BP's Bonus Bonanza: Why Rewarding Staff for Safety is Wrong
BP's new man in charge, CEO Bob Dudley, understands the only way to quiet the critics, keep politicians and regulators at bay and avoid financial disaster is to improve safety and prevent disasters like the Gulf of Mexico oil spill from happening again. He's just taken an odd and flawed approach to accomplish it. In a leaked internal memo, Dudley told staff the sole criterion for rewarding employee performance in the fourth quarter will be improvements to safety.
The fact that his plan looks like a cynical ploy isn't the main problem here. Obviously, the public doesn't trust BP. The UK-based oil company will forever be linked to one of the worst environmental disasters in U.S. history. More importantly, will tying bonuses to safety actually improve safety?
Here's why it won't.
Rewarding a core value is wrong. Plain and simple, safety -- even when trying to encourage managers to find ways to improve, not just maintain -- should never be tied to bonuses. Bonuses should be for going above and beyond the core goals and values of the company, not for meeting them. And safety, it seems, should be a basic tenet at any workplace. Somehow it just doesn't seem right to reward employees for not killing or maiming anyone this quarter.
Dudley is looking for ways to improve safety and that's to his credit. But how about this: Make safety a core value and then fire managers who don't follow it.
Performance pay helped create BP's problems. OK, everyone likes bonuses. In some industries -- ahem, Wall Street -- they're ingrained in the culture. But BP performance pay structure has been blamed for creating a culture that puts profits before safety. According to its last annual report, 15 percent of the company's bonus were tied to safety measures compared to 70 percent for financial and operational goals. Suddenly skewing it the other way may be bold, but it's also unbalanced.
One quarter and one quarter only. Limiting this to one quarter strikes me first as either a publicity stunt or a total failure to understand how long it takes to change the culture of a company. But perhaps, this is the point here. Maybe Dudley truly believes BP already has a culture of safety and little needs to be done.
Dudley plans to conduct a full review of BP's employee-reward system, according to the WSJ. It will be here that Dudley can make a bigger impact.
It's too narrow. A company with safety issues will eventually be crippled by lawsuits, fines and even have trouble retaining employees. So safety is key to a company's success. Still, BP could be the safest company in the world and still fail if it ignores its reason for existence, which is to find and produce energy. Tying bonuses only to safety for the quarter will act more as a distraction than create lasting change.
It will lead to bogus improvements. There will be some managers in key areas that will come up with smart ways to improve safety. And then there will be everybody else. That's not to rip on BP staff. But the directive from Dudley is going to leave some managers scrambling to come up with an idea.
Photo from Flickr user jabberowkcy381, CC 2.0
For complete coverage, see All Things BNET on BP's Gulf of Mexico Spill
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