The Restructuring of the Company British Petroleum - Essay Example

British Petroleum, Plc popularly known as BP is the largest corporation in the United Kingdom. It is also the fifth-largest company across the globe and the third-largest oil corporation. Established hundred years ago (1909), BP, Plc has its headquarters at St James’s, City of Westminster of London. Listed with the London Stock Exchange (LSE), the corporation is a major constituent of FTSE 100.

Restructure

The restructuring of the company can be in many of the verticals. It can take the form of financial restructuring or business portfolio restructuring. Also, the restructuring of a company can be in the strategic decision-making process or in human resource-related issues.

In the year 2007, British Petroleum, Plc took many restructuring initiatives. It had restructured its operations in the North Sea Organisation. The restructuring was aimed to simplify the organization and to improve the efficiency of the various related processes. The company was compelled to initiate such changes as the production in that area was depicting decreasing trend while cost was rising rapidly (BP, 2007).

As the chief executive of BP put it, the overall restructuring measure was not all about ‘cost reduction and cull’, rather it was about the change in culture among the employees of BP, as he observed that the oil major has been suffering from ‘over- complexity’ (Macalister, 2007).

Though the management claimed it to be a mere change in culture it invariably meant a reduction in the employee force as the company was witnessing alarming financial results. To do away with the complexities that according to the top management were responsible for such deplorable financial results, the company decided to make processes simpler. 

The corporation used to have three major divisions namely ‘exploration and production’, ‘refining and marketing, and ‘gas, power and renewable’. To make the operational process straightforward and reduce costs, the management restructured the process by doing away with the third segment and incorporating it into the other two. The company introduced a separate division to handle the business of low carbon and options for future growth and named it ‘alternative energy’ (Kukec, 2007). 

Results

The objective of any restructuring plan that any corporate initiates, is to increase its profitability and financial performance and to create enhanced value for the shareholders. The financial results of British Petroleum for the financial year 2008 clearly depict that the restructuring plans have paid off well. The operating cash flow, which was around $ 28.2 billion in 2006, increased to $ 38.1 billion at the end of the financial year of 2008. The dividend paid per ordinary share in 2006 was 38.4 cents and at the end of 2008 had been 55.05 cents, experiencing an almost 30% rise.