BP and the Oil Spill

Foundations in Management and Organizational Analysis

GROUP 3

28.10.2011

Warwick Business School

1 2 3 4 5

Overview Problem Definition Impacts & Consequences Activities Proposed Activities

Group 3

Foundations in Management and Organizational Analysis

28.10.2011

| Overview

BP is a leading, worldwide operating oil and gas company, vertically integrating all parts of the value chain from upstream to distribution to clients.
Basic Information (1
Headquarters Earnings 2010 Operating Cash Flow 2010 # of employees London, UK (listed on LSE) 20.5 bn USD 29.6 bn USD ~ 80,300

Business description

One of the largest vertically integrated oil and gas companies in the world Operates through two reportable business segments: Exploration & Production Refining & Marketing Operations in 53 countries Decentralized Management

(1 Datamonitor: Global Report on leading gas and oil companies, 2010

Group 3

Foundations in Management and Organizational Analysis

28.10.2011

| Problem Definition (2

The identified factors considerably influenced the actual happening of the oil spill and complicated the crisis management. Leadership
Lack of ownership Lack of accountability Lack of responsibility Poor 3rd party management

Employees
Poor management of staffing Inadequate Training

Technology

Poor communication

Risk- Mgmt.

Oil Spill & Crisis Management

Lack of Sophistication (Equipment) No Safety against Blowout

Systems not integrated No mitigation planning Analysis of data only for impact on time & cost

(2 Chief Counsels Report

Group 3

Foundations in Management and Organizational Analysis

28.10.2011

| Impact & Consequences

The impact on the overall organization was and still is extensive. Every division of the company was impacted.

Share Value Sudden drop in share price: USD 60 -> USD 27/28 Panic selling of BP shares

Hostile Take-Over (rumours) Exxon Mobile: Valued Merger -> USD 400 bn. Obama Administration: wont stand in the way Hostile Bid by Exxon -> USD 88 bn.

Overall Crisis Cost As of September 2011 -> USD 11.2 bn Collateral figure USD 20bn. Trust funds Prediction of total cost USD 44 bn. Brand Value (-ve) 30 under Brand Index Score Trials: 220 active cases so far

Bad Culture & Ethics Profit maximization, High Risk, Cost of Safety Culture of Complacency BP CEO and his attitude Underestimated risk, overconfidence on process driven work

Group 3

Foundations in Management and Organizational Analysis

28.10.2011

| Activities

In response to the crisis, BP rolled out the following programmes.

BP
HR Finance Brand & Marketing Social Media Strategies Customer service line (internally & externally) Foster Rebranding IT/Operations Legal & compliance Review 3rd party contractors and Service Level Agreements

Review org design Reward Strategy Leadership Smart recruiting

Increasing accrued liabilities Transparency Better commercial management

Review upstream division Partner with HR in Reorganisation Appoint local SMEs (Gulf Experience)

Group 3

Foundations in Management and Organizational Analysis

28.10.2011

| Proposed Activities

In addition to BPs existing programme, we recommend these activities to foster better integration amongst divisions and third party contractors.

BP
HR Finance Brand & Marketing IT/Operations Legal & compliance Increase frequency of audits Review risk management strategies

New unit setup focusing on safety Increase Staff communication Review strategic placement

Reporting Faster reaction Prepare for Conduct Annual syndicate General survey and Meeting (AGM) focus groups

Site Visits Management Information Systems (MIS) Reporting

+ Improvement of technical safety training + Allocation of money (corporate spending / departmental budgeting)
Group 3 Foundations in Management and Organizational Analysis 28.10.2011

Summary

Problem

Event

Impact & Consequences

Activities

Proposals

Thanks a lot for your attention

ANY QUESTIONS