BP: A Failure of Leadership and Management on a Massive Scale

“The nicest thing about not planning is that

failure comes as a complete surprise,

rather than being preceded by a period of

worry and depression.”

Sir John Harvey-Jones

The catastrophic loss of the Deepwater Horizon rig on the Macondo well seemed to come as a complete surprise, especially to those who were closest to it. It shouldn’t have.

Last year I blogged that the seeds of the Deepwater Horizon explosion were planted well before April 20, 2010.

The verdict is now in on the BP disaster: The sequence of mis-steps that resulted in 11 people killed and millions of barrels of oil gushing into the Gulf of Mexico was the result of a failure of leadership and management on a massive scale.

An Overarching Failure of Management

Last week the Chief Counsel’s Report of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling was published. And it’s a doozy. It calls the BP mess an “overarching failure of management”:

“The Macondo disaster was not, as some have suggested, the result of accidental alignment of disparate technical failures. While technical failures contributed to the blowout, the Chief Counsel’s team traces each of them back to an overarching failure of management.”

The failure of management wasn’t just one of style at the top.

It is easy to associate the mishandling with former CEO Tony Hayward, who proved inept in his public commentary (“It’s not our accident; What the hell did we do to deserve this?; Frankly, I’d like my life back”). But the report reads as if there was no-one at the helm who knew how to run an oil exploration company.

The report suggests that the dysfunctions that led to the disaster ran deep through the BP culture.

In my blog last year I noted that most crises follow predictable patterns, and crisis prevention involves pattern recognition. Early recognition of patterns helps a leadership team adapt and resolve problems before they get worse.

The report concludes that the Macondo disaster was not inevitable.  Rather, it was the result of human failure.  The report says that blowout happened

“because a number of separate risk factors, oversights, and outright mistakes combined to overwhelm the safeguards meant to prevent such an event. The Chief Counsel‘s team identified a number of technical risk factors in the design, execution, and testing of the Macondo well. The team was also able to trace all of these failures back to an overarching failure of management. Better management of personnel, risk, and communications by BP and its contractors would almost certainly have prevented the blowout.”

Over the course of 370 pages of detailed findings and conclusions, the report lays out patterns of inattention that are breathtaking. In the chapter titled Massive Failure of Management (that begins only on page 225!) the report summarizes some of the major categories of failure, and then systematically documents them:

“The Chief Counsel‘s team observed at least the following management failures:

(1) ineffective leadership at critical times;

(2) ineffective communication and siloing of information;

(3) failure to provide timely procedures;

(4) poor training and supervision of employees;

(5) ineffective management and oversight of contractors;

(6) inadequate use of technology; and

(7) failure to appropriately analyze and appreciate risk.

Ultimately, the companies placed undue reliance on timely intervention and human judgment in light of their failure to provide individuals with the information, tools, and training necessary to be effective.”

Management is Doing Things Right

Leadership is Doing the Right Things

– Peter F. Drucker

If, as the late management guru Peter F. Drucker noted, management consists of doing things right and leadership consists of doing the right things, BP got both wrong.

The report’s executive summary concludes:

“What the men and women who worked on Macondo lacked—and what every drilling operation requires—was a culture of leadership responsibility. In remote offshore environments, individuals must take personal ownership of safety issues with a single-minded determination to ask questions and pursue advice until they are certain they get it right.”

They did not.  The report details, among other failings:

There were also breakdowns in interpersonal communication, so that those on the line had no real situation awareness.

“Inadequate communication and excessive compartmentalization of information contributed to the Macondo blowout.

Individuals making decisions regarding one aspect of the well, such as onshore engineers, did not always communicate critical information to others, such as the well site leaders, who were making related decisions on other aspects of the well.

When faced with anomalous data, decision makers often failed to seek counsel from others with expertise and instead made decisions based on incomplete information. BP and Transocean also failed to communicate lessons learned from other wells that could have assisted the decision makers at Macondo.

Information about drilling at Macondo was compartmentalized both within and between companies. In several instances, the BP onshore engineering team was aware of risks with the Macondo job but failed to communicate those risks to its own employees on the rig or the contractor personnel who might have helped mitigate those risks.”

The report notes that in the absence of clear guidelines on what to prioritize, costs and speed became driving forces in decision-making.

“BP and Transocean did not have adequate procedures in place to properly account for risk or to assess the overall impact of decisions that appeared to relate only to one part of the well project. As a result, understandable cost pressures drove decision making and allowed some operational redundancies to be purged as inefficiencies.

The companies involved at Macondo failed to rigorously analyze the risks created by key decisions or to develop plans for mitigating those risks. This appears to have biased decisions in the last month at Macondo in favor of cost and time savings while increasing the risk of a blowout.”

Lessons for Leaders:

It’s Not The Plan That’s Important:

It’s the Planning

Best practices in crisis planning and response include the following:

  1. Ensure situational awareness
  2. Ensure clarity and accountability of role and of process
  3. Act quickly to avoid the compounding effect of multiple mistakes, and to minimize self-inflicted harm

All three of these require a robust crisis planning process.

The primary benefit of the planning process is not merely that there be a plan.  Rather, the main benefit is the effect of the planning process on leaders’ and managers’ understanding of risks and consequences.

Indeed, BP had a voluminous crisis plan for a Gulf oil spill.  But it didn’t take the plan seriously, in either formulation or execution.

In many ways this is emblematic of BP’s approach to risk management as well.  BP’s Gulf Oil Spill Response Plan seemed to be just a copy-and-paste document that included geographic and temporal anomalies:  For example, it listed Arctic marine mammals such as walruses as species at risk in the Gulf,  and contained out-of-date contact information for experts who had died years before.  The plan seemed to have been prepared and filed to fulfill regulatory requirements and then forgotten.

The purpose of a plan is not to check a box on a regulatory filing — to be able to say you have a plan — but to inform management decision-making.

Mental preparation is key.  The burden of leadership is to be mentally prepared to make tough choices to mitigate risk, and to respond effectively when things go wrong.  The management challenge is to have effective process in place to identify risks early, mitigate them when possible, and to respond effectively when things go wrong.

BP failed on both the leadership and management tests.

Every board of directors should ask its CEO: Are we prepared for when things go wrong?  And every CEO should task the management team to ensure that the answer is both correct and productive.

We can learn from the failures at BP: Be Prepared.

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