Some articles and discussions with oil industry players suggest that BP have "just been unlucky”. Could this Gulf Oil Spill have happened to any oil industry player active in deep water drilling? What could this possibly have to do with Tony Haywood’s leadership of BP?
We will use this incident over coming weeks to highlight different dimensions of leadership and the role of a leader in preventing such events as well leading the reaction and response in the event of an incident such as this. There are clearly many lessons that will come from an analysis of the incident and related responses and actions by all players and stakeholders.
It should be noted that the ydangle philosophy is to use the media reports we all see as the basis for comment on particular topics, in this instance the gulf oil spill (See the sidebar for some links to a selection of articles). We will use the ‘facts‘ as reported in the media to highlight leadership lessons - both positive and negative as the story unfolds.
Leadership is not just about motivating your staff and employees, rallying them around the company objectives, keeping investors happy and understanding and managing different stakeholders' preferences. Whilst these activities are important (as events have demonstrated) and an inherent part of the art of leading, it is also in the understanding of the trade-off's inherent in decisions associated with running the business such as the organisation, the processes, the metrics, reward systems, culture, values and risks that the true art of leadership lies.
In this post we consider RISK MANAGEMENT.
Risk management and associated planning are normally a formal process in large corporate organisations and such plans form an integral part of the management systems of the company. The problem however, is that often these exercises become an end in themselves rather than a tool to ensure that all the required management processes and related systems are in place.
Managing risk is a business imperative whether it is a small family business or a large corporate like BP. The consequences when things go wrong is well illustrated in the BP case with loss of life, environmental damage, $2 billion spent and growing, the establishment of a $20 billion fund to deal with the fall out from the disaster, loss of revenue, a significant reduction in credit rating from major agencies, a 50% reduction in market capitalisation and the impact on the company's reputation.
No doubt BP will have a risk management plan on paper, have identified different risks, looked at the likelihood of occurrence and formulated response plans. So what went wrong? Is it not the leaders role to guide their company/business division/department through a world of risks to achieve its business objectives?
Gary Player, the famous golfer, once remarked - “ It’s strange but the more I practice the luckier I get”. Leadership is no different - the more you put the effort in to identify, manage and reduce or remove risks and maintain the focus on ensuring procedures are followed, the less chance there is of an incident. Offshore drilling incidents are not unheard of in the oil industry, what was new was the nature of the drilling operation i.e. the depth at which the well was being drilled and the associated engineering challenges. It is a leaders role to ensure that enough resources are applied to risk relative to the consequences to reduce or eliminate the risk.
The metrics that drive decision making will lead many to query if the drive for ever greater profits and strong focus on cost cutting resulted in comprising safety and risks not being adequately covered. The true art of leadership lies in being attuned to the trade-off's inherent in decision making and is a skill developed through practice and reflection. It should be noted that whilst financial and strategic trade-offs can be made, human life and environmental risks have no trade-off.
Did the risk management processes within BP allow someone like the CEO to be aware of the risks and take adequate action? Did the extreme risks of deepwater drilling appear on the executive team radar screen and were they properly articulated and challenged? Was he assured by the specialists on his leadership team that the risks and responses were clearly mapped out? If not why not and where would one look for the source of the problem? What responsibility with regards to risk management would one ascribe to other leaders in the organisation? If leaders have done what they could reasonably be expected to do, is that poor leadership?
What do you think?
Lessons:
Always take risk management seriously. Failing do to so can be costly, both for the company and you personally
With activity that is not the norm (i.e. deep water drilling) extra caution an rigor should be applied
Cost cutting in high risk areas needs to be backed by tested failsafe processes and equipment. Understand the trade-off's
Ensure the processes in your company/division/department allow risk to be highlighted to the appropriate level of management.
Some leaders are good and others not so good. Practice and reflection in addition to knowledge and understanding are key to becoming a great leader.
We will take a further look at the spill crisis and its leadership to distill other lessons - subscribe to the RSS feed for WHAT’s DANGLING UPDATES.