BP's Bubbling Cauldron

Some unattended HR issues regarding culture and leadership may have contributed to the Deepwater Horizon's tragic explosion and spill.

Tuesday, March 1, 2011
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Just before 10 p.m. on April 20, 2010 in the Gulf of Mexico, high-pressure methane shot 5,000 feet up the Macondo well-drill column and exploded, setting fire to the Deepwater Horizon oil rig, leased by BP, setting off an environmental disaster that kept the world transfixed for five full months. Although most of the workers escaped by lifeboat, 11 men died and 17 were injured.

On April 22, after burning for 36 hours, the rig sank, giving way to one of the worst oil spills ever recorded.

Before the well was capped nearly three months later, almost 4.9 million barrels of oil spilled into the Gulf. Today, oil and tar continue to wash up onto the coast and researchers have mapped an 80-square-mile "kill zone" surrounding the capped well where everything on the seafloor appears to be dead.

With the one-year anniversary coming next month, many experts are using the milestone to reflect back on the disaster, hoping they might learn how to prevent future accidents of this magnitude. Even now, the explosion and spill is seen by many as the ultimate disaster, affecting lives, livelihoods, the environment and many industries -- not just the oil industry.

Something -- or, rather, many somethings -- went horribly wrong, starting with a string of poor decisions leading to technical problems that contributed to the blast and subsequent gusher. Experts conclude that it ultimately came down to a culture in which an engineer, worried that the concrete centralizers that had been installed weren't adequate for the job, wrote, in part, "But, who cares, it's done, end of story, [we] will probably be fine... ."

Famous last words.

In January, the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling published a 398-page final report entitled, Deep Water: The Gulf Oil Disaster and the Future of Offshore Drilling. It was dedicated to the workers who died in the accident "in hopes that this report will help minimize the chance of another such disaster ever happening again."

The report concludes that the oil spill in the Gulf of Mexico was the result of systematic management failure at BP, Transocean and Halliburton.

Five months earlier, BP published its own internal investigation on its website, concluding that the tragedy was "a complex and interlaced series of mechanical failures, human judgments, engineering design, operational implementation and team interfaces among multiple companies."

You might say that's the strategic intersection between HR and operations, a place where many lessons can be learned.

The BP recommendations included developing an advanced deepwater-well-control training program that supplements current industry and regulatory training, embedding lessons learned. They also will require mandatory attendance for all BP and drilling-contractor staff directly involved in deepwater operations, "specifically supervisory and engineering staff both onshore and offshore."

Not long after making those recommendations, the company established a new Safety and Occupational Risk division to oversee and audit the company's global operations. To date, no findings have been generated, though that hasn't stopped Robert Dudley from pushing his message.

Dudley, the former BP executive vice president -- who, from June to September, served as president and CEO of BP's Gulf Coast Restoration Organization in the United States -- took over for outgoing CEO Tony Hayward on Oct. 1.

In late September, a few days before he took the reins, Dudley wrote to the BP staff, "Our response to the incident needs to go beyond deepwater drilling. There are lessons for us relating to the way we operate, the way we organize our company and the way we manage risk."

The BP report did not cite failures in the human resource function specifically and Sally Bott, group HR director and member of the BP executive team since 2005, remains in her position. BP, itself, declined a request for an interview with Human Resource Executive®, saying "we haven't got anything to add to the published internal report at this stage of the wider external investigations."

However, over the almost year since the incident, enough information has come out of the National Commission's final report, as well as BP's internal investigation, for HR experts across the country to draw conclusions about culture, leadership and training issues that may have led to the tragedy, and could lead to similar disasters in any industry where mistakes have the potential to be long-lasting and severe.

As John Hofmeister, retired president of Houston-based Shell Oil Co. from 2005 to 2008 and former group human resource director of the Shell Group based in The Hague, Netherlands, puts it: "Unfortunately, in the hydrocarbon industry, if you don't take the HR profession seriously, people die."

Roots of the Catastrophe

Hofmeister notes that BP's rapid growth over the last 15 years -- which included acquiring Amoco Corp. in 1998, followed by ARCO and four other companies by 2001 -- coupled with BP CEO John Browne's focus on numbers, set the tone for the company, with shareholder value being the ultimate goal, often to the detriment of safety.

Browne, who resigned in 2007, "endeared himself to financial analysts, where his facility with numbers and communication skills on numbers were first-rate," says Hofmeister, founder and CEO of Washington-based Citizens for Affordable Energy and author of Why We Hate the Oil Companies: Straight Talk from an Energy Insider, which was published last year.

"The actual minutiae and day-to-day operating aspects of this company, its people, its culture and cultural issues were of much less interest to him. He was a big-picture strategic leader with enormous talent, but I don't believe he gave sufficient time or attention to what it takes to truly run the company," he says.

Repeated requests to interview Browne received no response.

A 2005 explosion and fire at BP's Texas City oil refinery that killed 15 and injured 170 is a good example of cost trumping safety. BP inherited the aging and poorly maintained facility from the acquisition of Amoco in 1998.

The accident investigation by the U.S. Chemical Safety and Hazard Investigation Board found that, between 1998 and 2005, BP had failed to heed or implement a number of safety measures made before the blast, stating that budget pressures cut the proposed replacement of two systems that would have prevented the accumulation of gas during the refinery process, which ultimately created the explosion.

Moreover, the investigations concluded that numerous failings in equipment, risk management, safety management, working culture at the site, maintenance and inspection, and general health and safety assessments combined to cause the catastrophe.

In fact, a 2005 report by the Telos Group -- a consulting firm hired to examine conditions at the plant -- detailing an inspection of the facilities and working conditions done two months before the explosion states, "We have never seen a site where the notion 'I could die today' was so real."

The lesson here, says Hofmeister, is that Browne surrounded himself with people "in his own image" who didn't challenge him on major issues such as safety and training "without fear of penalty, punishment and banishment."

The ultimate reasons for the Texas City explosion, say the experts and investigators, were poor decision-making, culture and leadership.

Sound familiar?

According to Hofmeister, BP started to change its culture in 2007 after Browne resigned and CEO Tony Hayward took over, but it was a daunting case of tackling a long-term problem. BP had "grown too fast" over the years, he says, and hadn't done "the necessary work of integrating all the factors that support effective operation and effective culture change."

Based on fines and violations alone, it appears safety has not been a BP priority, compared to other oil producers. From 2000 to 2010, BP was issued nearly $109 million in OSHA penalties. During that same period, fines at Exxon were around $360,000, $307,000 at Shell, $201,000 at ConocoPhillips and $171,000 at Chevron. The total number of BP's OSHA violations from 1990 to 2009 were 518; Chevron had 240, Shell had 217, Conoco Phillips had 193 and Exxon had 108.

Hofmeister credits his former company, Shell, with having a better safety record due to a specific strategy from 1995 to 2008: "During that time, the key objective for the HR function was to assist and enable the wholesale transformation of Shell from a group of many national companies to a global, coherent organization. It involved structure, process, culture, and communication and [the right] behaviors. Throughout the course of that period, the company literally transformed itself."

Safety and success, do, indeed, go hand in hand, says Wayne F. Cascio, the Robert H. Reynolds Chair in Global Leadership at The Business School at the University of Colorado-Denver.

"Good safety is good business," he says. If you look at companies that have great safety records, such as Alcoa, he says, they succeed because "even the lowest-level workers can stop the line at any time if they saw a safety violation."

So why do leaders fall prey to short-term gains when catastrophes could cause long-term losses? "There's a lot of pressure on CEOs to please shareholders," says Cascio. "When Tony Hayward came in as CEO, improving the health and safety record was [promoted as a value] but so was rooting out inefficiency, which rooted out a lot of costs that were related to improving the safety culture."

One positive change coming out of the Deepwater disaster, Cascio says, was CEO Dudley's announcement that safety was the sole criterion for incentive pay in the fourth quarter of 2010. "Money sends signals every day. You do what you have to do to earn bonuses," he says.

"Modeling is absolutely crucial," says Cascio. "Trust is the top priority. People don't speak out when they worry about the consequences of speaking out. If people are rewarded for bringing forward potential problems before they happen, that sends an important message to everybody. We saw just the opposite in [BP's case].

"In the long term, you have to get senior executives leading the process of creating the values that are consistent with the outcomes you want [to see]," Cascio adds. For example, strange as it may sound, "in infant-care facilities, you don't drop babies," he says. "That's not because the institution has rules -- that's because it's a cultural value. It's that kind of value that has to get to every individual, saying, 'We're going to do it this way, follow that procedure.' If we have a decision to make that puts risk margins above a certain point [drawn by the company], then we're not going to do that."

The Boiling Frog Syndrome

Tom Krause, chairman and co-founder of BST Consulting, a global safety consulting firm based in Ojai, Calif., compares BP's decisions and culture to the parable about boiling a frog: If you throw a frog in very hot water, it immediately jumps out. But if you put a frog in water and heat it up slowly, it won't realize it's starting to boil until it's too late.

That's symbolic of organizations that lose their safety culture one degree at a time, says Krause, who has investigated catastrophic events, including NASA's Space Shuttle Columbia disaster, looking for commonalities that can be spotted and fixed, before it's too late.

"NASA staff gradually got used to the fact that it was violating its own rules," says Krause, who threw his hat into the ring to serve on the National Commission's proposed oil and gas industry safety institute. "The great problem is that you do that a lot and get away with that and then get rewarded for it by coming in on time and on budget."

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In BP's case, four days before the concrete failed and the well blew, BP engineer Brett Cocales sent an internal e-mail to engineer Brian Morel, saying that more centralizers to stabilize the well were necessary, but it was too late.

His famous last words of the e-mail symbolize how decisions were made without fully understanding the risks that were being taken -- the boiled frog syndrome. He wrote: "But, who cares, it's done, end of story; [we] will probably be fine and we'll get a good cement job. I would rather have to squeeze [remediate the cement job] than get stuck above the WH [wellhead]."

The "main thing [about the BP explosion] that struck me was the importance of decision-making," says Krause. "There's a direct HR connection there, by way of training and bringing people into contact with research done by Daniel Kahnemann on cognitive biases and behavioral economics. Of any one of those six or eight decisions that the [National Commission] thinks were made out of consideration for saving time or money -- any single one of those probably would have been OK. It was the combination of all of them that was fatal. It's difficult for the individual to keep track of the sum total."

That's where the role of HR comes in, not only in training and hiring the right people, but also in building culture. "The CHRO," says Cascio, "has to be the conscience of the company, has to say things to the CEO that others don't want to say about effective safety management."

Merri Spaeth agrees with Cascio's assessment.

"It doesn't look to me as if there [was anybody from HR or communications] empowered to tell the top executive the things they don't want to hear. The communications people are still the order takers instead of strategists," says the president of Spaeth Communications, based in Dallas.

HR and communications need to work closely together to not just strategize about a crisis but also to practice how it will work, and all the while, giving leaders sound advice they may not want to hear. While Spaeth doesn't know how CEO Hayward was advised on the messages he was sharing with the press, she points out that he kept stumbling into dangerous water when some of his quotes were pulled out as sound bites.

For example, it stirred public ire when he announced, "I want my life back," claimed that the underwater plumes didn't exist, insisted that the amount of oil was only a teaspoon in a vast ocean and -- after he left the company -- that BP appeared to make up the disaster response as it went along.

"It's clear that BP didn't have any comprehensive model or philosophy of communication and that the CEO didn't have a close, trusted adviser who could become his alter ego advising on communication," she says.

She also notes that BP's crisis-communication response lacked a campaign-like network of spokespeople on the Gulf Coast to respond to media and public inquiries, as well as an overall strategy for who would speak for BP and when, especially since BP hired Halliburton to drill the well and Transocean to operate the rig. "It's ultimately your name," she says. "You should be responsible for controlling the message going out about it. It's a question of responsibility and integrity."

Power of HR

Hofmeister points out that successful companies -- he mentions IBM, Shell, Mobil, Procter & Gamble and Unilever -- are testimony to the importance of HR's capacity within an organization.

"When you see companies falling apart, or going through consistent trauma like BP, look immediately to their HR capacity," says Hofmeister. "Bear Stearns, Lehman Brothers, Enron -- they all fell apart because they never ever had an HR agenda worthy of what the company deserves. I have to seriously question how BP, with its brilliance in many other respects, couldn't get its systems, processes, structures, people and measurements [together like] a great company needs to [to succeed]."

Having walked through refineries and visited oil rigs, Hofmeister knows the culture in those places. In ones that work, there's open communication in a control room, for example, where everyone has a voice and a point of view that matters, because people's lives depend on what they are doing.

"You have to have that value," he says. "If you don't, and they see something wrong and they know they're going to get yelled at if they report it, people are going to get killed. They will shut up and someone's going to die."

"There's a lot of variation across safety culture and leadership in the industry," says Krause. "If everyone was as good as Exxon and Conoco, and then, if everyone in Exxon was as good as Exxon's best, it would reduce the exposure significantly."

Krause says, however, that the industry can't afford to take the normal long-term cycle to implement safety improvements. "Leaders have to get involved and go after a new vision of safety for their organization and in the industry. They have to go at it with both hands and really take it on."

There's reason to think that there's hope, he adds. "I think top leadership in the industry recognizes their vulnerability. When Deepwater Horizon happened, senior executives throughout the industry said, 'That could have been us.' When they went to their safety people for reassurance, they didn't get it. They were told, 'Yes, we have less exposure, but that could have been us.' "

He adds, "It's an interesting parallel with safety in aviation -- aviation is a piece of cake compared to the oil and gas industry. If they can't get the part for the plane, then they don't fly. You do need things, though, like crew-resource management, for people to take [safety] seriously." (See sidebar.)

"Sometimes," Cascio adds, "it takes a catastrophe to wake people up and take the steps to make a major change in the culture, and maybe to BP's culture."

That is, unless we don't learn from history. Then, we're due to repeat our mistakes.

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