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Change Management at BP

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Change Management at BP

Summary

BP (British Petroleum) is an international conglomerate that has dominated the oil industry for decades. It has thousands of employees in over 100 countries and generates billions of dollars worth of profits annually. This level of success was painstakingly achieved through a rigorous transformation process that dates back to 1992. BP faced an existential crisis that was occasioned by a sharp decline in oil prices following the Gulf War, an increase in debt, difficulty in penetrating the private sector after the 1987 stock market collapse and a rise in unit costs (Ghoshal et al. 2). The board began by firing the then CEO, Bob Horton and launched a multi-pronged management approach geared towards the realization of BP’s renewed vision. The firm entered into different mergers and acquisition transactions with rival entities which aided in the extension of its market share. It also introduced performance contracts for individuals in senior managerial roles and provided them with a central location for easier communication and coordination of projects. BP encouraged innovation within the corporation by offering financial incentives for such employees. Several business units were created and filled with diverse personnel to provide healthy internal competition within the organization. Regular meetings were held between the top-tier managers and their juniors while topical intranet discussions were commonplace for exchanging ideas and skills on handling the various challenges the company faced. The corporate culture was altered to suit a more ethical value-based system as a “force for good” in the global arena. Cooperation with governmental departments and other private sector players was administered in several areas of jurisdiction. In addition BP installed a strong commitment to environmental protection within its subsidiaries. In 2001, the company consolidated these changes.

Kotter 8 Steps Analysis

The article used the following Kotter 8 step analysis viewpoints.

Sense of Urgency. The BP board launched a reorganization campaign centered on the need

for salvaging the company from further financial loss. It successfully pitched the firm’s future decline based on the loss of revenue it had experienced at the time. In fact, it implored all stakeholders to consider the new changes as soon as possible because BP’s collapse would have detrimental effects such as layoffs, inability to meet tax obligations, lower dividends for shareholders and irreparable damage to its reputation. These factors were well canvassed in internal memos sent to different departments and partners across the various areas of operation. The slump in the stock market was perceived as a threat and the advent of information technology an opportunity for enhancing better prospects. It was therefore imperative for the corporation to embark on a restructuring process at that time because any delays would have adversely affected BP’s ability to withstand the onslaught from its competitors such as Exxon Mobil and Royal Dutch Shell. The pioneers of these changes ably examined the changing business landscape especially in oil-rich countries and realized that BP had to quickly penetrate such markets with a viable organizational structure (Bergin 46). It became apparent that an urgent intervention in its system of management was necessary to stave off competition from capturing these markets. They launched honest discussions about the various issues to examine the different scenarios of the working environment and concluded that the firm had pressing managerial matters that required the attention of all stakeholders.

Formation of a Powerful Coalition. BP identified reputable leaders and institutions that

championed the said changes. For example, they tapped David Simon as the new CEO and later John Browne as his replacement because of their strong ties to the government. As a notable British company, its performance was keenly followed by the latter and securing the support of such officials was instrumental in forging its agenda. It also broadened the input of numerous environmentalists and civil society organizations as a means of aiding the revamped waste management protocols vital for ensuring the safe production of oil.  The leaders of various business units were also roped in to reinforce the new structures because they had immense knowledge of the local terrain and a deeper understanding of the personnel working under them. The board of the corporation steered this process, which showed the highest level of commitment to the cause and offered reassurance of the firm’s determination to achieve its goals.

Vision for Change. BP had been struggling in its quest for dominance in the oil industry.

Its overall change strategy also faced potential skepticism from different quarters because of the prevailing negative publicity associated with oil companies. For example, oil firms were viewed as dirty, big, secretive and powerful (Ghoshal et al. 5). The proposed changes aimed to alter this perception because they were anchored on BP being a “force for good” by increasing the shareholder value of the business through engagement in humane and ethical practices in all its operations. It was therefore clear to all employees, investors, and consumers that BP would have a different modus operandi from its competitors. The envisioned changes emphasized the integrity of all workers for the firm’s reputation to be cemented in all its subsidiaries.

Communication of the Vision. The corporation embarked on a spirited campaign for the changes by using print and electronic media within all its areas of operation. Emails on official BP portals were circulated to the numerous managers while message boards were hung on office complexes across different countries with the aim of monitoring the progress of the discussions. In other instances, business unit leaders were compelled to hold regular weekly meetings which were facilitated by their central location on the same floor of one building. The new CEO also capitalized on his appearances at trade fairs, international business conferences, and government summonses to spearhead the revised vision. Intranet services were installed in all BP centers to link employees with their management teams. They aided the discussions about the new structures because such forums hastened the consultation process and ensured that all workers were kept abreast with the board’s new project.

Removal of Obstacles. Resistance to the changes was bound to happen, and BP introduced performance contracts targeting all business unit leaders as a way of aligning them to the new vision. Such an initiative was also vital in creating uniformity in the fulfillment of the corporation’s business goals. The firm encouraged peer-assisted scrutiny of each other’s work within the different segments of the industry. This too facilitated an open process of transformation that empowered the workers to greater productivity and a higher collective responsibility devoid of skeptics. It enabled all BP employees to have a stake in the performance of their colleagues and minimized opposition to the members of the board. The company secured the support of authoritative business leaders who penned supportive editorials in respectable dailies such as the Financial Times as a means of satisfying the intellectual curiosity of different people and institutions.

Short-Term Wins. John Browne acknowledged the hazardous effects of climate change, authorized a reduction in BP’s emissions and increased funding for scientific research on alternative fuels. These actions immediately won the company various accolades which served as a morale booster for the staff (Stanford 38). The peer challenge that sought to enhance the performance of all individuals amongst several business units facilitated great rapport and forged a higher degree of teamwork; something that had been lacking for a long time. Project completion was hastened and employees had a better attitude towards working for BP in different geographical locations. The reception from members of the public was mostly positive which reinvigorated the firm’s standing and buoyed its client base, especially in emerging markets.  Such developments ensured that all BP personnel were ingrained with the new corporate culture and approved the restructured management hierarchies with more zeal.

Build-up on Change. BP relooked at the changes in 2001 and decided on conducting a continuous improvement exercise based on the concept of Kaizen. For example, the company reduced the number of business units to balance ownership against complexity.  The group VPs were also subjected to personal accountability in their areas of supervision rather than having joint responsibility. They were also evenly distributed in various countries in stark contrast to their earlier posting in London. BP separated the marketing division from the sales department as a way of maximizing numerous customer attraction and retention strategies. All these changes were based on a philosophical mantra of learning from mistakes. This was espoused by the CEO and outlined the corporation’s constant reorganization in line with the success that such changes had occasioned.

Anchorage of Changes in the Corporate Culture. Rodney Chase and John Browne’s insistence on matching BP’s goals with the individual values of employees was meant to foster a corporate culture based on integrity. As such, the changes were drafted and implemented throughout the supply chain for the business to embrace a transformative era. All members of staff were encouraged to analyze the Colombian scandal that had engulfed BP in 1997 where the firm was alleged to have paid for the training of highly skilled security forces who later butchered their citizens (Ghoshal et al. 4). It behooved members of staff to undergo a paradigm shift geared towards acting in the best interests of the business and civilians surrounding their areas of operations. The changes were inculcated into their ethical codes of conduct and became part of BP’s signature working environment. It was vital for BP to have such drastic measures engrained in the company DNA because of the importance attached to their human capital.

Prevailing Conflicts

The introduced changes within BP experienced some setbacks because of the conflicting ideals of different business unit leaders. For instance, the plan for housing all members of senior management in one building in London was initially resisted by several executives because of the potential for undermining their influence. These people had earlier relied on their budgetary allocations and oversight roles away from the prying eyes of the board as opportunities for creating fiefdoms. Some openly rebelled against the move citing the need for retaining this structure but the board strictly enforced this policy to maximize on the new cost-cutting measures envisioned by the changes.

It was also a struggle for the various departmental heads to convince senior managers to use operational reports as a basis for the formulation of different policies. The former were determined to rely on their cross-cultural interactions and market analysis to make strategic decisions concerning economic shifts, reputation, and societal shifts.

Implementation of the peer challenge facilitated deep-seated tensions amongst the staff members. It was common for employees with personal issues to have harsh criticisms of one another, and this sometimes sowed discord within the business unit (Dowling et al. 61). In such circumstances, there were competing interests pitting personal matters against professional conduct especially from lower level workers who desired promotions to senior management levels.

The ability to sift through such underlying emotions was blurred and fed malicious misinformation to the board. In fact, sometimes it led to the creation of a hostile working environment that stalled BP operations in these areas. It therefore encouraged the prevailing managers to cloud their judgments and seek retention of their positions through the elimination of their rivals. As a result, some provided negative reports about a few of their juniors in a bid to ruin their chances of advancing up the corporate ladder. In some instances, the hiring of dynamic personnel to boost strategic initiatives became a source of conflict with the existing workforce because of the possibility of the latter’s removal. Such rivalries derailed the completion of certain projects which aided a decline in BP’s growth in some quarters.

Criticism of the Article

The article is subjective in nature because it heavily insinuates that BP’s transformation was a positive experience that only led to greater annual profits for the company. It does not tackle the financial challenges and shortcomings that such changes had on the firm’s bottom line. For example, it highlights the tremendous growth projection that accompanied the business in different global jurisdictions and paints a rosy picture of the reception of various stakeholders within the supply chain. This perspective masks an underlying outcome that was witnessed during this period. It is imperative that the article uses an objective lens for the case study by also focusing on the monetary pitfalls that BP encountered in its pursuit of the restructuring program. For example, it would have been prudent for the article to chronicle the massive financial losses suffered by the corporation during its mergers and acquisitions. The cost of retraining BP personnel in line with the board’s bold decision for changing the firm’s corporate culture should be included too because such initiatives are capital intensive. Additionally, it would have been great for the article to monetize the cost of relocating all the VPs to various international locations after their previous London posting. It would also be vital for the article to examine benefits of the investment in climate change policies at a time when the industry faced strong opposition to such issues (Tankersley 1). In fact, it is integral for the article to offer insight into the progress of such research especially in comparison to the sociopolitical landscape during this period. Having this additional information would help in providing a balance within the article. They would enhance its objectivity and facilitate a proper evaluation of the BP strategies against its balance sheet. The reader would also have a better understanding of the pros and cons of the transformative agenda that was launched by BP’s board.

 

 

Works Cited

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Bergin, Tom. Spills and Spin: The Inside Story of BP. Random House Business, 2012.

Dowling, Peter J., Festing, Marion, and Allen D. Engle. International Human Resource Management. CENGAGE Learning, 2017.

Ghoshal, Sumantra, Gratton, Lynda, and Michelle Rogan. The Transformation of BP. London Business School, 2002.

Stanford, Naomi. Corporate Culture: Getting It Right. John Wiley & Sons, Inc., 2011.

Tankersley, Jim. “Why the Job Market Actually Improved After the BP Oil Spill.” Washington Post, 22 Aug. 2014, https://www.washingtonpost.com/news/storyline/wp/2014/08/22/why-the-job-market-actually-improved-after-the-bp-oil-spill/?utm_term=.e4066cc38af1 Accessed 13 November 2017 Accessed 15 Nov. 2017.

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