The Times: Mutterings at the court of Lord Browne

December 19, 2006
Carl Mortished: Analysis
 
How do you change a corporate culture when it loses credibility? It is a moot question for BP, where the senior executives are beating their chests — Tony Hayward, head of exploration and candidate for the chief executive’s job, recently told an internal audience in Houston that the top of the organisation was not listening.

He said that management was too directive and too fond of making a virtue out of doing more for less. “(BP) has lived too long in the world of making do and patching up this quarter for the next quarter,” he said. 
 
It was a pep talk for staff bruised and battered by bad news from the deadly explosions at Texas City to the oil pipeline corrosion in Alaska, all blamed on cost-cutting. It was also, no doubt, an effort by Mr Hayward to project himself as a potential architect of change, a necessary image for a man who would like to be BP’s next leader.

BP needs a cultural shift because whoever wins the race for the top job will be leading a company built in Lord Browne of Madingley’s image — a highly centralised organisation with a presidential style of office that keeps its senior management on a tight leash and projects its public image from the chief executive’s podium.

BP has suffered greatly in its year of crisis because no one can speak but Lord Browne. Internally, his lieutenants bridle at the tight control kept over public communication. The people who lead BP’s core businesses are in charge of companies of FTSE 100 scale but, if they are not gagged, they are shepherded and actively discouraged from speaking to the media, even on a non-attributable basis.

It raises the question of who will be trusted to speak when Lord Browne finally gives up his job in 2008. More importantly, it asks: how will his successor learn to speak convincingly? Mr Hayward’s passionate plea for management to listen and reject the penny-pinching approach to resources would sound more persuasive if he had not been an arch exponent of the BP cost mantra in previous years.

Those lieutenants — Mr Hayward, John Manzoni and Iain Conn — have been put in an invidious position, forced to toe the line in an absurdly public but mysteriously silent race for the top job.

Lord Browne, more than anyone, ought to be keenly aware of the dangers of not listening. Fourteen years ago, the oil company was in a different management crisis, groaning under excessive debt and its staff in near-open rebellion over redundancies and an abrasive style of management. In June 1992, the board ganged up and asked Bob “Hatchet” Horton to go.

The key issue was his refusal to cut the dividend but his style of top-down leadership did not help. In the end, his successor, David Simon, completed and extended the redundancy programme initiated by Mr Horton.

The hatchet was passed to John Browne, who quickly set about abolishing fiefdoms like those that did so much damage at Shell. In the early years, he was fascinated by Enron and he admired Exxon’s discipline. He benchmarked BP against it, setting cost-reduction targets like skittles to knock down.

When BP expanded in mergers with Amoco and Arco, it formalised the central command in the so-called Green Book, a manual that described BP’s management framework, for the avoidance of any doubt.

Lord Browne’s presidential office is a streamlined way of running a business but it leaves the organisation a bit helpless when errors multiply.

It is the antithesis of the former Shell. While the Anglo-Dutch company was run as a collection of independent and sometimes warring businesses, BP was transformed into a very tall pyramid with Lord Browne sitting alone at its apex.

In an interview with The Times in 1996, the BP chief suggested the group was like a living creature. He said: “It’s a society as well as a company and it corrects itself when it becomes uncivilised.”
 
http://business.timesonline.co.uk/article/0,,13129-2511138.html

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