BP's Management Shakeup: 3 Positive Steps and One Bold Move Not Taken
Incoming BP CEO Bob Dudley took a fairly predictable -- yet smart -- approach to reshaping a company tainted by oil spill in the Gulf of Mexico. But does Dudley go far enough, especially considering how close BP is to total destruction? Or put another way, when a company is marred by scandal or tragedy, should management take the safe remodel approach or scrap the structure altogether?
Dudley's three smart moves:
No. 1: Busting up the upstream division.
As the one guy most directly responsible for BP's operations in the Gulf of Mexico, Andy Inglis, BP's head of exploration had to go -- even if he was the one leading the effort to kill the leaking Macondo well. But his firing is not as important or noteworthy, although it will surely gets loads of attention.
Instead of stopping at a simple personnel change, Dudley has gone further by splitting BP's upstream division into three separate units -- exploration, development and production. The breakup will increase transparency and give Dudley more direct control.
No. 2: Incentives
BP's culture of profits over safety was largely borne out of how the company rewards its employees. That culture was magnified unintentionally under former Tony Hayward, who made it his mission to increase efficiency, slash overhead and boost performance.
Dudley plans to change that culture, although it's not entirely clear how. Dudley announced BP will conduct a fundamental review of how the company incentivizes business performance, including its reward strategy. If done correctly, this could have the most far-reaching positive impact on the company's culture.
No. 3: Safety and oversight. Dudley's creation of a new safety division is hardly revolutionary. The new safety and operational risk unit will have the authority to intervene in all aspects of BP's technical activities, according to BP. The safety division will be headed by Mark Bly -- the guy responsible for BP's recent oil spill report -- and will report directly to Dudley.
Here's the good part: The safety team won't operate as an insulated unit. Instead, members of the team will be embedded in BP's different operating unit, putting them close to the action and mistakes.
The one bold move Dudley's management restructuring puts him more directly in control of the company and marks the beginning of a culture shift. But as the Houston Chronicle points out, the new BP safety plan is strikingly similar to Exxon's playbook following the Exxon Valdez accident. There's nothing wrong with following Exxon's lead. But I'd argue the stakes are higher for BP, a company with two fatal accidents -- Texas City refinery and the Deepwater Horizon rig explosion and Gulf spill -- on the books.
What about breaking up BP? The most suitable split would be its downstream business -- that's refining, marketing and retail -- and its upstream business. And then rename both. Dudley calls his plan the "first and most urgent steps" in a plan to rebuild trust in BP. But Dudley could successfully overhaul the entire company from the inside and folks will still see the word "BP" and think of the spill in the Gulf.
I'm not the only one who thinks there's some merit in the idea. The folks over at financial services group Nomura not only argue that BP will forever be haunted by the disaster and suggests a name change, but believes that all oil majors should split their upstream and downstream assets, as FT Energy Source noted today.
Photo from Flickr user Paul Goyette, CC 2.0
For complete coverage, see All Things BNET on BP's Gulf of Mexico Spill
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