Failure of Responsible Management - Case Study Example

Investigation of an Example of a Failure of Responsible Management Introduction On 20th April the biggest oil leak ever in the petroleum industry happed in the Gulf of Mexico when an explosion occurred in BP’s deep water gig killing 11 crew members and occasioning the introduction of millions of barrels of oil into the sea water. It took 6 months for the leak to be capped and during this period the damage done to the environment (Alijani, Mancuso, Omar & Ordogne 2012, p.2) and as well as BPs reputation was phenomenal, the leakage not only messed with the area’s economy by also regional tourism which is one of the main income earners (De Wolf and Mohamed 2010, p.48). While there were many interrelating factors that led to the spill, there is no doubt that the most significant was as result of a failure in management. Evidence showed that BP’s management had actually been aware that there was something outward about the well and if they had followed procedure to the letter, they could have avoided the disaster. However it was apparent as soon as the crisis occurred that BP had not only been unprepared in terms of anticipation and prevention, it was ill equipped to deal with most of the crisis management especially the communication aspect of it (De Wolf and Mohamed 2010, p.49). BP’s crisis management plan as submitted to the mineral management service turned out to have in view of the circumstances grossly understated the potential damage an oil spill could cause estimating that the probabilities of the oil reaching land would be remote at best. Evidently BP has not prepared or anticipated the magnitude of what could happen in the case of a leak and their initial knee jerk relations betrayed the ineffectiveness and incompetence of their management which resulted in escalating the environmental and PR damage on the firm. This paper aims at examining and discussing the management failures and how they caused and in impacted on the disaster with attention to the publicity and environmental damage all which were by-products of BPs biggest scandal to date. BPs culture of every dollar counts to a large extent precipitated the disaster; this was claimed by Bob Bea who had in the past served as a consultant for the firm (Rushe, 2013). He claimed that the incident as due to a classic failure in BPs management, BP it turned out had deliberately failed to exercise the highest safety standards in the Mexican gulf although they were aware that deep water drilling in the area was an extremely high risk venture. BP had a safety system designed for situations like this called petroleum management system (OMS) which had however not been applied to the gulf oil situation because presumably the management was trying to save on cost. This embodies the failure in a management system that is so money and profit oriented that it seemed ready and actually jeopardized the lives and livelihoods of millions not to mention the colossal damage to the environment (Mancuso, Alijani & Kwun 2011, p.72). Prior to the leak, a breach of the cements seals at the bottom of the well as noted, there was an increased pressure which was weakening the cement and which was the first warning that an explosion was likely to happen in action was not taken. Afterwards, during the post crisis analysis and trials some of the former employees admitted that the breach had been detected but trivialised and therefore ignored. BP had several early warnings that their machines and drilling equipment may be unable to handle the pressure from the well; in response to these, the firm had initiated preventive measures aimed at eliminating the possibilities of an explosion and consequent spill. It installed several centralizers in the central positions of the well casing to in response to the rapid buildup in pressure. Nonetheless, despite this they failed to install a float shoe at the bottom of the casing which would have provided periodic information on the validity and integrity of the valve as well as effectively measure and monitor the pressure levels in a way that could have made it possible for the spill to be contained before it caused the magnitude of damage it did. Had the float shoe been in place, management would have been able to automatically activate a barrier in the case of an emergency such as the one that occurred through the prevention of an automatic flow of hydrocarbons into the system and enhances the level of mitigating action that could be taken (Khan, 2010). At the end of the day, it is evident that vulnerabilities and human error resulting from the management’s failure to be vigilant were key causative agents of the event which had the firms leadership paid more attention to early warnings and invested more on prevention could have been avoided. Another way through which the stark incompetence of management contributed to the crisis was the fact that the rig crew recorded the wrong pressure readings and this were never double checked. This were among the main justification for ignoring the Macondo well, this in part was a fail both by the firm and the government body carrying out the inspection. As can be easily imagined, the consequences of the spill were grave, the first victims of the crisis were the 11 man crew on the Transocean rig who were reported missing after the explosion that accompanied the leak and started the fires after 2 days of search and rescue, and they were assumed dead (Aldy 2011, p.1795). The well exploded in what is reoffered to as a blowout (Tavakoli 2011, p.1949), it occasioned the release of over 300 million gallons of crude oil into the marine environment grossly polluting the gulf and beaches and coast lines for hundreds of miles. The delicate ecosystem in the Mexican gulf was confronted with millions of barrels of oil and the impact on the environment; the gulf had numerous species of animal and plant life all existing in the natural environment. However there were myriad disruptions to the entire species in various ways, millions of aquatic birds were rendered flightless when their wings came into contact with oil and as result they could not fly to hunt for food and eventually starved to death (Ferrara 2011, p.2). The oil cast a coating over the water for thousands of mile along the coastline and deep into the sea and consequently millions of fish and other aquatic life including plants perished for lack of air or sunlight. The food supply for those that didn’t dwindled down causing even more death and imbalance of aquatic food chains, the effects of all these were escalated by the fact that the environment was already in a fragile state as result of climate change (Biello, 2011). The overall environmental impact however transcend those caused directly by the oil coating water, it caused high toxicity levels in the environment especially in the deep seas and even when it did not kill the fish, they may have undergone physiological changes as a result of exposure to the chemicals in the oil. Case to point; studies into the after effects of the oil spill on fish in the gulf’s water have shown that tuna which are large predatory fish found in the area appear to suffer heart problems which are characterised by the shutting down of key cellular process in the valves. This cardiac toxic damage on tuna is just an example the negative impact of the oil ad there are many others which are not known but which may continue being felt decades after the event. Eventually, a cap was put in place to stem the spilling of oil into the water and ever since the spill PB has been working together with the US government of clear the oil from the water with a relatively high degree of success. Today, it is estimated that only there are still about 1.1 million barrels of oil either lost at sea or hidden in the shorelines with time, it is hoped that even these may be collected. The most notable area of mismanagement in the oils spill crisis was however not in the causes but the crisis management aspect of it, more so the communication. BP was initially reluctant to provide full disclosure so as to save face so it provided figures that were considerably lower than the actual ones in terms of the extent of the spillage and damage. This failure can be to a reasonable extent shared by the government of the United States, this is because instead of carrying out and independent study, they used the figures which BP provided hence derailing action of the magnitude that befitted the extent of potential damage. Unfortunately, this move which was designed to save face and protect the firm’s public image had the directly opposite effect, there was great public outcry and condemnation by the government and public when it was discovered that the firm had not only caused the biggest oil spill in world but also had the audacity to lie about it. Coombs argues that media relations play a key role in mitigating the challenges that come with crisis management, therefore a variety of options should be explored by the firm so that it ensures its activities are not delayed by too much media attention (Coombs 2009, p.10). BP formed a crisis management committee and one of the biggest mistakes they made was to put the CEO of the organisation at its head. For one, during such a situation, the CEO should keep out of the limelight as much as possible; this is because the public tend to associate him with the actions of the firm since to them he is the face of it. Ergo they tend to personalize the negative elements of the crisis and blame him since he appears to be the one responsible. For this reason BP increased the hostility of the public who refused to recognise his efforts towards reconciliation since they had a negative attitude towards the firm’s mouthpiece. In addition instead of focusing on the crisis, the CEO decided to down play it and act as if this was not very important to him on a personal level when he was confronted with questions and accusations from the media and on social networks. As a result of this the public reacted in a hostile way as was evidenced by the many sarcastic and sadistic comments he received on the media and this hostility served to worsen the firms public perception even more. BP’s poor management strategies are also evinced in the fact that initially they had refused to take responsibility for the crisis instead choosing to pin the blame in Transocean a drilling company they had subcontracted for this particular rig, this showed the firms lack of responsibility for their action and in the long run when they finally agreed to be fully responsible they ended up looking as if they had been deliberately lying to the public. The firm appeared to be fixated with the idea of saving face at the expense of taking mitigative action, as aforementioned the initially blamed another firm for their actions, in addition they consistently manipulated the information they provided to the public and until independent surveys were done they had all but convinced people that the spill was just a minor one and which they had full control over. BP was slapped with numerous laws suits after the crisis and it is predicted they may keep being sued for as long as the next three decades for the long term effect of the spill. The US government in addition to the families of the 11 diseased and numerous community groups, parishes, Indian tribes and environment lobbies have been awarded close to $30 billion in damages so far although the litigation process is still on-going. The situation was so serious that BP had to open a claims office where it is receiving and processing the compensation claims from individuals who were affected. Conclusion In conclusion, there is little doubt that the BP oil crisis was a result of poor management and the bad publicity and slow pace of recovery was in many ways motivated by the sae poor managements crisis management strategies which rather than taking responsibility opted to point fingers. Given the circumstances, one can even argue that the disaster was a reflection of the poor state of BP’s management strategies and lack of preparedness to handle crisis. Hopefully BP and other companies have learnt important lessons from this event and will use the experience to reinforce their crisis management strategies so as to avoid a repeat of BP even in a different context. References Aldy, J.E. 2011, "Real-Time Economic Analysis and Policy Development During the BP Deepwater Horizon Oil Spill", Vanderbilt Law Review, vol. 64, no. 6, pp. 1793-1817. Alijani, G.S., Mancuso, L.C., Omar, A. & Ordogne, N.G. 2012, "A GUMBO OF CATASTROPHIC EFFECTS - THE EFFECTS OF THE BP OIL SPILL MEASURED DURING THE OIL SPILL AND SIX MONTHS AFTER THE OIL SPILL ON THREE TOWNS IN SOUTH LOUISIANA", The Entrepreneurial Executive, vol. 17, pp. 1-11. Biello, D. 2011. How Did the BP Oil Spill Affect Gulf Coast Wildlife? Scientific American. Available at: http://www.scientificamerican.com/article/how-did-bp-oil-spill-affect-gulf-of-mexico-wildlife-and-ecosystems/ Coombs, W (2009) Conceptualizing Crisis Communication. In R. L. Heath, & H.D. O’Hair (Eds.). Handbook of crisis and risk communication. (pp. 100-119). New York: Routledge De Wolf, D and Mohamed M. 2010. Crisis communication failures: The BP Case Study. International Journal of Advances in Management and Economics. Vol.2 | Issue 2|48-56 Ferrara, E. 2011, "Review: Blowout in the Gulf: The BP Oil Spill Disaster and the Future of Energy in America", Electronic Green Journal, , no. 32, pp. 1-2. Khan, A. 2010, Oil dispersants effects still largely a mystery; Scientists arent sure how much good, or bad, massive use did in BPs gulf spill, Los Angeles times. Available at: http://articles.latimes.com/2010/sep/04/science/la-sci-dispersants-20100905 Mancuso, L.C., Alijani, G.S. & Kwun, O. 2011, "THE EFFECTS OF THE BP OIL SPILL AND HURRICANE KATRINA ON BUSINESES IN SOUTH LOUISIANA", The Entrepreneurial Executive, vol. 16, pp. 71-79. Rushe, D. (Tuesday 26 February 2013). Deepwater oil spill a classic failure of BP management, court hears. The Guardian. Available at: http://www.theguardian.com/environment/2013/feb/26/deepwater-oil-spill-trial-bp-failure Tavakoli, J. 2011, "Blowout in the Gulf: the BP oil spill disaster and the future of energy in America", Choice, vol. 48, no. 10, pp. 1949. Read More