British Petroleum Oil Spill Case Study

Task: professional report

You need to choose a real organisational case illustrating questionable organisational and management practices that have been critiqued in the public spaces. Examples include companies, such as BP, Toyota, WorldCom, VW; government agencies such as the Wheat Board, Wollongong Council planning approval; non-profits, e.g. Health Union, FIFA, Essendon Football Club.

PEASE NOTE THAT I HAVE CHOSEN BRITISH PETROLEUM -OIL SPILL CASE- TO COMPLETE THIS TASK.

You are then to analyse the reasons for these questionable organisational and management practices including an analysis of the judgements made by leaders/managers of these organisations via organisation theories ‘listed below in green for your reference’. How accountable do you see have managers and leaders of the chosen organisation been in their actions and decisions?

In your analysis, you must draw from two different Organisation Theory lenses from the following list of Organisation Theory perspectives. Please write only about the 2 lenses/ Theory below in red ethical and moral dimensions of organization theories and organizational culture.

You must illustrate your deepening personal and critical awareness of management and organisational practices and how theoretical lenses in the literature can illuminate these practices.

  1. Agency Theory
  2. Institutional theory
  3. Bureaucracy
  4. Control
  5. Stakeholder Theory
  6. Power and Politics
  7. Ethical & moral dimensions of Organisation Theories
  8. Approaches on employee co-ownership and commons
  9. Organisational culture
  10. Stewardship.

Based on your analysis, you are then to develop 3 high-level recommendations to the management/leaders of the chosen organisation how to change these practices. These recommendations need to be written in a form that persuades for the need for changes and they need to be based on one of the alternative/future approaches to organisation theory and practice. This section should be seen as part of a dialogue you are trying to open with the organisation and its leadership. You are strongly need to avoid simplistic recommendations and ‘quick fix’ solutions, as these are not realistic.

You must draw from one Organisation Theory lens from the above list of Organisation Theory perspectives to develop and support your recommendation.

Executive Summary

In this paper, I address the issue of British Petroleum (BP) company oil spill that occurred at the deep-water horizon in the Gulf of Mexico on April 20th, 2010. I will offer a background review followed by the analysis of the situation from two perspectives. One is that of ethical and moral dimensions of the organisation and the second is organisational culture. Investigation into the case showed that the company was accountable for the oil spill, but remained reluctant and did not accept blame until forces such as the court came into
play. The activities that lead to the explosion can be traced back to the failure of organisational culture. Despite the company having professionals, the management ignored the appropriate advice in favour of cheap solutions. The paper also offers recommendations that could be taken by the company. The recommendations are based on the high-risk nature of the oil business and the shortcomings that were noted in the BP oil spill. In this context, there is a need for more cooperation among government agencies, as well as different players in the oil business to reduce the risks involved and offer appropriate solutions that can be engaged in overcoming such incidences promptly and effectively.   

Background

British Petroleum (BP) also known as BP P.L.C is a British multinational oil and Gas Company, which has its head office in London, United Kingdom. The company is one of the leading oil and gas super major companies in the world. The company’s operations are spread all over the word, with approximately 17,200 service stations worldwide. The company was originally founded in 1908 by the Anglo- Persian Oil Company. It was then the ancillary of the Burmah Oil Company, whose role was to explore and mine oil discoveries in Iran. Over the years, the company has spread its operations to most states in the world.  The BP company has previously been involved in some safety and environmental incidents. Some of the incidents are the Texas City refinery explosion that caused the death of 15 people and multiple incidences of oil spills, among them the largest oil spill in British History. The questionable management and leadership practices that were discussed are the 2010 deep water horizon oil spill (Spencer and Fitzgerald, 2013). There are various reasons why the company received a significant amount of scrutiny. According to Schultz et al. (2012), the spill was one of the largest accidental releases of oil into the marine water in history. The other basic reason why the BP oil spill elicited sharp criticisms is as a result of its massive health, environmental and economic consequences.

Issues Identified and Analysis

There are various ways that the BP Oil spill can be described. The role played by leaders before and after the incident directs me to discuss the issue from leadership and management point of view. One of the management or leadership theory that explains the key tenets of moral management is the ethical and moral dimensions of the organisational theories. The deep water horizon oil spill also referred to as the BP oil disaster, happened on April 20th, 2010 in the Gulf of Mexico on a Macondo Prospect. The facility was managed by the BP Company. The spill is considered as one of the biggest inadvertent marine oil spills in the petroleum industry. It is estimated that about 4.9 billion barrels of oil leaked into the Atlantic Ocean within the first three months of the incident. The oil spill had devastating impact not only to the American economy, but also to the environment. The way the company engaged in the incident and the critical acclaims from various actors reveals the lack of ethical and moral dimensions, as well as the failure of important aspects of organizational culture.  

I also feel that the response by the company regarding the oil spill was baffling. Initially, the BP downplayed the incident. Tony Hayward, its Chief Executive Officer, referred the quantity of oil as relatively tiny in relation to the big ocean. However, after being criticized, he withdrew his statements. Additionally, Doug Suttles, the company’s chief operating officer denied the underwater plume discussion. The company wanted to downplay the extent of the oil spill. The company did not provide conclusive and convincing reasons on the factors that led to the occurrence of the oil spill. In my analysis of the reasons offered by the organization, it is evident that the leaders wanted to vindicate the company from the responsibility of the spill (Muralidharan, Dillistone and Shin 2011). Given the magnitude of the situation, I find it unethical for a reputable company like BP to try and deny what had happened.

The ethics of leadership benchmark that the BP Company ought to have relied on the three essential pillars. They include the moral character of the leaders, the ethical values that are coalesced with the leader’s visions and the morality of the processes of social ethical choice (Cunliffe and Luhman 2012). Additionally, the behaviour of the BP company management can also be best explained by analysing the actions the company engagements. Over the years, there have been some safety and environmental incidents associated with the company (Honnungar 2011).

It took great effort from other actors for the company to accept its failures that lead to the incident. Most of the incidences led to the involvement of the court of law, in order for the company to accept responsibility. It is from this perspective, that I argue that the ethical and moral dimensions of organization theories provide a more realistic approach for the ethical parameters that leaders ought to follow. The investigative reports concluded that the spill was caused by a series of poor management decisions. The investigative report concluded that the company managers got the wrong impression about pressure data and gave endorsement to the rig employees to carry on with a faulty operation. The company rushed its operations so that it can quickly complete the well. The management decisions made during the creation of the well focused more on cost reduction and overlooked the safety measures. I feel that these managerial decisions do not meet the ethical and moral threshold due to the risks involved, including the possible loss of human lives, just as it happened in the BP situation. There is no doubt that most organisations have the tendencies of improving the organisation’s image in the public face (Cunliffe 2014). In a significant number of cases, such organisations overlook the company’s mistakes, and that there is a need to come up with measures that would remedy the problems caused. Perhaps this is what the leadership at BP was trying to do, denying the accusations and its role in the oil spill.

 The other important theory that I will employ to explain the company’s reasons for the spill focuses on aspects of organisational culture.  Most companies have the system of shared assumptions, beliefs, and values which govern how individuals behave in the organisation. It is this substantial value that has significant influence on the people in the organisation. It dictates how people are going to behave or act in times of crisis such as oil spills. I argue that if BP had a strong organizational culture, the incident could have been avoided or at least its response to the issues could have been better. The company was focused on shielding itself against the challenges and threats that would jeopardize its reputation and how the public viewed it. At the time of the occurrence of the oil spill disaster, the company was trying to protect its public image by avoiding direct responsibility and not acknowledging the extent of the negative impacts from the oil spill. The impact of the incident only ruined its reputation. The environmental impact was detrimental to the marine environment and the impact was even felt by people on the coastline.

Organisational culture can also be explained in the manner that the organisation conducts its business and the freedom allowed in the decision making (Argote 2013). From the circumstances that surrounded the oil spill incident, it showed that there is a possibility of fractured corporate culture in the organisation. In this context, the delegation of responsibilities and flow of power that are often dictated by the organisational structure had failed. From this perspective, I can attribute the blame to the management of BP for leading the workforce to make risky decisions despite appropriate advice from individuals who were experienced (Cunliffe 2014). Initially, there was a spirited campaign, whose aim was to protect the company from such mistakes. However, when comprehensive investigations were done, it was noted that the BP Company made significant managerial errors.

Recommendations

Various recommendations were provided after the compiling of the investigative report.  One of the recommendations that I would put forward is that the petroleum industry needs to develop and maintain an effective Technology Delivery System (TDS).  The TDS would foster the industry players and government at local, state and federal collaboration in the exploration activities so as to promote the development of high-hazard environmental control measures that are reliable, sustainable and effective. The exploration and the production of oil is a highly dangerous activity, where any slight mistake is likely to lead to a disaster of magnitude proportions. There is the need to ensure that there is a close collaboration between the government agencies and oil companies, so as to make sure that exploration activities are done in a reliable, sustainable and environment friendly manner.

Currently, there is a need for the development of the Technology Delivery System (TDS). The relevance of the TDS would be to promote the creation of a sustainable oil exploration environment with reduced risk. The other intervention that would promote the effectiveness of the technology delivery systems is the essence of the establishment of the monitoring tools. The relevance of monitoring tools is to promote audit of the oil exploration and production facilities, so as to promote the development of a sustainable and risk free operations.

The other important recommendation that the BP Company and other stakeholders in the petroleum company should consider is the essence of the development and maintenance of the industrial-governmental agency, whose responsibility would be to develop, validate, advance and implement risk assessment and management technologies. These would assist in ensuring that the companies and the government have improved disaster preparedness. The agency would also be involved in the definition of the risk assessment and management goals and the objectives for the exploration and the production of hydrocarbon resources, which are highly hazardous. The environmental impact of the oil spill was intense and widespread.

Additionally, the company was forced to pay significant sums of money as the compensation and to undertake the clean-up activities. Therefore, an independent government regulatory agency with adequate regulatory powers should be formed so as to enhance the safety of the exploration and mining of hazardous petroleum products. The agency should be tasked with evaluating the level of preparedness of the governmental institutions and oil exploring or producing companies.  Additionally, the agency should also advise on the changes on the risk assessment and management technologies that the government and the companies have put in place. It is imperative to note that oil spills generally have significant economic, environmental, social and public relations implications. Therefore, risk management efforts should be taken seriously. The government entities and the companies should work in collaboration to promote a risk-free oil exploration and mining activities.

Finally, the industry needs to foster validation of projects. Current validation processes in the industry are opaque and not effective. The primary purpose of enhanced validation projects is that they would promote the engagement of the highly-qualified contractors, operators, consultants and other essential stakeholders in the industry. The other primary advantage of the establishment of a comprehensive validation process is that the industry would be able to have a strategic disaster management and prevention techniques while dealing with ultra-hazardous high risk exploration. It would also help in addressing the risks that may be identified in the process.

Conclusion

The deep-water horizon oil spill is one of the most unpleasant oil disasters in recent times. The results of the incident highlight the importance of ethical business strategies and the role of organizational culture. Investigations show that the incident was as a result of managerial errors that trickled down the organisation, leading to failures that resulted in the explosion. The leadership in the company had ignored professional advice and opted to engage in less costly approaches that increased the risk at the well. Consequently, the failure of the system lead to the loss of life, devastating effects on the environments, and huge financial losses. Organizational culture dictates how information is dispensed and used in an organization. The failure of appreciating these considerations in the organization made it difficult to follow the appropriate means of rectifying the situation. After the incident, the company was not quick to accept its role in the incident. Consequently, it destroyed its reputation, lost public support, and shareholders withdrew from the company. The case shows that ethical business strategies are imperative to the public relations, as well as shareholder support. From the case, it will be imperative if future research can determine the impact of national laws on the formulation of organisational structure. In this line, we can be able to understand if the American law could be employed ensuring that the organisational structure is in line with risk management approaches and how issues such as oil spills can be handled by both public and private parties.

Reference List

Argote, L. 2013. Organizational learning. 1st ed. New York: Springer.

Cunliffe, A.L. and Luhman, J.T., 2012. Key concepts in organization theory. 1st ed. Sage Publisher.

Cunliffe, A. (2014). Very Short, Fairly Interesting and Reasonably Cheap Book about Management. 1st ed. London: SAGE Publications.

Honnungar, V.  2011. British petroleum oil spill crisis and aftermath. 1st ed. Grin Verlag Ohg.

Muralidharan, S., Dillistone, K. and Shin, J.H., 2011. The Gulf Coast oil spill: Extending the theory of image restoration discourse to the realm of social media and beyond petroleum. Public Relations Review, 37(3), pp.226-232.

Schultz, F., Kleinnijenhuis, J., Oegema, D., Utz, S. and Van Atteveldt, W., 2012. Strategic framing in the BP crisis: A semantic network analysis of associative frames. Public Relations Review, 38(1), pp.97-107.

Spencer, D.C. and Fitzgerald, A., 2013. Three ecologies, transversality and victimization: the case of the British Petroleum oil spill. Crime, law and social change, 59(2), pp.209-223.

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