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Policies Have to Be Lived to Be Believed

August 10, 2010

In late June, I spent some time in California with friends.  One, a Canadian economist, had done some work for BP and knew former CEO Hayward.  His observation was that BP has a much better business reputation in Europe than in America.  He attributed that to the “original BP” culture infusing the “European BP” characterized by decentralized management and two prime directives:  1. Safety above all, and 2. Do not take risks that jeopardize the environment.  My friend believed that the acquisition of Amoco, an American company with detailed policies and procedures and significant bureaucracy, began the change.  In his opinion, as BP’s decentralized management structures took over, the detailed policies and procedures were cast aside, and there was no core ethic to safety or to the environment to guide behaviors.  As BP lauched on their cost cutting strategies and their orientation to “no dry holes” and “big finds,” the prime directives got lost.

I’m skeptical of that scenario explaining the last 20 years of accidents, short cuts and maintenance “lite.”

Nonetheless, it brings up some observations:

1.  In mergers, strategies for combining cultures are every bit as important as combining operations, and should be orchestrated even more carefully.

2.  People in companies watch what their leaders do and whom their leaders reward with promotions and bonuses to determine what is really held in esteem.  Clearly, safety and protecting the environment were NOT perceived as BP’s current prime directives.

It is harder to do this in large companies.  Executives must be crystal clear and consistent in their actions, and many parts (like compensation and recognition) must be aligned.

IF BP wants safety and environmental protection to be be prime directives, they have their work cut out for them.  At the very least, given their recent history, their legal and regulatory performance requirements are being raised for them…. and for everyone else in the industry.

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