Organizational Theory in the Context of British Petroleums Activities - Case Study Example

ORGANIZATIONAL THEORY: BP] Submitted By: Name Course Lecturer Date Introduction Initially, BP operated under a bureaucratic and over-complex organizational structure with several hierarchy levels. After experiencing intense strains in the 1980s, the company decided to simply its organizational design to a simpler and flatter structure in 1990 (Siddall, Willey, & Tavares 1992, p.39). This essay seeks to analyse how the British Petroleum (BP) post-industrial organizational structure and its relation with the wider global environment might have contributed to the oil spill in Mexico’s Gulf. It will also analyse how the company has impacted the environment, as well as how the environment has affected the company from both a modernist as well as a post-modernist perspective. A brief presentation of BP William Knox is to be owed for the foundation of BP. After the start of the 20th century, he invested money, labour and time believing that significant oil deposits could be established in Persia, currently called Iran. In its first 60 years, the company mainly focussed in Middle East. However, towards the end of the 1960S, its focus shifted westwards to Britain and USA. At the present, BP is a global corporation operating in more than 80 countries. Its main operations include gas and oil production and exploration, refining, promotion and selling of oil products, as well as the production and selling of chemicals. Its business operations are all supported by high quality technology and research. By December 2012, the company had a total of 85,900 employees (BP 2012). BP organisational design During the 1980s, BP experienced a lot of management issues under its bureaucratic and over-complex organizational structure, where the BP Group was much European-centred. The company underwent reorganization in 1990, which saw the adoption of a flatter organizational structure with Robert Horton being the new chairman of the Group. The reorganization introduced delayering, team-work and consensus among managers in order to eradicate the former hierarchy (Stonham 2000, p.416). Following several changes of BP’s organizational structure, the company now operates under a network organizational design. According to Gaspar (2006, p.180), a network organizational design denotes a structure of allocation and synchronization of business activities among several organizations. It involves several organizations working together in the production of a given product or rendering of a given service and allows a firm to collaborate with other firms in the attainment of its objectives and goals. The main role executed by network organizational designs is administration, while manufacturing, sales, and distribution is contracted to other companies. Therefore, the main aim of such a structure is administrating and coordinating contracts and agreements with other firms that carry out all manufacturing, selling and distributing (Hatch & L.Cunliffe 2013). Siddall, Willey, & Tavares (1992, p.38) maintain that, as the BP Group began addressing the issues of complexity and scale, the Group’s matrix was decreased by the divestment or combination of the global businesses. It became evident that a bigger percentage of national companies were running BP Oil’s units with a number of extra operations in areas like exploration, nutrition, and chemicals. The organization was mainly European-focussed due to the significance of its German, French, and UK associates. Thus, new initiatives and ideas were normally created for Europe and extended to other parts of the globe. This is a good example of a network organizational structure. Moreover, BP’s practice of a network organizational design is seen where during the Gulf Oil Spill, it had leased the Deepwater Horizon podium from Transocean (Klein 2010). In this case, BP used Transocean to execute its business activities. BP has impacted the environment in a number of ways, with the Gulf Oil spill being one of the worst environmental disasters to ever have occurred due to the serious effects it had on the Gulf of Mexico. The shift of BP to a post-industrial organizational design made some contributions to the oil spill. The adoption of a flatter structure weakened the company’s oversight of the operating units. The risk a firm faces by removing levels, particularly when it is executed in BP’s one-size-fits-all manner, is that such a move damages its ability to handle complexity. Several management issues are highlighted in reports some few hours prior to and after the explosion in the Mexico’s gulf. Such issues include inept attempts to stop the oil flow, the inexperienced non-mobilization of resources for cleanup based on incorrect information, inadequate equipment to contain the spilling oil, and the finger-pointing after the accident (Klein 2010). Modernist Perspective General environment comprises of sectors that may not directly affect the routine activities of an organization but have an indirect influence on it. It often encompasses the government, technology, financial resources, economic, and socio-cultural sectors (Daft, Murphy, & Willmott 2010, p.143). With growing public and regulatory pressure, most oil firms have begun changing their climate strategies. In 1997, BP adopted a more open position in relation to the Kyoto practice and climate science. The company has invested in renewable and low-emission energy sources. In terms of socio-cultural factors, there has been a growing social concern about climate change. Consequently, BP changed its organizational strategy in 1997 to gain a greener profile. This was followed by its new international brand and advertising campaign (Kolk & Levy 2001, p.504). The economic status of the oil industry has been characterised by turbulence. In the previous several years, the oil industry has shown diversification waves, focus strategies and divestments, and large-scale acquisitions and mergers towards the end of 1990s. In response to the situation, BP began its wider focus with outlay in solar energy in 1996. This has expanded specifically through the formation of BP Solarex, which merged with BP Solar previously purchased from Enron (Kolk & Levy 2001, p.505). Furthermore, the general environment has also impacted BP through resource dependence. Being a British owned company, BP mainly depends on the Middle East to obtain its oil. According to Stonham (2000, p.411), the oil sector has mostly been typified by volatile prices and dominance of few firms. The OPEC nations in the Middle East highly manipulate the price of oil. For instance, in crude oil price hikes in 1972 and 1979 resulted in world economy downturn. Such instance, negatively affects the operations of oil companies like BP. Post-modernist Perspective Stakeholder theory proposes that the aim of a firm is to generate the maximum amount of value for stakeholders. So as to thrive and ensure sustainability in due course, executives ought to align the interests of suppliers, employees, customers, shareholders, and communities (Hatch & L.Cunliffe 2013). BP exists both to make profits as well as maximize shareholder value. The move toward the idea of value of shareholder was started by the new CEO, David Simon. Thus by 1996, BP considered shareholder return its main performance measure. The adaption of the stakeholder theory to BP is seen through the splitting of the company into BP Exploration, BP Chemicals, and BP Oil. Such a split allowed the company to assess performance of each group. After the split, asset managers ran each group independently, with accountability for performance ranging from productivity, environmental performance to liaison with local community (Stonham 2000, p.417). In this case, the interests of different stakeholders are represented in BP’s business operations. Conclusion BP shifted from a bureaucratic and over-complex organizational structure to a simpler and flatter organizational structure in 1990 following intense strains in the 1980s. William Knox founded BP and began its operations in Iran before diversifying to other parts of the globe. BP has a network organizational design with its units being run by several national firms. BP has impacted the environment through the Gulf Oil Spill, which was contributed by its shift to a post-industrial organizational structure. Such a structure made it impossible for the company to deal with complexity. Economic, regulatory, and socio-cultural factors have led to changes in BP’s strategies. The adoption of the Stakeholder theory by BP is evidenced by its split in 1996 into BP Exploration, BP Chemicals, and BP Oil, which enhanced its performance accountability. Reference List BP 2012, December 31, BP at a glance, Retrieved May 10, 2013, from http://www.bp.com/sectiongenericarticle.do?categoryId=3&contentId=2006926 Daft, RL, Murphy, J & Willmott, H 2010, Organization theory and design, Andover, South-Western Cengage Learning. Gaspar, JE 2006, Introduction to business, New York, Houghton Mifflin Company. Hatch, MJ & L.Cunliffe, A 2013, Organization Theory: Modern, Symbolic, and Postmodern Perspectives (3 ed.), USA, Oxford University Press. Klein, P 2010, July 20, The Organizational Economics of the BP Oil Spill, Retrieved May 10, 2013, from http://organizationsandmarkets.com/2010/07/20/the-organizational-economics-of-the-bp-oil-spill/ Kolk, A & Levy, D 2001, Winds of Change: Corporate Strategy, Climate Change and Oil Multinationals, European Management Journal, 19 (5), 501–509. Siddall, P, Willey, K. & Tavares, J 1992, Building a Transnational Organization for BP Oil, Long Range Planning, 25 (1), 37-45. Stonham, P 2000, BP Amoco: Integrating Competitive and Financial Strategy, European Management Journal, 18 (4), 411–419. Read More