According to this morning’s FT, BP’s new chief executive, Tony Hayward, told staff at a meeting in Houston that its third quarter results will “be awful.”
It is understood that Mr Hayward believes that BP is suffering from an over-complex management structure, one in which no one seems to be able to take responsibility for decisions, one in which risk isn’t properly quantified and one in which there are simply too many layers of management.
It’s reported that Mr Hayward said, “There is massive duplication and lack of clarity of who does what.”
A couple of years ago, it was Shell that was hitting the headlines for all the wrong reasons. Now the baton has been handed to BP. What with fires in the refinery in Texas, oil spillages in Alaska, the ignominious exit of its former CEO, woe seems to be the best word for describing BP at the moment.
Earlier this year, a report into BP produced by former US secretary of State James Baker talked about a “corporate blind spot relating to process safety.”
He said the company was using the wrong criteria in measuring safety procedures. It was looking at personal safety, and proudly proclaimed the steps it took to ensure each worker’s individual safety, but did not seem to have a corresponding policy for process safety.
To put it in the words of the report: “While BP has an aspirational goal of “no accidents, no harm to people,” BP has not provided effective leadership in making certain its management and US refining workforce understand what is expected of them regarding process safety performance.” The report also said: “BP mistakenly interpreted improving personal injury rates as an indication of acceptable process safety performance at its US refineries.”
It appears that the problems James Baker found relating to safety are endemic within the group and apply to other areas too. Divorce staff from the ability to make decisions, insert a management chain that is too cumbersome, and the key issues can get overlooked. Risk taking can go down the oil well, faster than carbon dioxide can come out of the oil refinery. According to the FT, Mr Hayward put it this way: “Assurance is killing us.”
Poor old BP, with oil so high in price, right now it should be raking in the bucks. It seems that the British oil giants don’t know how to make the most of things.
Maybe, what BP really needs is to be bought out by private equity. That would sort out the layers of management. The trouble is, even when credit was booming, it would have been all but impossible for private equity to pull off that trick. Now, it would appear it’s all just impossible. If you like this article, why not register for our daily newsletter? Or if you already receive the newsletter, then start spreading the news and tell your friends and colleagues. To register visit this link

Copyright #169; 1996-2007 Limited. All rights reserved

© Investment & Business News 2013