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A number of press articles, interviews with survivors and also blogposts make reference to BP only being interested in money and they paid little attention to safety. It is suggested that they focussed on reducing costs, meeting project deadlines and chasing greater profits at the expense of safety! They allegedly traded off safety against costs.
Some articles refer to an unprecedented number of errors in decisions leading to the disaster. But why would this be?
Most decisions are made based on a set of criteria. All decisions by definition require a trade-off i.e. giving up something to gain something else so either the criteria used were wrong or it’s a case of human error or pure incompetence. For the purposes of this discussion we will rule out last mentioned.
It would be our contention that the criteria used to make those decisions are embedded in the driving metrics present in any organisation.
In a previous blog posting we spoke about understanding the different trade-offs that leaders at all levels of the organisation need to understand and make. These are generally encapsulated in the metrics that exist both explicitly and implicitly in a company and internalised in different ways in individuals and leaders. In a company such as BP there will be a large number of metrics at play.
So who sets these metrics? Who provides these criteria for decision making? If greed was the criteria for decision making in the BP case who drove it and what form did it take?
Ultimately, in all commercial organisations profit provides the reason for their existence. There are a wide group of interest holders that influence and help form the driving metrics in an organisation such as: shareholders, board members, company leadership/management, politicians, environmental groups, contractors and employees throughout the organisation.
Shareholders (often large institutional investors such as pension funds), driven by the need to satisfy their own interest groups' need for better returns, hold a lot of sway via their ability to move investments rapidly in today's efficient capital markets. Are they the greedy ones? By its nature the company's executive have a leading role to play in establishing the metrics but given their probable performance based pay and their vested interest in the share price, are they the greedy ones? Politicians indirectly exert their own influence (taxes, jobs for constituents, re-election etc.) are they the greedy ones? Employees who act on the performance metrics for that bigger bonus at the end of the year on the reward inherent in climbing the corporate ladder, are they the greedy ones?
Would any of these parties espouse a trade-off for profit at the expense of safety or the environment? It would surprise us if this were true. So why then would, what appears to be a trade-off of safety and environment for various performance criteria, occur?
A company's values and principles set the boundaries and constraints within which it operates. They provide rules and the boundaries of the playing field within which goals can be scored. These are normally widely publicised and you will see them displayed on the walls and at the entrances of company premises, on websites and various publications. Most items in these sets of constraints, such as safety, are actively managed and measured.
Unfortunately we all have learnt somewhere along the way that what is said and what is done is not always the same thing. When values are words, when the safety initiatives become an end in themselves, when the behaviour of the leaders do not match the espoused constraints (even subtly so) the metrics become a time bomb. In simplistic terms, to illustrate the point, when the referee in a soccer match does not enforce the rules and when the linesman constantly misses line calls or when showmanship with the ball becomes more important than scoring a goal the game is compromised.
Leaders have a clear role to ensure that processes exist to ensure agreement on the chosen metrics and that the constraints are unequivocal. It is the leaders role to communicate these metrics and constraints, not just through waffly vision statements and the like, but through action and behaviour.
The leader walks a tight rope between exerting pressure on the organisation to perform and applying too much pressure resulting in a breach of the constraints. It is not only the leaders that the need to be aware of this but also all those other stakeholders referred to above.
Extra care needs to be taken when exceptions are made as “apparent” disregard for the constraints will quickly filter down the organisation. There needs to be consistency between what one says and what one does and it must be perceived as such.
Was the BP case and issue of greed or an unconstrained profit motive? Is there a difference?
Key take-outs
- stakeholders influence the criteria for performance and decision making.
- leaders must clearly articulate the criteria and constraints for decision making.
- a leaders action and behavior send clear messages with regards to “what is ok around here”
- pressure is good but excessive pressure can lead to abnormal behaviour and undesirable consequences.
- leaders need to ensure that the multitude of metrics in an organisation are aligned.