any leadership style emerges on the basis of situation. The three major factors involved in leadership style are: leaders and followers, situation and control over situation. Situations are responsible for giving charge to the leader in the following three stages: a) Leader-member relationship-trust, respect and confidence b) Task structure-the hierarchy and group c) Position power-degree of influence on followers The main issues in context of Fiedlers theory are as follows: a) If the situations are supposed to control the leadership style, then no prior crisis handling preparations can be done and no disaster recovery plans can be made. This is because any change in situations drifts the style of leadership according to this theory. b) There is nothing called Disaster management planning or crisis management planning if the Fiedlers style of leadership is to be followed. c) No hierarchy group can be defined unless the situation to be handled is known. The Fiedlers style of leadership does not fit in the case of Exxon Valdez oil spill. Here the CEO, Mr. Rawl was under a tremendous pressure to react to the situation to contain the spreading of oil in the sea. He had to take the responsibility for the problem that occurred or appoint someone to handle the situation. He could have done a better job, but due to his

unwillingness, it was seen that Exxon was running away from its responsibilities and blaming others for the oil spill near Alaska. What Exxon Corporation should have done during the Oil Spill Crisis? Exxon management needs to develop ethical communication skills to truthfully communicate with stakeholders. They should have taken the responsibility for the incident that happened and apologized for the same. They should have taken immediate measures for containment of oil spill and CEO of the company, Mr. Lawrence Rawl should have personally visited the location to check the damage done. The CEO of Exxon Corporation should have called for a press conference and should have given the plan for crisis management and cleanup reports. It was necessary to appoint outside public relations consultants to address the media. They should have appointed a designated spokesperson so as to avoid rumours and misunderstandings among the people. They should have accepted the responsibility rather than blaming others. They could have made a transparent system of approach to the crisis management & should have acted maturely to the situation.