Key Strategic Implementation Issues at BP - Essay Example

?Running head: strategic management. Strategic Management Key Strategic Implementation Issues at BP 6. Strategic Implementation: A general perspective BP, the largest producer of oil and gas, reached its current position after many years of its existence. It was formerly associated only with the British Government, and had not put in much effort towards growth or expansion. Former CEO, Sir John Browne’s 101 Strategy led the foundation for BP’s expansion, new acquisition, exploration and innovation. BP vey soon became the largest producer of oil and gas in the United States, very different from what it was before Browne taking over as the CEO (Reed & Fitzgerald, 2011). However, operations at BP have caused many catastrophes, causing severe damage to environment and mankind. A study of its strategic implementation has revealed four main issues. 6.1 Issues in strategic implementation: 6.1.1 Leadership perspective: Despite its immense growth and achievement, issues from leadership perspective are haunting this oil giant. In her article, Corkindale (2010) highlights that the major weakness of BP is its top leadership and points to mistakes made by BP. According to her, CEO, Tony Hayward, was solely responsible for the major oil spill that happened couple of years back. The attitudes and behaviors of senior most management team are believed to have caused this massacre. Organizations function based on strategic goals and objectives by following certain strategic values in the form of mission, vision and values (Ledlow & Coppola, 2011). While every organization sets its strategic objectives, makes strategic choices and directions, and links all tactical and operational strategies to the corporate strategies, leaders in critical positions must adhere to this principle. At BP, inappropriate governance and safety practices, and lack of ownership of its employees’ safety and hygiene emerged as a result of the major catastrophe. Moreover, Hayward is also accused of risky actions and investments; is accused of ignoring expert advice and overlooking warnings about safety issues and other facts (Corkindale, 2010). 6.1.2 Inappropriate business level strategic plans: Browne’s operating model comprised of six broad culture guidelines around people, openness, teamwork, simplicity, trust and empowerment. This model was introduced to make BP less bureaucratic and shift the command and control management to facilitated management through empowerment of middle management (Morrison, 2003). However, the catastrophes reported at BP could be the result of lack of knowledge and experience for middle management. Extreme empowerment to govern their individual units could have resulted in gaps or inappropriate safety and security management. Much before the recent BP Oil Spill, there have been other reported undesirable incidents that have caused loss to the community and environment, like the Texas City incident, few leakage incidents, blasts etc. The strategic drift in safety and operations were ignored by management. BP officials have been accused on many occasions of downplaying small erroneous operations and equipment, which had later caused larger blasts (Maresh & Williams, 2011). Moreover, BP’s cost cutting measures did not take into consideration its workers’ and environment’s safety, which is evident from BP’s corrosion-related history. Report from BP’s Congressional hearing (2006) indicates that these issues were repeatedly escalated to BP’s top management before the major catastrophe. This is an indication of lack of ownership and also lack of aligning business performance with broader organizational objectives. 6.1.3 Cultural issues: The top executives at BP acknowledge their responsibility to protect and preserve the environment. However, lack of ownership by the top management of governance measures have hitched BP’s growth because of inappropriate practices and the consequential catastrophes, thereby questioning trust of their stakeholders in BP’s system. For instance, lack of transparency has been cited as one of the issues in BP’s entries into other parts of the world. BP’s entry into Angola created much questions about financial transparency because of their signature bonuses in bidding round for the ultra-deep water blocks (Christiansen, 2002). System integrity had been a long-term issue at BP, which is attributed to its internal management based on various accusations laid at Hayward. 6.1.4 Lack of Innovation: Browne was quick to act on the company’s strategies, which accelerated performance at BP. However, few accidents at BP occurred due to lack of change in strategies/practices. It can be said that BP failed to change its strategies after experiencing the immense success. Applying the Sigmoid curve principle, BP failed to change at point A, and hence reached point B (Thompson & Martin, 2005). After Browne’s commendable efforts to take BP to greater heights in all ways, not too much of improvement was seen at BP. It was during Browne’s time that BP was able to achieve carbon emission reduction by almost 10%, which no other company in this sector had achieved. In addition to this, evidences also indicate that BP has produced substantial innovation towards environment preservation through other initiatives like carbon sequestration to reduce release of carbon into the atmosphere; emissions trading systems to allocate efficient resource allocation. Moreover, BP is known to be the largest investor in solar systems. Nevertheless, these initiatives and efforts are not tangible in terms of their impact on the environment against the required efforts (Daft, 2008). Management at BP lacked vigilance and hence overlooked the gaps and glitches, focused more on capturing new markets. Capturing new markets would also require change in values and more innovation, which were ignored. 6.2 Strategic implementation summary: BP’s strategies have been the reason for its expansion and success; however, leadership’s lack of focus and vigilance had made the same strategies either redundant or inappropriate. As one among the topmost oil and gas companies, BP’s presence across 100 countries makes it most powerful along with its operational presence in six continents. BP’s strategies for creation of new businesses worked well, but sustaining its new businesses with the same strategies failed. Literature and study on BP reveals that BP has many glitches in operations, mainly because of leadership and culture issues, incongruent business plans, and lack of innovation; these factors are also possibly the reasons for various catastrophes reported at BP and the reasons for holding back BP in recent times in comparison with its competitors. 7. Strategic evaluation: Current and future strategies 7.1. The Balanced Score Card Evaluation Kaplan and Norton’s (1996) Balanced Score Card evaluates organization’s strategies based on four perspectives, financial, customers, internal business processes and learning and growth. From financial perspective, BP’s vast expansion and investments are indicative of positive signs. Browne’s initiatives are responsible for attracting variety of investors and shareholders, which further encouraged sustainability investments and replication of best practices. To add to these, BP’s contribution towards environment through eco-friendly practices further reinforced sustainable development. However, the series of catastrophes, mismanagement of BP operations, safely and security hazards, all can have a substantial negative impact on BP’s performance and financial reserves. Customers: BP’s presence in over 100 countries will continue to add more and more customers, which include end users, suppliers, shareholders and also employees. All these stakeholders’ confidence in BP has dwindled after the last oil spill. Towards community and economy, BP has taken significant steps to mitigate the impact of oil spill across the gulf coast in five states including Florida, Louisiana, Mississippi, and Alabama. BP has released millions of dollars to reinstate tourism and seafood by providing help in checking quality of the seafood (Restoring the economy, 2011). With millions of customers and thousands of employees, BP has huge responsibilities, the foremost being operating in safe and compliant manner. Internal business processes: In spite of its acclaimed business strategies, BP has caused much damage to property, mankind and environment. BP should evaluate its strategies on a periodic manner in order to stay competitive, safe and environment-friendly. Business processes in terms of operations, control mechanisms, resource allocation and impact on environment should be the main focus of periodic evaluation. Learning and growth: Considering BP’s immense progress and vast expansion, leadership’s role in its success cannot be ignored. Browne’s 101 strategies have been fundamental in achieving the topmost position for BP. Moreover, many issues reported at BP roll towards knowledge management, which was appropriately identified and addressed by Browne through knowledge-sharing practices such as the BP Intranet, virtual teamwork, and transfer of data and information with understanding (Morrison, 2003). These strategies have been effective and hence should be continued, but encouraged by the right leadership team. BP has formed virtual team working groups between different locations in order to learn best practices from each other. Employee empowerment in the right frame will be able to trigger innovation and motivation. 7.2 Future strategies From a leadership perspective, corrective and immediate action, the strength to face the reality and working together have been the lessons from BP Oil spill. The same opinion echoed from BP’s roundtable discussions conducted in 2010. Rebuilding trust should be the main agenda for BP’s leaders. BP seeks to take advice from leaders belonging to different established entities. Rebuilding trust would require reinstating proven governance systems and transparency through employee involvement at all levels and empowerment; shifting organizational culture towards more participative, trustworthy, team-based and process-oriented one. For this, organizational structure, control systems, practices and hierarchy should be supportive of creating a better culture. Strategically, an efficient organizational culture, strong teamwork and effective leadership form the building blocks towards achievement of organizational goals. 7.3 Summary of strategic evaluation: Strategic evaluation based on the balanced score card draws attention to the four main drivers finance, customers, internal processes and learning and growth, which are the core aspects for BP to sustain. In order to improve its shareholders and investors, BP will have to rebuild its trust by incorporating better processes and control mechanisms and review its current strategies. BP should continue its contribution towards environment and society through more innovative initiatives. BP should also rebuild trust of its employees by employing better practices for learning, employee engagement and empowerment; moreover, BP should focus on improving its culture toward more employee-friendly, participative, and trustworthy culture through effective leadership at all levels. 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