Leadership Theory and Practice Via an Account of BP's Gulf of Mexico Oil Spill - Assignment Example

Critical Essay of Leadership Theory Name: Course: Institution: Tutor: A Critical Essay of Leadership Theory Executive Summary The following paper discusses the concept of corporate moral accountability as relates to the Gulf oil spill crisis which involved BP. The paper finds that the BP leadership should be held accountable the environmental and social impact of the company’s business. The company failed to develop appropriate measures for reinforcing corporate social responsibility and accountability. An organization’s leadership has a duty to ensure that everybody in the organization has the opportunity to contribute to meaningful decision making and that the company’s business is conducted based on productive relationships. It is equally important for an organization’s leadership to develop strategies for keeping long term goals at the fore front while ensuring that all short term goals are accomplished. Question 1: A Discussion of Moral Accountability Issues Emerging from the Article Corporate moral accountability refers to the obligations of enterprises for the impacts of their businesses. In order for corporate institutions to be morally accountable, they should put in place certain processes for integrating social, ethical, environmental, consumer and human rights concerns into their core strategies and business operations. In the Financial Times article of July 15, 2010 about British Petroleum oil spill in the Gulf of Mexico, various moral accountability issues have been implied. One of these issues is ethical failure. In the article, it is clear that BP failed to put in place appropriate measures to reinforce the ethical conduct of its business. For instance, intimidating employees in order for them not to report acts of negligence on the side of the company’s leadership is a clear show of ethical failure. According to Sanders (2001), ethical failures can be attributed to poor leadership support, inefficient organizational culture and a poorly articulated corporate environment where corporate objectives are not aligned to the interests of stakeholders. In order for BP to depict a morally accountable image, it has a duty to do more than just harboring right intentions. The corporation has an obligation to implement objectives and policies which reinforce moral accountability within its corporate culture. From the perspective of a rig operator working with the company, BP has a duty to provide sufficient safety measures for its employees. Essentially, employee safety is a major issue of corporate social responsibility, which can have deleterious impacts on organizational performance if ignored. According to Elkington (2003), employees are the major drivers of organizational growth and success. They are an organization’s greatest source of strategic competencies and therefore their welfare, both as individuals and as a group, is important. The fact that BP lost 11 employees in the Gulf explosion indicates that the company could as well have lost many more employees in the same incident. This underscores the importance of the company being morally accountable in its treatment of employees. Another important issue of moral accountability that is explicitly implied in the article is that the corporation had to be responsible for the impacts of its acts on the environment. In the article, it has been explained that the Gulf rig explosion left millions of gallons of oil spilling into the sea. The environmental damages caused by such a massive spill are innumerable and had dire consequences on marine life as well as the likelihood of adjacent coastal communities. Sanders (2001), has explained that an organization that is morally accountable for the impacts of its activities conducts its businesses in a manner that best promotes environmental well-being. This way, such an organization provides a solution to a wide range of social problems by preserving the wellness of the environment. The BP Gulf incident led to significant loss of income to the company, which culminated in the company’s shares trading at low prices. This had serious impacts on the company’s shareholders, especially retirees who depended on the dividends from the company as their main source of income. In fact, the oil spill which was largely an act of negligence on the part of BP and its leadership was an upsetting experience to the investors who depended on the company for livelihood. This implies that the company had a moral duty to protect the interests of its shareholders. Had the spillage not occurred, the company’s shares could not have lost values and hence shareholders could not have any issue to worry about. Question 2 a) Major Leadership Issues of Vital Importance for BP’s Future In order to be capable of competing effectively into the future, BP needs to address various leadership issues in its business practices. Carl, Gupta and Javidan (2004) have pointed out that effective business leadership is vital for meeting employee, customer and corporate needs. The leadership issues which are of vital importance to BP’s future success relate to the ability to communicate and develop a wider view of the corporate image and objectives and gather information and make informed decisions. The ability of the leadership to communicate organizational policies and objectives effectively is vital to the ongoing success of any business (Celia & Juan, 2003). Most of the issues facing BP could have been avoided if its leaders were effective communicators. When leaders are effective communicators, they make sure that employees are always aware of what they need to know about their jobs and how those jobs can impact on company goals. Effective leadership communication is not necessarily a one-time communication. It is about developing processes to facilitate regular communication with employees in many ways. Had BP’s leadership listened to its employees about the inefficiency of its aged equipment, the disaster could have been avoided. Strategy building is another important leadership issue that is paramount to the future success of BP. According to Galarraga and Anil (2004) improved organizational performance depends greatly on effective strategies and planning. BP’s leadership has a responsibility to build strategies for helping the corporation move towards specific business goals and objectives. Such strategies should be focused on achieving the company’s overall vision and mission and should be specially designed to move the company forward in an agreed direction. BP’s leadership also has a challenge to instill attitude change in the company following the tragic rig explosions. Some of the attitude problems inherent in the company include out-of-control emotions and putting off decisions. It is also possible that the company’s leadership may fail to understand the personalities of team members. Undeniably, the future of PB is dependent on how its leadership makes use of information for decision making. Although it is not possible to be accurate on certain decisions, using data and past experience to guide decisions can help businesses get closer to their strategic goals. Internal data such as cost of oil explosion on the company can guide its leadership in providing insights for future business operations (Rowley & Berman, 2000). Strategies for Changing the Practice of Senior BP Managers in Responding to Public Critiques of their Actions in the Gulf Spill i. The Concept of Accountable Leadership A critical analysis of the situation at BP and the circumstances that led to the massive oil spill in the Gulf indicates that leadership attitudes and practices of the company’s senior managers need to be changed. This will help transform the organization into a robust institution capable of responding effectively to public criticisms about its actions in the Gulf spill. In today’s increasingly challenging business environment, business leaders are faced with a lot of complex and often contradictory demands from stakeholders, chief among them customers, investors, employees, the government and the community (Cornelis & Pearce, 2006). Therefore, organizations need to develop strategic leaders who can lead their organizations into delivering on the demands of each of these groups of stakeholders. Essentially, it is correct to think that companies should be responsible for their business actions by creating quality products and marketing them in the most ethical manner, and in compliance with acceptable laws and regulations. All business actions should be represented in an honest and transparent manner to all stakeholders. This gives rise to the concept of leadership accountability. According to Carl, Gupta and Javidan (2004), leadership accountability is about creating a corporate society in which a proper balance is achieved between ecological, economic and social aims. For businesses, this involves not only expanding and sustaining economic growth and shareholder value, but also developing a leadership that is accountable to the deleterious impacts of a business to the society (Orpen, 2001). It also means pursuing ethical business practices and creating sustainable values for a company’s stakeholders. A company that embarks on the path of corporate accountability needs to examine its mission, vision and strategic values carefully vis-à-vis stakeholder expectations. The company must also be fully informed about prevailing legal constraints and examine the effectiveness of its leadership structures. There is a compelling business case for leadership accountability. In their book, Dickson, BeShears and Gupta, (2004) have stressed that the principles of leadership accountability help companies to reduce business risks, innovate new and ecologically friendly business processes and obtain operating permits from local communities. Thus, by adopting leadership accountability principles, companies can become more profitable and sustain their businesses over the long run. Far from being an end in itself, leadership accountability is a vital process by which companies integrate managerial decisions with corporate objectives into their business strategies (Orpen, 2001). In today’s world of business, companies must comply with an increasing number of national and international regulations governing environmental responsiveness, corporate governance, labor standards and human rights. Essentially, leadership accountability means going beyond mere legal compliance. Leaders can demonstrate accountability by proactively innovating businesses practices and products which are economically and environmentally attractive and which also contribute to fulfilling a social need (Sanders, 2001). Galarraga and Anil (2004) have cautioned that the process of developing responsible and accountable leaders within organizations is much more than a public relations gesture. Accountability occurs only when there is an active leader within an organization who initiates this practice. In fact, it always takes individuals to transform an organization into an accountable and socially responsible enterprise. These individuals need to be both good managers and good leaders (Becky, 2007). Their accountability work starts by a careful examination of the factors that determine the accountability of accompany and its partners. These factors can be internal (mainly managerial and organizational) or external as in the case of stakeholders’ demands. Addressing these external and internal factors may not be easy for any organization. Ideally, there are a number of barriers that may need to be overcome in order to develop an good leadership. Nevertheless, the most fundamental success factor for organizational accountability is the sprit of true leadership with an organization. True leadership means securing and strengthening the commitment of the top management and developing a good system of incentives for rewarding leaders at all levels of organizational hierarchy. It also means developing the ability to respond to changes with flexibility and to engage in dialogue and partnerships with stakeholders including the society. ii. Strategies for Changing the Practice of BP Senior Managers in Responding to Public Critiques for their Actions in the Gulf Spill Organizations depend on responsible leadership to guide them through periods of unprecedented crises. Yet, there is a lot of evidence in research studies and reports that even the most venerable organizations fail to respond to crises effectively because of poor leadership (Northouse, 2004). Positive and responsible leadership enables organizations to adapt to change, implement strategic plans successfully and be prepared for future uncertainties. According to Elkington (2003), organizations that have developed responsible and accountable leadership can respond to external and internal pressures and criticisms about their business practices. In the case of BP, the organization could have responded to the oil spill crisis effectively had it nurtured a responsible and accountable leadership. There are various strategies that can be employed to develop a responsible leadership at BP. Such a leadership should be capable of addressing public criticisms about the company’s omissions in its business, which led to the oil spillover. The most vital strategy in transforming BP’s leaders is to begin by evaluating the organization’s leadership culture. According to Cornelis and Pearce (2006), leadership culture refers to the collective actions of both formal and informal leaders acting together to influence an organization’s success. It does not necessarily relate to the number or quality of individual leaders in an organization but the ability of leaders to work together in support of strategic organizational goals. Thus, leadership culture entails both leaders and the relationships between leaders (Celia & Juan, 2003). According to Carl, Gupta and Javidan (2004), an effective leader should be capable of impacting on various areas outside their functional areas or business units. The leaders should realize relationships which have to be nurtured with followers and stakeholders. It is apparent that BP has developed a poor leadership culture where organizational leaders are less concerned about the organization’s social corporate responsibility and accountability issues. In many respects, the idea that leadership is greater than an individual leader is of paramount importance to the long term growth and survival of an organization (Orpen, 2001). To ignore this consideration in the development of any leadership is to miss a point on what an organization really needs to do and what must be done if strategies are to be implemented successfully. Evaluation of BP’s leadership culture can help reveal weak points that should be strengthened to enable the organization’s leaders respond effectively to public criticisms about its actions. Another important strategy for changing the company’s leaders is to review the company’s strategic business objectives for the implications for new leadership requirements (Hughes & Beatty, 2005). This analysis can be best conducted by a team of experts composed of people who understand the business intimately and who are well informed in the processes of acquiring, developing and retaining leadership talents. In light of this consideration, it is imperative for BP to start the leadership evaluation process by identifying the drivers of organizational change, which require the input of strategic, responsible and visionary leadership. Essentially, drivers are the key choices which leaders make regarding ways of positioning an organization to take advantage of strengthens and opportunities in order to respond effectively to weaknesses and threats (Becky, 2007). They are the things which make a particular leadership strategy to be unique to one organization and dictate where trade-offs should be made with respect to alternative investments of organizational resources. BP’s managers can be made to become responsible and accountable leaders capable of responding to criticism by developing an innovative leadership culture. According to Northouse (2004) an innovative leadership culture allows greater independence among managers and leaders to create enhanced and effective collaborations across departments and functional areas. This can be vital especially when an organization is facing pressures from stakeholders to demonstrate responsibility and accountability. Innovative leadership cultures play a fundamental role in increasing leadership involvement across functions and in collecting stakeholder insights and translating these into profitable business ideas (Triandis, 2003). Such a culture also anticipates space, capital and talent implications for its activities. The tragic event at BP illustrates that the organization’s management needs cultural change in order to create a spirit of innovative leadership as opposed to a mere culture of risk-aversion at the management level. Another equally important strategy is for BP’s management to develop strategies for making its leadership more stakeholder-focused. Ideally, it is not possible for the company’s leadership to respond appropriately to public criticism about the Gulf spill when the leadership does not have the interests of the stakeholders at heart (Celia & Juan, 2003). In this respect, the company needs to develop and implement a robust process for understanding stakeholder’s experiences and translating them into improved business practices. The organization must create solid linkages across all stakeholder touch points so that the stakeholders experience a mutual, seamless relationship. It is also important for the company to make efforts in understanding the varying needs and expectations of different stakeholders and move beyond the traditional one-size-fits-all approach when responding to public criticisms (Javidan, 2003). In addition, the BP management must develop strategies for improving the company’s operational efficiency as a show of accountability. According to Stacey (2003) operational accountability can be increased by introducing lean manufacturing, Six Sigma and other methods that can help minimize operational costs as well as social and environmental impacts of a business. It is essential that BP creates a culture of continuous improvement, which should be led authentically by those in leadership authorities. Hughes and Beatty (2005) have explained that the process of developing responsible and accountable leadership requires careful attention to talent development management. By accelerating acquisition and development of talents for key positions and roles, BP can avoid adverse impacts arising from its business practices. Essentially, every manager at BP is should be responsible for fostering strategic leadership in others. In many organizations, people tend to believe that only executive managers should attend the top level meetings where strategies that affect the future of the organization are discussed. Stacey (2003) however believes that strategic leadership works best when decisions and information from top levels combine with those from middle and lower ranks. For this reason, everybody at BP should be nurtured and developed into a strategic leader capable of practicing strategic thinking. Before developing strategic leadership in others, a leader or mentor must first determine if they are visionary leaders themselves. Many organizations have come to the view that when evaluating their people, the ability to deliver results by responding to external criticisms is not enough. Rather, how the results are delivered has long term impacts on the health of the organization. Therefore, companies must respond to the simple principles of honesty and fairness and also encourage a long and broad view of business impact on the stakeholders. In conclusion, leadership accountability has emerged as a major theme in the modern business community and is fast becoming a mainstream activity. The growing interest in leadership accountability and corporate social responsibility are affecting relationships between organizations and their stakeholders such as customers, employees and investors. Modern business organizations are under pressure to provide evidence of their responsiveness to social and ecological responsibility in addition to economic responsibility. Organizations are being criticized for failing to integrate stakeholders environmental, social and other concerns into business objectives. This requires developing a responsible and accountable leadership. Essentially, responsible leadership is about ensuring that a company can be held accountable for the adverse impacts of its activities. 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