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Financial Times: BP chief calls for profound culture change

By Ed Crooks in London
Published: October 12 2007 03:00 | Last updated: October 12 2007 03:00

Tony Hayward, the new chief executive of BP, made a decisive break with the era of his predecessor, Lord Browne, yesterday when he set out his plans for a sweeping reorganisation of the company.

Speaking to the Financial Times in his first interview since taking over in May, Mr Hayward called for profound changes in BP’s structure, culture and behaviour.

Without either praising or criticising Lord Browne by name, he signalled a very different style of leadership and corporate focus. “What we are doing represents a fundamental shift in how BP works,” he said.

The restructuring involves cutting layers of management and central costs. Thousands of jobs in support functions are likely to go.

But the strategy behind it is to simplify and standardise BP’s operations, improve their reliability and efficiency, and change the company’s culture.

Implicitly, Mr Hayward accepted the criticism that while Lord Browne had been brilliant at grand strategy, turning BP from a struggling former state enterprise into a world leader with a series of well-timed acquisitions, he had presided over a company that had lost its grip on operational details.

BP has suffered a succession of problems in recent years, mostly in its US businesses, including a fatal explosion at its Texas City refinery in 2005.

Mr Hayward said the company had done a “fantastic job assembling a great set of assets, but a much poorer job in really making them run efficiently”.

He admitted that morale at BP was poor, and that the company had been failing to recognise and reward excellence among its employees.

“And by the same token, if people aren’t demonstrating behaviours they won’t get promoted, they won’t get rewarded, and maybe even worse than that,” he said.

Mr Hayward also accepted criticism of his own role in BP’s recent past, as the former head of exploration and production, the company’s biggest business segment.

“I’ve had to eat a bit of humble pie. I’ve had to recognise my failings,” he said. “I think that if you had lived through the past few years and not learned anything from it, then you’d say, ‘that’s a problem’.”

He stressed that management needed to listen, an attribute not generally regarded as one of Lord Browne’s greatest strengths.

He was critical, too, of the effects of building BP into a big international company while retaining its operationally decentralised structure. “At a period in our history when the company was much smaller it was incredibly invigorating, and delivered real performance,” he said. “[But] it is not the way to reap the benefits of the scope and scale that BP has today.”

Mr Hayward also played down the importance of some of the ideals, such as environmental responsibility, that were dear to Lord Browne.

“We are in the business of business,” Mr Hayward said. “We need to be a very succesful business. That gives you the permission to lead in other areas.”

Shares in BP rose by 2.33 per cent yesterday, closing at 593.5p.

Another sign of his determination to break with the past came as he described how widely he listened to BP’s employees as he was drawing up his restructuring plan. “The plan we formulated has not been cooked up in a smoke-filled room by half a dozen people,” he said.

Whether the reference was conscious or not, the whiff of Lord Browne’s cigars hung in the air.

Copyright The Financial Times Limited 2007

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