Innovation Blog

What Business Are You In? BP’s Tony Hayward Under Fire

The disastrous oil spill that has dumped thousands of barrels of crude oil into the Gulf of Mexico for the past 47 days has focused attention of British Petroleum’s CEO Anthony (Tony) Hayward and on his handling of the crisis.  He has not been given high marks.  Press reports note that “a series of Hayward misstatements since the April 20 explosion that killed 11 people haven’t helped his case with the general public — and investors have been fleeing BP’s stock.”   Since many  British institutional investors (pension funds, etc., ‘widows and orphans’) hold BP stock, the damage has been enormous, and not just to the environment.

In Sept. 2009 we brought a group of Israeli managers on a benchmarking visit to London, and heard from senior BP officials.  They were astonishingly frank.  They noted that BP’s legendary leader John Browne focused on mergers and acquisitions, including the huge one of ARCO, and had neglected operations — the fact that BP is an oil company and is in the business of producing and discovering oil, not just rearranging deck chairs on the deck of Wall St.   The result:  Operational decline, and an explosion and fire at a Texas refinery that killed a number of workers.  The aftermath was to fire Browne, despite his achievements, and appoint an internal engineer, Tony Hayward, with long experience in the field in operations.

Now comes the Gulf of Mexico disaster. Hayward has been on the scene.  But like many engineers, he has not been trained for situations like this.  He has clearly been counseled by lawyers, not to admit liability, at a time when what ordinary people wanted to hear was: We screwed up, here is how, and here is what we’re doing to fix it. (A ‘screw up’ confession, of course, is the last thing lawyers want CEO’s to say).

BP’s future is in doubt.  It will become a widely-taught case study of what happens when a company neglects its core business, lets the pieces of paper and finance people gain control,  lets its operational excellence decline — and pays a heavy price when disaster strikes.

Let BP remind itself.  We discover and produce oil.  We must do this with superb excellence and with zero mistakes.  Let every one of BP’s nearly 100,000 employees refocus on this fact. Let Tony Hayward, as long as he is CEO, refocus the company on this.    And let us all remember that operational excellence is one value discipline no company can ever neglect.

Recall what Harvard Business School Professor Ted Levitt taught us:  Every day, ask, ‘what business am I in?’.  Remind yourself — and then do it.  BP forgot.