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Case Study “BP and the Deepwater Horizon Disaster of 2010”

Anonymous

Master of Business Administration, University of the People

Dr. Jason Fair

BUS 5411 Leading in Today’s Dynamic Contexts

December 22nd, 2021

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Case Study “BP and the Deepwater Horizon Disaster of 2010”

Change is undeniably part of our lives. Sooner or later, all leaders face change. How

they react to it can make all the difference. In this paper, I will address the corporate

attitudes presented by corporate leaders in BP back in 2010 that resulted in the Deepwater

Horizon disaster.

Case Description

Ingresoll et al. (2012) provide a timeline of BP. British Petroleum (BP), founded in

1909 as an Anglo-Persian company, was near bankruptcy when Winston Churchill’s

decision to make its source of oil supply saved it. The British government-owned 51% of

BP. By 1987, the government had sold all its shares and BP was struggling as a new private

company. Decision-making during this time was bureaucratic. In the early1990s, under the

direction of Robert Horton, the company adopted a new growth-focused strategy.

Managerial decision-making was faster and that accelerated the pace of the entire business.

Horton’s flexible teams always kept open communication among them to make it more

efficient. Employees were encouraged to take responsibility and take initiative. In 1995

John Browne replaced David Simone as CEO. Browne’s leadership kept extending

decision-making responsibilities to more levels of the organization. His leadership was also

characterized by what became known as “asset federation” which consisted of tying

compensation with asset performance. The drawback of this strategy was that because each

site manager was autonomously compensated, there was little or no incentive to

communicate and share best practices and risk management with other teams. The other

downside was that top managers had little oversight over performance targets. In the early

2000s, the company had repositioned itself. It was renamed BP and associated its brand

with an environmentally friendly oil company. During this time, the company invested in
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alternative energy and became the world’s biggest solar cells manufacturer and Britain’s

largest producer of wind energy. In 2007, Tony Hayward changed the company strategy

into one that would put growth on hold and would focus on safety issues. During his

leadership, the company cut costs by reducing personal and investment in alternative

energy. Before the Deepwater Horizon incident, BP was the largest company listed on the

London Exchange. The Deepwater Horizon was one of BP’s oil rigs in the Gulf of Mexico.

On April 20, 2010, the rig exploded. The result was eleven deaths, several injured, and the

danger of petroleum poisoning of many species in the area. The oil spill was so

catastrophic, it represents the worst oil spill and worst environmental disaster in American

history.

Analysis

The Deepwater Horizon catastrophe began before it happened. In the 80s, BP leadership

decided to change its organizational power and shift power. It was decided that leadership

in the decision-making process would be spread. More decision-making and decision power

would be assigned to smaller teams. The decentralization of leadership made

communication a big issue in BP’s organizational culture. The changes were not transmitted

to all members. The employees were unclear about the consequences these changes would

bring. Changes were not aligned with organizational culture. Only one out of 18 group

values mentioned safety as an aspirational goal. It said, “no accidents, no harm to people,

and no harm to the environment” (Ingresoll et al., 2012). Another aspect of the new strategy

was based on cost reduction. The strategy was not clear on where costs needed to be

reduced. The outcome was risky infrastructure and equipment. After the disaster, BP

leaders failed to recognize their fault in the case. They tried to deceive the public about the
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dire consequences of the spill. Instead of taking responsibility, they started blaming their

partners. They wanted to keep a front of being “green”.

Solutions and Strategies

BP’s quest of filling their own pockets without any regard of how it would affect others

took a toll on them financially. BP should try to look for alternatives that benefit society. It

should work on its social corporate responsibility. Implementing SCR would be a radical

change and investing more in renewable energies instead of focusing on fossil fuels would

be another.

An effective response to radical change is a challenge for any organization. However,

knowing how to respond is a necessity. All members of the organization need to fully

understand their roles and responsibilities. BP had no radical change process -planning,

enabling, launching, catalyzing, and maintaining- and the leadership style required at each

stage. BP should have had a logical leader that would have analyzed all the facts, the

obstacles and would have evaluated the alternatives focused on safety. Instead, leaders

dismissed the data at hand. The same leader would have been needed to share his

knowledge with his peers and subordinates. An inspirational leader would have also helped

in the enabling stage by persuading his followers to embrace his safety concerns. The

supportive leader would have guided them through the process. A commanding or logical

leader would have carried out the plan to implement the change. The catalyzing of the

change could have been achieved by a supportive leader who would encourage others to

invest time and energy in the change effort (Reardon et al., 1998). Assessing, guiding, and

motivating people would maintain the momentum. In other words, BP needed a strategic

leader. One that would be flexible and adapt his leadership style according to what was

needed from him at each stage.

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References

Ingresoll, C., Locke, R., & Reavis, C (2012, April 3). BP and the Deepwater Horizon

disaster of 2010. MIT Sloan Management, 1-28. This worked is licensed under the

Creative Commons Attribution-Noncommercial-No Derivatives Works 3.0 Unported

License.

Reardon, K. K., Reardon K. J., & Rowe, A. J. (1998). Leadership styles for the five stages

of radical change. Acquisition Review Quarterly, 129 - 146. Download the pdf.