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The Times: New BP boss is set to make his mark with restructure of top management

January 16, 2007
Carl Mortished, Industrial Business Editor

Tony Hayward to appoint own team
Critical report expected today
 
Can Hayward close the gap?

A management reshuffle at the top of BP is expected as Tony Hayward, BP’s chief executive-designate, prepares a top team that will put his own stamp on the company after the departure of Lord Browne of Madingley at the end of July. 
 
Lord Browne’s departure, 18 months ahead of schedule and announced before today’s publication of the Baker Report into BP’s US refining business and the Texas City fire, gives Mr Hayward the opportunity to begin to reshape BP’s senior leadership and project a different style of management.

The report is expected to criticise BP for failing to provide adequate safety resources at the US refinery business and implicate the current management in the problems with the safety culture there.

Mr Hayward’s immediate task will be to appoint his own successor, the new head of exploration and the second most important job in the organisation. Another key post, chief financial officer, will open up in just over a year when the incumbent, Byron Grote, reaches retirement age.

Analysts are expecting that even wider changes may be needed as some investors believe that Lord Browne was let down by his lieutenants in relation to the recent refinery safety record and lacklustre operational performance.

Merrill Lynch, the US investment bank, said that Mr Hayward will use the opportunity to make a break with the past. “(The succession) provides a platform for BP to turn around what has become a de-rated management and operational story,” the bank said.

Lucas Hermann, analyst at Deutsche Bank, said that Lord Browne’s retirement had conveniently removed the requirement to deliver “sacrificial lambs” to US regulators and to the City.

However, the future of John Manzoni, the head of refining and marketing, may be less certain after publication of the Baker Report, which is expected to be highly critical of BP’s management of its US fuel plants. “He hasn’t covered himself in glory,” Mr Hermann said.

In a note published yesterday, Merrill Lynch said that Mr Hayward’s new broom could involve more changes than filling his own shoes in exploration: “We would also not rule out a larger reshuffle of the top team in light of recent operational issues in key parts of the business at some stage in the next six months,” it said.

Pressure will intensify on BP to reveal any further changes to management following the fourth-quarter analyst presentation on February 6, which will be delivered by Lord Browne. BP stock has underperformed Shell and the other European oil majors and it has been left trailing by the industry leader ExxonMobil.

The widening gap with Exxon will be a severe disappointment to Lord Browne, for whom the US giant was the critical benchmark against which he wanted BP to be measured.

Raising the bar in each of the core businesses is the critical challenge placed in Mr Hayward’s in-tray at a time when oil markets are beginning to deteriorate with falling prices and weakening demand. Further deterioration in oil markets could put more pressure on the company’s margins.

In a speech to his staff, Mr Hayward signalled that he wanted a management style that listened more and he criticised a cost-cutting culture that seeks “to get 100 per cent of the task completed with 90 per cent of the resources”.

However, he also gave warning that the firm was “overheating” with supply chain shortages and a lack of experienced staff.

BP in the firing line

James Baker: The man commissioned to report on BP’s US refinery business is a veteran of three Republican administrations. Mr Baker, right, served as commerce under-secretary for Gerald Ford and became President Reagan’s chief of staff in 1981. He then served as Treasury Secretary and was appointed Secretary of State by President Bush in 1989. He founded the James A Baker Institute for Public Policy at Rice University, Texas in 1993.

John Manzoni: As head of refining and marketing, John Manzoni, left, is the executive more exposed to the Baker Report’s findings. He is a typical “BP lifer”, joining in 1983 as an Imperial College-trained engineer with an MBA from Stanford. He was quickly promoted by Lord Browne, becoming one of his executive assistants, dubbed “turtles” within the company. In 2003 he was put in charge of global refining and marketing and joined the BP board.

http://business.timesonline.co.uk/article/0,,9072-2549039.html

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