Examining British Petroleum decision process organization
British Petroleum is a public limited multinational oil company listed in theÂ New York stock exchange. It opened its doors in 1901 when William Knox got permission to search for oil in the Middle East. On discovery of oil wells, the organization grew over the past century from a one-man business enterprise to today’s BP, a multinational organization. This was accomplished through mergers and acquisitions in theÂ United Kingdom. It operates in the energy sector where it provides energy sources in form of oil andÂ Â gas as well otherÂ alternative sources of energyÂ such as solar energy ( it manufactures solar panels). It has its operations in theÂ United Kingdom, America, and Africa as well as in theÂ Middle East. Due to the global nature of BP’s operations, the organization operates in an environment where the stakeholders include various governments from various nations, its distributors, direct consumers, and shareholders. Due to the sensitive nature of its essential products, the public also forms a major part of the organization’s stakeholders (Verschoor and Curtis 13)
By close of year 2009, the organization recorded sales of approximately 239, 272 million dollars. This high level of sales can be attributed to its diversified products that include its heavy investment in geothermal as well as solar energy that culminated in the purchase ofÂ Lucas Energy SystemsÂ in 1980(s) and later the purchase of sloarex in year 2000. Suchalternative sources of energyÂ indicate and communicate to the relevant public shell’s efforts to carry out business through eco friendly means. This was further demonstrated in year 2004 where the company launched a project whose intention was to reduce sulphur content in diesel fuel, which is mainly meant for industrial use. This worked well in improving their public relations as demonstrated by the way the government and environment management bodies welcomed the move (Verschoor and Curtis 14).
Oil spill issue
BP oil currently faced a challenge that is very costly not only in terms of lost production but also in the management of all the concerned stakeholders effectively. In April 2010, the organization’s deep water drilling horizon exploded. This explosion in theÂ Gulf of MexicoÂ left eleven people dead and injuring 17 others, while at the same time leading to uncontrolled gushing of oil from underneath into the ocean putting aquatic life at risk. Although it was hard to measure the actual flow of oil to the ocean, experts estimated the flow to be at least 35000 barrels of oil per day. The effects were expected to spread if the spill went unchecked. These tremendous effects led to a call by the United States of America as well as other governments internationally for BP to take responsibility and devise ways on how to stop the flow (Blackmon, Connel and Berzon 17).
In responding to this, the organization spent nearly $20 billion, something that adversely affect its capital expenditure as well as issuance of dividends. Having put all these efforts, the organization managed to design tighter fitted caps for its three oil pumping openings thus blocking further flow of the oil to the sea. Nevertheless, this left the BP brand highly dented.Â BP formed a team that was required to gather the facts surrounding the oil spill, then analyze the accessible information to identify likely causes and recommend on how similar accidents can be avoided in future (Verschoor and Curtis 15).
Several task forces that were set up to investigate the accident found out that to some extent the decision process of the company was to blame. For example, one team concluded that there were weakness in the cement design, quality assurance, and risk assessment. The BP site leaders and the Transocean rig had reached an incorrect decision that the pressure test was a success and that integrity of the well was established. These are good examples of effective decision-making management principles (Blackmon, Connel and Berzon 18).
Bp leaders were without doubt to blame for that accident, the accident clearly shows that BP CEO Tony Hayward headed an organizational culture that approved intense risk taking, disregarded expert advice, failed to disclose facts and ignored warnings on safety issues. This flawed culture was clearly shown by failure by the organization to respond to the accident immediately (Casselman, Gold and Russell 15).
The other problem was clearly shown by the organization using its public relations and media advisers to get its way out of the crisis rather than taking responsibility and tackling the problem. The organization should have noted that some crisis cannot be spun. By trying to disrespect these leaders did much harm to the company’s reputation. According to the task forces such an accident is predictable and hence preventable. They concluded that had the organization taken necessary steps to improve the oil spill would not have occurred, or else the outcome would not cause so much damage (Blackmon, Connel and Berzon 19).
The culture of accountability was a major problem in the organization. It is clear that rather than the organization taking the responsibility it was quick to issue blames. The highlighted problems show that there is a need for the organization to change its management principles if it really wishes to minimize the risks of future disasters. The principles that require immediate revision include the management leadership, planning and organization, controlling, decision making, and innovation and overall change. These principles are what makes effective high performance organizations that are sustainable. If one of these principles is missing or is overlooked then the business will underperform, or even find itself in a position similar to that of BP.
Management principles define the role of the managers in exercise their daily work in an organization. In management of organizations large or small, private or public, service oriented or product oriented there is a general framework used. These principles are planning, leadership, controlling, organizing, creativity, change and innovation and decision making (George 201).
Many people believe that leadership is the vision to take hold of the day and make a difference. Although this is the case in most cases the leaders are faced by many constraints that they make no impact at all. The role of leadership in any organization should be to support adaptive or useful changes. Leadership is the aspect of influence that one gets that makes others do what he wants. Leadership can be formal or informal. High performing organizations such as BP will need new leadership perspectives. Leadership mainly directs people to accomplish something in the organization. This means that the leader must motivate the employees if the set objectives are to be achieved. There are several ways to motivate employees to contribute in achieving the organizational goals leaders should use the most appropriate in their cases. Leaders also encourage high performance teams in their organization; however these teams must be managed effectively.
Leadership in an organization must also encourage communication. Individuals in an organization communicate to influence, inform or enquire within the course of their day to day operations. Functions of communication are to inform, regulate, interrogate, manage, persuade and socialize (George 186). Opportunities to give feedback and question are very important in improving the effectiveness of communication. Leaders may decide to visit every employee and explain any new change in the operation process, although this may guarantee that each and every employee understands what is expected of him/her this may however, be very expensive in terms of time.
Firms’ success largely depends on the daily decisions made by the members. The excellence of these decisions determines the long-term success of an organization and its day to day image in the eyes of employees, customers, and community at large. The current challenging environments also call for even more strictness and creativity in the decision-making. New products and service processes are brought about by ideas. Firms must provide for decision making that allow the free flow of new ideas and give support to the efforts of employees who want to make their ideas real (John 265). People working in an organization should make right decisions and at the right time. Managing the decision making process calls for selection of some at the expense of others. This selection involves which decision to take, which employees or stakeholders will be involve and how they will be involved.
The current business environment has created a challenge in the organizational decision makers. The work place trends which include business ethics, technology, and culture create more complexities in the decision making process. Technological advancement has caused changes in the traditional organizational decision making process. Cultural diversity determines by whom, when, how, and why decisions are made. Ethics is nowadays involved in every step of the process
This principle involves determining the business targets and deciding how to achieve them. Planning involves selecting work that must be done, how and when they will be done. Planning shows how the organization hopes to succeed. It requires time, experts, coordination and objectivity (Gray and Larson 325). For planning to be effective it then has to take a lot of effort and the ability take a broad objective. Decision making is also partly included in planning in selecting what needs to be done in order to succeed. Successful planning is a process that involves several steps that is stating the organizational objective, listing the alternative ways available to achieve the organizational goals, having a ground on each alternative, selecting the best alternative, come up with a plan to execute the chosen alternative and put that plan into action.
This involves assigning work to various employees in order to achieve the goals, executing the plan. Mainly organizing involves using the available organization resources to achieve the set goals. It involves the manger knowing the organization fully and the employees as well. There are several steps involved managers must always remember the plans and objectives and should act as their guidelines, managers should determine what are the main tasks, they should then subdivide them into smaller tasks, allocation of resources is also vital to succeed and finally managers should evaluate the results of their strategies (Leban and Stone 156)
In management context it involves making sure thing happen as planned. It is a continuous process that involves monitoring the progress made by the employees. Mangers should play a role in seeing to it that the business is performing as expected and that goals will be achieved. This principles call for gathering of information and performance measurement. The performance is measured against set standards. The managers must take corrective action where necessary to get back on track.
Analysis and application of principles
When Tony Hayward took the helm in the year 2007 as the CEO he promised a reorganization plan. Further he promised to simplify the organization structure so that performance would improve. The CEO had promised to reduce the BP organization structure by taking out four levels. The CEO was ambitious in that the company really needed change (Casselman, Gold and Russell 15).
Reorganization of businesses should however, be taken cautiously. Using the case of BP when the CEO simplified the organization structure, the company improved it profits and developed a record for safety violations. However as latter noted oversimplification of management structure can cause major problems in the business for example, management conflicts are bound to occur. In the case of BP this is clearly depicted through the incompetent efforts to stop the spill, poor immobilization of resources that was based on inaccurate information, complicated claims procedure, laying blames, and inadequate equipment to clean up the spill.
BP’s reorganization was liable to the accident. It considerably abridged the company’s ability to make good decisions. Reorganizing only improved the organizations capacity to communicate these more and more bad decisions. In any high performing organization, leaders make decisions, and then communicate them. Hierarchies then need to put up both: a capacity for complex decisions that are communicated down the shortest possible paths. In a bid to communicate better Bp went on flattening is structure (Casselman, Gold and Russell 16). This helped to expand the size of the teams. However, it has been argued, that for a company to make better decisions it should increase the number of levels and make smaller teams. The danger a business faces by eradicating levels particularly when it’s made in a one-size fits all way like what BP did, is that it will harshly damage its ability to manage convolution. Moreover, reality is multifaceted. When it comes to decision-making, any widespread importance demands organizations to flatten and calls for teams to enlarge in size in spite of local circumstance is not prudent.
Planning principle is key if the organization is to succeed. Planning shows how the organization sets to achieve its goals. Planning must therefore be done with utmost intelligence if disasters in organizations are to be avoided. BP failed in planning right from restructuring its organizational structure. Plans to flatten the organization were not well researched. Though the company improved performance and profits increased the disaster was awaiting. Poor plans are also depicted by the organizations response to the disaster, the ineffective trials to stop the oil from spilling. Planning requires experts and coordination BP neglected experts’ advice leading to the disaster. Planning involves making good decisions at the right time.
Best practices in organizing involve assigning tasks to different employees in order to achieve specific goals. Shrewd managers should wisely use the available resources to achieve their goals. The mangers should know their organizations and the people in and out. This will help them know when a disaster is awaiting and take necessary action to prevent them from occurring. In the case of BP the CEO is seen to have overlooked this principle on a number of occasions, for example, failing to efficiently use the available resource to respond to the accident. To succeed the managers must first develop organization structure that is relevant to the organization. Strategic management is also part of organizing that can effectively be employed by managers to succeed in business.
This principle calls for measuring the outcome and progress of the plans that have prior been made. Measuring involves ensuring that set goals are realized by the company. Mangers should have a benchmark against which they measure their performance. Managers should also develop a continuous monitoring process that ensures that all the actions taken are checked and appropriate corrective actions taken
This paper has discussed organization design and decision making management principles. A case study of British Petroleum is used where it starts by explain the history of the oil company. The oil company has undergone several organizational changes for example with the appointment of Tony Hayward the company flattened its organizational structure getting rid of four levels is the structure. All this is welcomed by many as a prudent move especially because of the increase in profits and safety violations measures. However by doing this the leader welcomed a big disaster than anyone would have expected. The oil spill accident claimed the lives of eleven and injured seventeen.
Having discussed this problem and which was caused by poor management principles the paper then examines the relevant management principles that should be applied. It explains how BP ought to organize its decision process to minimize the risks of future disasters. Relevant management principles that can be applied in such a case are outlined. Leadership, planning, controlling, organizing and decision making are examined conclusions made on how each is vital in the overall process of management. It is further noted that no matter how well some of these are put into use, overlooking a single principle will have devastating effects on the organization as a whole as depicted by the BP company.
Each of the management principle is then analysed and its application well explained. Having analysed these management principles it is then recommended that for the company to succeed it has to put all the practices into use. Neglecting either will have implications on the overall running of the institution. Companies that will use these principles wisely will improve performance and minimize risks of disasters.