Failure of Responsible Management within the BP Deep Water Horizon Oil Spill - Essay Example

Failure of Responsible Management within the BP Deep Water Horizon Oil Spill Executive Summary During the last decade, businesses and society at large have been changing continuously at a fast pace, which has led to unprecedented pressure to act as circumstances demand quick decision making. BP has not been immune from this trend as can be shown from their response to the Deep Horizon Oil Spill. Because BP had to make quick decision under pressure from the US public and government, they were best by various managerial bad practices. These included poor crisis coordination with its partners Transocean and Halliburton, their inability to keep up with a dynamic and changing marketplace, as well as inability to respond effectively to ambiguous and complex conditions. In addition, they laid too much emphasis on the small details of safety, rather than the systemic hazards present in their operations. Consequently, they failed to prevent or contain the oil spill resulting in profound environmental damage. This included damage to beaches, fragile marine ecosystems, and marshlands located inshore, health effects on marine mammals, destruction of wildlife habitats and breeding grounds, and loss of livelihood for coastal communities. BP sought to remedy this by controlling the oil leak, funding recovery operations, and setting up a trust fund for future claims. In the future, BP should plan ahead through anticipation, preparation, and practice, be quick to show contrition, conviction, and compassion f another oil spill was to occur, and outsource communication of various technical aspects to third party experts. FAILURE OF RESPONSIBLE MANAGEMENT WITHIN THE BP DEEP WATER HORIZON OIL SPILL Introduction During the last decade, businesses and society at large have been changing continuously at a fast pace, which has led to unprecedented pressure to act as circumstances demand quick decision making. One major factor behind this urge to speed up decision-making is that market share and profits are dependent on faster recovery from crises. Although quick decision making is normally a positive attribute of management, managers and executives under pressure are more likely to suffer from impairment to decision making ability when under immense pressure (Benoit, 2011: p32). For example, they may act prematurely if they do not have time to collate all relevant information, which may have profound ramifications in the future. When these poor decisions finally impact on the organization, management is, in turn, forced to make more fast decisions in order to minimize losses. This happened with the BP Deep Horizon Oil Spill on April 10th, 2010, which resulted from BP making rushed decisions that had significant economic and environmental results because the management was unprepared to handle these unintended consequences of their past decisions (Benoit, 2011: p32). This paper will seek to conduct an exploratory case study in order to understand the managerial missteps at BP leading up to and after the oil spill and the environmental impact of these managerial decisions. In addition, it will also discuss how BP should have responded and how it should respond if there is a future reoccurrence. Management Issues Surrounding the BP Oil Spill Following the Deep Horizon Oil Spill, the National Commission set up by President Obama released a report that criticized BP and other companies it had contracted, including Halliburton and Transocean for oversights and individual missteps that caused the oil rig to explode (Neill & Morris, 2012: p631). While BP was involved in extracting the oil, Transocean owned oil rig and the cement used to seal the rig was provided by Halliburton. According to the commission, the oil well exploded because of separate outright mistakes, oversights, and risk factors that combined to overpower safeguards put, in place, to prevent an oil spill. However, majority of oversights and mistakes at the oil rig can be traced to management failure. The blowout at the oil rig could have been prevented by better management at BP and its partners, especially by improving the capacity of individuals to identify risks, as well as to communicate, evaluate, and address them (Neill & Morris, 2012: p631). One major management problem at BP was the management’s inability to keep apace of a dynamic and changing marketplace, as well as inability to respond effectively to ambiguous and complex conditions. The challenge faced by BP was the experience to simultaneously gather information, and then decipher it and analyze it prior to deciding on how to act on the information with minimal error margin (Neill & Morris, 2012: p632). Although BP had plans for the oil spill, their plans did not anticipate a widespread disaster that would affect the entire coastline. Another managerial issue that affected BP’s handling of the oil spill was a failure in communication. Communication from management and experts at BP initially released false numbers in order to downplay the impact of the oil spill to the media and the US public. This information given by BP was the initial information utilized by supporting organizations in responding to the spill. This meant that these supporting organizations were not sufficiently equipped to handle the magnitude of the disaster. The motive for BP management to give the wrong information was basically financial because of the Clean Water Act that requires a fine of $4,300 for each barrel of oil spills, as well as additional royalties for the squandered oil (Neill & Morris, 2012: p632). BP’s management laid too much emphasis on the small details of safety, rather than the systemic hazards present in their operations. In addition, the management of BP did not require strict overall procedures from its partners at Transocean and Halliburton (Neill & Morris, 2012: p634). While BP owned the lease for oil well in the gulf, the drilling rig belonged to Transocean, which BP blamed faulted for the explosion. This spilt between the owner and contractor resulted in poor accident prevention as BP’s management applied lesser standards of process safety than it did for facilities it owned. In this case, therefore, BP’s management dropped the ball on accident hazards involving its partners. They failed to conduct a comprehensive and effective evaluation of hazards because the program for risk evaluation instituted by management only covered assets owned by BP, rather than other assets contracted to other companies for their operations. Finally, instead of looking into process safety risks, BP’s management only considered the financial risks of its offshore endeavors (Neill & Morris, 2012: p634). Effect of Oil Spill on the Environment The BP Deep Horizon Oil Spill resulted in immediate, as well as long term, environmental damage, some of which may last for decades. Notable environmental damage that resulted from the oil spill was damage to beaches, fragile marine ecosystems, and marshlands located inshore. Mendelssohn (2012: p567) contends that, because oil coats most of what is in contact with the water, the oil from oil spill clung onto sand and rocks on the beach, while mangroves, coastal wetlands and fibrous grass and plants absorbed the oil, damaging them and making them unsuitable as animal habitats. At the time when the oil began to sink into the marine environment, similar damage resulted on underwater ecosystems that killed organisms and fish in the water. In fact, Kinver (2011: p1) contends that the residual oil is only degrading at a rate of 5% in the first year after the spill. The oil spill was also responsible for the death of marine birds, especially those that need to dive and swim in order to feed. The oil spill also damaged the bird’s nesting grounds, particularly since it happened during prime nesting and mating season, while it also disrupted a major stop for birds migrating to South America from the North. Marine mammals were also greatly affected by the oil spill, including sea otters, sea turtles, and dolphins, especially by clogging the dolphin’s blow holes, making it difficult for them to breath (Mendelssohn, 2012: p567). In addition, the oil coated the fur of sea otters that made them vulnerable to hypothermia and killed numerous of them. The oil spill also damaged the food supply of these marine mammals, especially since they had to eat animals poisoned by the oil. Long-term effects on these sea mammals include stunted growth and eventual death. Fish were also not spared, especially since most of the fish eggs were exposed to the oil. Oyster fisheries and shrimp fisheries along the coast of Louisiana were among the initial casualties of the spill, which also destroyed billions of herring and salmon eggs. These fisheries, according to Kinver (2011: p1) are still a long way from recovering and will require that fishing is stopped for at least five years for some sort of recovery to occur. Finally, the oil spill destroyed wildlife breeding grounds and habitats. For sea turtles that are reliant on the shore for nesting, their young ones have been noted to possess stunted growth, while they are unable to make it back to the sea after they hatch due to oil coating. BP’s Actions to Remedy Oil Spill Within days of the oil spill, BP began to work under a Unified Command Area established by the US government, along with the US Coast Guard and the States of Mississippi, Louisiana, Florida, and Alabama (Showstack, 2010: p281). BP also collaborated with the EPA, the National Atmospheric and Oceanic Administration, and the US Department of the Interior. The initial steps to remedy the oil leak involved plans to stop it at the source and creating relief wells, as well as various options to contain and stop the flow. BP also sought to expedite leak containment, such as the use of oil caps, piping leaking oil to the surface, and using static kill procedures to seal the oil. During the installation of the oil cap, BP leased remotely operated undersea vehicles to install a cap that would make oil collection more efficient (Webb, 2010: p1), while also making it easier for any potential cementing and well kill procedures. BP also implemented a claims process that sought to supply quickly funds for the recovery process. After agreeing with the United States federal government, BP set up a trust of $20 billion to satisfy the communities affected that it would satisfy any future claims, local and state response claims and costs, litigation settlements, and costs related to natural resource damage (Webb, 2010: p1). With regards to local businesses and individuals, BP has since May of 2010 paid an estimated $15 billion through various claims processes, while it has also compensated the US government and its agencies involved in the Unified Command Area. Since 2010, BP has paid approximately $2 billion for settlements, advances, and claims for various government entities. They have also covered funding request for expenses or losses incurred by countries, parishes, states, and Indian tribes recognized by the government (Webb, 2010: p1). From the start, BP agreed to work under the Unified Command Area in minimizing the human and environmental impact of the spill by removing, containing, and dispersing offshore oil. By the end of 2013, BP had used over 70 million man-hours and $14 billion on clean up and response activities, which speeded up clean up efforts, resulting in less than 20 of the 4,400 miles of shoreline being under active recovery efforts all located in Louisiana (Jernelov, 2010: p358). In addition, given the toxic environment the recovery personnel was working under, BP had to pay to assemble a team of industrial hygienists and toxicologists to ensure that the oil and dispersants used were safe for the personnel to work in. To help in monitoring the safety and health of responders and residents, BP funded water and air monitoring programs by collecting samples from residents, wildlife, and fish and making the results available to relevant authorities (Jernelov, 2010: p358). Sampling and monitoring of the environment was conducted by the EPA with funding from BP. Results were shared with appropriate federal and state agencies to help in protecting the safety of residents. Recommendations for Future Occurrences In order to prepare for future oil spills and deal with them appropriately, BP should plan ahead through anticipation, preparation, and practice. BP should assess potentially disastrous risks routinely and formulate a plan to respond to crises of this nature. By instituting effective crisis communication practice and planning and emergency management before another oil spill occurs, BP can better coordinate their actions and statements (Ibrahim & Allen, 2012: p1918). Because BP failed to acknowledge that there were risks attached to an underwater oil spill, they appeared not to have put in place any response plan. If BP had been honest about their ill-equipped status to handle a deep-water oil spill, experts may have accordingly prepared their spokespersons and would have had the opportunity to consider requirements to handle such an accident, none of which happened. BP should also be quick to show contrition, conviction, and compassion if another oil spill were to occur. In a case such as this that appeared from the start to be BP’s fault, the spokespersons should admit mistakes on the part of the company, express concern for affected people and state their commitment to uncovering the accident’s cause and ensuring it never happens again (Ibrahim & Allen, 2012: p1918). While legal counsel may advise companies not to admit guilt or apologize, in a case like this, legal ramifications are the least of an organization’s problems. A company’s reputation is important to its success, and if it is destroyed, it will take billions and years to remedy (Ibrahim & Allen, 2012: p1919). BP initially failed to admit fault and responsibility, insisting that another company was in charge of the rig’s operations and staffing. Because they failed to express genuinely empathy or concern initially, it was difficult for the public to trust them in rectifying the ramifications in spite of BP’s repeated statements to the effect that they would compensate for the damage and implement future safeguards. Finally, BP should also ensure that they stick to what they are sure of during another crisis. Communication during any future crisis should be such that spokespeople only state what can be confirmed, while also deferring matters outside their expertise to other third party experts (Ibrahim & Allen, 2012: p1920). They should refrain from any speculation, especially when they are faced with hypothetical questions. BP’s management continuously underestimated the spill’s damage and commented on issues that were outside their expertise, such as the rate of oil spill and how long it would take to reach the shore. Conclusion An explosion, in April of 2010, at the Deepwater Horizon oil rig owned; a property of Transocean and operated by BP exploded in the Mexico Gulf, killing eleven personnel and releasing some 5 million barrels of oil into the gulf. This discharge threatened hundreds of miles of the gulf’s shoreline, including marine life and people dependent on the gulf for a living. Although it is clear that BP made numerous mistakes during the management of the Deep Horizons Oil Spill, especially regarding communication, it is imperative to be mindful that even the best planned and executed crisis response does not compensate for obvious flaws in the organization. In short, because the oil spill was the worst to ever happen in the United States, there was only so much that BP’s strong public relations would have dome for the organization. If BP had, from the beginning, acknowledged the risks of deep-water oil extraction, however, slight they might have been; it would have been possible to reduce its probability, while the company would also have devised a better, faster, and more efficient plan remedy the oil spill. BP was unprepared for an oil leak in the deep ocean, considering it a high impact, low risk accident, which meant they were ill-equipped to handle the consequences. References Benoit, P. (2011). The BP oil spill. New York, Childrens Press. Ibrahim, H. & Allen, D. (2012). Information sharing and trust during major incidents: Findings from the oil industry. Journal of the American Society for Information Science and Technology. 63(10), 1916-1928. Jernelov, A. (2010). The Threats from Oil Spills: Now, Then, and in the Future. AMBIO: A Journal of the Human Environment. 39(6), 353-366. Kinver, M. (2011, April 20 ). BP oil spill: The environmental impact one year on. Retrieved April 22, 2014, from BBC News: http://www.bbc.com/news/science-environment-13123036 Mendelssohn, I. A. (2012). Oil Impacts on Coastal Wetlands: Implications for the Mississippi River Delta Ecosystem after the Deepwater Horizon Oil Spill. BioScience. 62(6), 562-574. Neill, K. A., & Morris, J. C. (2012). A Tangled Web of Principals and Agents: Examining the Deepwater Horizon Oil Spill through a Principal-Agent Lens. Politics & Policy. 40(4), 629-656. Showstack, R. (2010). U.S. Congress Sharply Divided Over Gulf Oil Spill Responsibility. Eos, Transactions American Geophysical Union. 91(32), 279-286. Webb, T. (2010 , June 1 ). BPs clumsy response to oil spill threatens to make a bad situation worse. Retrieved April 22, 2014, from The Guardian: http://www.theguardian.com/business/2010/jun/01/bp-response-oil-spill-tony-hayward Read More