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Execution Meltdown: Four Key Failures that Sank BP

Written by: Richard Lepsinger

Article Overview: Though the worst oil spill in history resulted from many contributing factors, they can all be summed up in one big problem for BP-lack of execution. What exactly went wrong and what can other companies learn from BP’s failures.

Execution Meltdown: Four Key Failures that Sank BP

The oil spill is a tragedy that "never should have happened." That's the sentiment expressed by BP CEO Tony Hayward during the recent congressional hearing on the Gulf Coast oil spill. Obviously, no one would disagree with him-especially the Americans left to deal with the terrible aftermath. Hayward is right: the tragedy really shouldn't have happened-and the fact that it did is a failure of execution. For any business, the inability to get things done is a serious issue. If you can't execute well, you aren't going to be very successful even if you've got a great strategy, terrific products or talented employees-and as we've seen from this event, you could potentially cause significant problems for others as well.

It's obvious from recent events that BP has an enormous execution gap. And had the company focused on recognizing and closing that gap, it would have prevented this unprecedented disaster.

Research has found a set of characteristics and competencies that make closing the execution gap possible-let's call them the "Five Bridges." They are a structure that supports execution, alignment between leader behavior and company values, company-wide coordination and cooperation, employee involvement in decision making, and the ability to manage change. It is these Five Bridges that differentiate the companies that are consistently able to get things done from those that aren't.

The oil spill is a complex and tragic event but the cause can be traced back to BP's failure to build these critical bridges and close its execution gap. Unfortunately for us all, this failure resulted in much greater damage than just bad PR for the company. The causes and lessons of BP's failed execution serve as a case study that today's companies and future CEOs or entrepreneurs ignore at their own risk.

There were too many players in a maze of relationships. Several companies and government organizations were involved in the operation of the Deepwater Horizon rig. BP is the well's owner, Transocean owns the rig, and Halliburton provides oil rig services. In addition, the Minerals Management Services regulates off shore drilling and shares oversight with the Environmental Protection Agency, which reviews off shore drilling for potential damage to wildlife and the environment. And finally, the Coast Guard inspects vessels for seaworthiness and licenses crew members to work on rigs.

The companies and government agencies that were involved in the events that led up to the crisis clearly did not work well together. The maze of relationships created by having so many different players was cumbersome and complex. It resulted in a lack of clear accountability and poor quality decisions. For example, it appears that the rig's crew was unclear about whether BP's or Transocean's managers were in charge after the explosion and that confusion led to inaction in the critical moments following the rig explosion.

In addition, the fragmented nature of the government oversight contributed to poor decisions being made well before the explosions. For example, BP asked for and got exemption from an environmental review, permission to test the blowout preventer at lower pressure, and permission to delay mandatory testing of the blowout preventer. Each of these decisions was made by a different agency that did not appear to know what the others had done.

BP as the well's owner, the organization that contracted with the other companies for service and the one that had the primary interface with government agencies should have taken the initiative to put such a structure in place.

A good structure enhances accountability, coordination, and communication. Plus, it ensures that decisions are being made as close to the action as possible. BP should have worked with the other companies and government agencies connected to the rig to put in place an operational structure which clarified the responsibilities, level of authority, and expectations for all involved.

BP's focus on greed and speed belied the company's proclaimed values. Although BP's public statements and advertising emphasize a commitment to safety and environmental protection, many of the decisions made leading up to the explosion appear to have been driven by two main criteria-saving money and saving time.

In addition to the exemptions BP asked for (and got) related to testing and equipment, they appear to have not followed established company policies and procedures and to have cut corners on materials. Internal BP documents show that engineers got permission from company managers to use equipment that deviated from the company's own design and safety policies, that BP officials chose a type of casing with a greater risk of collapse, and that BP skipped a quality test of the cement around the pipe.

These actions show a serious disconnect between the behavior of BP's managers and the expressed values and written policies of the company. Managers were apparently so concerned about having fallen behind schedule and being over budget that their decisions and actions were no longer aligned with the company's policies and procedures. In retrospect, we see how this disconnect led to disaster.

BP should have placed greater importance on aligning its leaders' behavior with the company's stated values and held them accountable for those behaviors. When leaders say one thing and do another, business always suffers.

The right hand didn't seem to know what the left hand was doing. Federal investigators have been shocked at the apparent lack of cooperation and coordination among the various companies and government agencies involved in the Deepwater Horizon disaster. And the lack of coordination was not limited to the day of the explosion.

A web of government agencies granted exceptions to rules and none seemed aware that others were also permitting the company to engage in risky activities that, when aggregated, made the disaster more likely. Plus, the interests of the three companies operating on the Deepwater Horizon were not aligned, a condition that certainly didn't encourage cooperation. For example, progress was slowed after the explosion when the lack of coordination and arguments over who was in charge led to delays and disagreements over how to cap the well and who would be responsible for the cost.

The complexity of the situation and the critical time sensitive nature of the actions required an increased level of cooperation and coordination. This is a perfect example of how the lack of cooperation and coordination can make a bad situation even worse.

Ensuring that decisions and actions are coordinated across organizational boundaries requires more than faith and words alone. It takes shared goals, clear communication, and well-defined roles-factors it would seem BP and its oil rig brethren were in short supply of.

The right people were not empowered to take action. Lepsinger notes that the lack of an effective structure and unclear accountability created another problem for BP: The company was unable to get input from those who had the knowledge and experience to make the best decisions about how to handle the spill. What's more, BP failed to empower people to use their best judgment and take appropriate action.

Hours before the explosion the rig crew was arguing about the best way to finish the well and move the rig to the next site. A Transocean mechanic testified that he overheard a "company man" telling rig workers "how it's going to be" and that although the rig workers felt the plan was too risky they reluctantly agreed.

Also, just after the explosion as workers were scrambling for safety, a worker was yelled at by the Captain (who worked for the rig's owner, Transocean) for pressing the distress button without authorization and when another worker was asked if he had called to shore for help said he had not because he did not have permission to do so.

In order for any company to execute successfully, the right people have to be involved with the right decisions. Obviously, this is even more critical when there is so much at stake.

Identifying the causes and closing the execution gap is critical for any company. You may not encounter consequences on the same scale as BP has but if you don't ensure the Five Bridges are in place and maintained, you'll have a tough time achieving your company's goals. Remember, execution is not a single-point event; it's an ongoing process. But since your ability to execute well and consistently is the very fabric of success, I can think of no better place to focus your time and energy.

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Article Tags: BP, execution, oil spill



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