In recent days we have witnessed the pressures that are brought to bear on senior leaders when things go wrong. In commerce, people are calling for the head of Tony Hayward, the Chief Executive of BP, while in sport, people are demanding the resignation of Fabio Capello following the England team’s ignominious exit from the World Cup.
But is it reasonable to assign complete responsibility for these failures to just one person? More to the point, would sacking the CEO fix the problems?
In an organisation the size of BP it would clearly be impossible for the CEO to be aware of all operational issues, but this does not mean that he is not responsible. Indeed, if he were not responsible, it would be rather difficult to justify his seven-figure salary!
However, the ritualistic baying for CEO blood that occurs whenever something goes wrong tends to mask the true nature of many company problems. As a project manager friend of mine used to say “projects don’t go wrong, they start wrong.” The same is true of most large-scale corporate problems – they are not attributable to the isolated actions of the CEO, but more often than not, a result of the culture of the whole organisation.
Take the pre-crunch banking environment as an example. I am sure that no bank CEO ever told anyone that it was OK to lend money to people who were unlikely to be able to repay the loan if the property market collapsed, but they did preside over a business where people were rewarded for taking risks, where controls were too relaxed, where successes resulted in massive bonuses but failures were ignored. The result was that they created the environment that made the disaster possible.
In the case of BP, it is probably no coincidence that in the months prior to the Deepwater Horizon disaster there were a number of incidents in which their safety record has been called into question – In 2005 an explosion at BP’s Texas City refinery resulted in 15 deaths and 180 injuries, between 2007 and 2010 BP were responsible for 97% of all “wilful safety violations” by oil refiners in the US according to the Occupational Safety and Health Administration, whose Deputy Assistant Secretary of Labour was quoted as saying; "The only thing you can conclude is that BP has a serious, systemic safety problem in their company." Most recently, in 2010, the Deepwater Horizon disaster resulted in the loss of 11 lives and led to the worst oil leak in history.
However, despite the obvious safety problems, recent initiatives appear to have focused on reducing costs with some 5,000 jobs having been cut in the year ending March 2010 with operating expenses reduced by some £2.5bn.
As an external observer, it therefore appears that the problems of BP do not simply come down to the actions of the CEO, but instead lie deep within the culture of the organisation. More to the point, the culture of BP is not down to Tony Hayward, quite the opposite, having been with BP for 28 years, Hayward is himself a product of the BP culture rather than its architect.
To appease the public and the politicians it may well be necessary for the CEO, the Chairman and even the whole Board to be replaced, but it is questionable as to whether their successors would have the ability to transform the culture of a company that has been years in the making, especially as their focus would most likely be the rebuilding of the balance sheet.
In the short-term it may well be the difficulties inherent in replacing the Board that saves the jobs of both the CEO and Chairman. In the longer term it is likely that the company will be acquired by either Exxon Mobil or Shell. Sad as it will be to see yet another British company fall into foreign ownership, if it is the quickest way to improving safety, it may be a price worth paying.
Thanks to Stig for use of his adapted BP logo image. Stig can be contacted at www.shtig.net