Reuters: BP revamp copies Exxon

By Tom Bergin and Jonathan Cable

Reuters – Wednesday, October 10 05:56 pm LONDON (Reuters) – BP will on Thursday announce cuts to management layers and standardisation of procedures to address poor performance, but no cost savings targets will be set, sources familiar with the matter said.

“It will be more of the Exxon model,” one source said, referring to the world’s largest non-government controlled oil company by market value, Exxon Mobile . BP ranks number three by this measure, behind Royal Dutch Shell.

Exxon employees report along functional lines and the company insists on standardised safety and operating procedures across the organisation, analysts said.

Under former CEO John Browne, BP gave greater independence to operational units. Browne felt this encouraged and helped managers of large fields or units to maximise profits and cut costs.

Current CEO Tony Hayward feels this model has led to duplication of efforts, with people doing things in different ways in different units, raising costs and not allowing the firm to refine procedures.

Hayward also feels this has led to excessive layers of management, which he plans reduce.

The changes should lead to cost savings, but no targets will be set.

“It will be an outcome, not a diktat,” the source added.

Browne was criticised for setting ambitious cost reduction targets without consulting junior staff.

In the past two years, BP has gone from being one of the most admired companies in the world to one of the most criticised, after a fatal refinery explosion that killed 15 workers, oil spills in Alaska, big delays on key projects and probes into oil market manipulation.

Last month, the CEO told staff in Texas that the company’s current performance was “terrible”.

The overhaul of BP’s organisation will not be achieved within a set time scale and will involve asking BP staff lower down the management chain how things can be improved, the sources said.

“Tony is a very different man .. he’s going to be much more flexible, more collegiate,” a source said.

“We anticipate that these measures will involve the re-allocation of personnel from financial roles to operational posts, but that there will be no wide-reaching cost saving programme based on the restructuring,” analysts at Citigroup said in a research note, citing BP’s investor relations department.

BP declined to comment.

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