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Capstone W2 Case Study Analysis: BP and the Deepwater Horizon Disaster of 2010
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Introduction
The Deepwater Horizon oil spill in 2010 is recorded as one of the most extensive marine man-induced disasters globally. The disaster spilled oil at a rate of fifty to sixty thousand oil barrels daily from April twentieth to July fifteenth. The explosion killed seventeen employees and injured twelve. Additionally, the disaster led to thirty-six-hour oil combustion in the ocean surface, polluting the air as evidenced by the thirty-mile smoke trail. BP took pride in its safety commitment and identified itself as an environmental-friendly organization (Ingersoll et al., 2012).
The cause of the Deepwater Horizon disaster leveraged BP’s risk-averse culture, the decision-making strategies to reduce costs, and its organizational structure, including the executive team. Additionally, Transocean, the rig owner, and Halliburton, an involved contractor, partly influenced the blowout by using below standard procedures in the oil rig. The decision to cut costs primarily led to the disaster since BP had limited scope of decision-making given that it reduced its managers and adopted a decentralized decision-making approach. In 2007, Tom Hayward made headway to improve BP’s safety issues when he placed development target achievement on hiatus to pursue safety improvements (Ingersoll et al., 2012). His efforts aimed at prioritizing safety and risk preparedness over cost in contrast to other CEOs who prioritized cost over safety.
Analysis of the problems that led to the disaster
The cost reduction strategies promoted BP’s risk-averse culture. The organization’s executive management failed to efficiently and strongly communicate the unacceptability of procedural mishaps. The lack of a corporate safety message caused most of the employees, who predominantly consisted of BP’s employees, to dismiss the safety procedures facilitating the disaster. Additionally, the management lacked corporate values that instilled a culture of safety in the organization. To add to the equation, BP was involved in past disasters in the previous years that stemmed from its risk-averse culture, for example, the Texas Refinery explosion of 2005. The flawed process safety in the organization increased the chances of the disaster in 2010. The lack of concise process safety communication from the executive management hindered the achievement of process safety in past disasters. Organizations that embrace process safety excellence dismiss the cost of the procedures since it is ethical to consider human life when determining the cost of risk management (Ainsworth et al., 2018).
BP’s organizational structure and strategy also presented problems that caused the cascade of events to the occurrence of the disaster in 2010. The organization employed a decentralized design called the asset federation approach, where the central management had minor control over main organizational activities in exploration sites. It encouraged site managers to operate assets and get compensated for exemplary performance independently. The asset federation organization model discouraged collaboration among the site managers, which hindered the exploration sites’ growth of risk management practices. Connectivity in global enterprises leverages the collaboration of the workforce in different sites and geographical locations (Ainsworth et al., 2018). The asset federation model did not incentivize collaboration leading to the underdevelopment of the risk management leading to the disaster.
Decision-making strategies employed by BP also resulted in a series of events that led to the explosion of the Deepwater Horizon rig. The company decided to use the Deepwater Horizon rig despite a 2009 audit identifying over three hundred issues requiring repair. The rig required maintenance before use which was forgone due to poor decision-making and lack of oversight from the central management. The flexible organizational structure resulted in poor decision-making. The elimination of layers of management and simplification of the decision-making procedure compromised the integrity of the decision-making. With the asset federation model in place, the decision to close the well in Macondo was compromised, leading to the disaster. The management was concerned with the cost of closing the well instead of the safety of closing it.
Recommendations
Corporate social responsibility obligates organizations to be responsible to the environment it occupies and the people it employs. The Christian worldview also entails that human life is sacred since humans are created in the image and likeness of God, their safety is paramount (Ainsworth et al., 2018). In light of this, BP can revise its organizational structure and reinforce its top management to facilitate effective decision-making that will prevent the occurrence of future disasters claiming the lives of employees. Furthermore, the company should be committed to environmental conservation to honor God’s creation since oil mining presents a high potential of an environmental disaster when a disaster occurs.
References
Ainsworth, C.H., Paris, C.B., Perlin, N., Dornberger, L.N., Patterson, W.F III., Chancellor, E., et al. (2018) Impacts of the Deepwater Horizon oil spill evaluated using an end-to-end ecosystem model.
Ingersoll, C., Locke, M.R. and Reavis, C. (2012) BP and the Deepwater Horizon Disaster of 2010