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Hayward Fell Short of Modern CEO Demands


JULY 26, 2010


LONDON—In three short months, BP PLC Chief Executive Tony Hayward learned what it meant to become the face of disaster.

Until this spring, Mr. Hayward was a brainy geologist leading a seemingly successful turnaround of BP’s sluggish operations and positioning it to compete more effectively with rivals such as Royal Dutch Shell.

But that fell by the wayside on April 20, when the Deepwater Horizon oil rig, drilling a well for BP, exploded, eventually sending hundreds of millions of gallons of oil spewing into the Gulf of Mexico. Eleven workers died in the catastrophe.

Now, as BP’s board meets Monday to decide Mr. Hayward’s fate, his story serves as a cautionary tale to CEOs everywhere of how a single mishandled crisis can eclipse an entire career and of the multiplying demands on the top corporate job.

Chief executives must placate a wider variety of constituencies than ever before, making the job’s symbolism nearly as important as its substance. Mr. Hayward’s various gaffes—saying he wanted his “life back”—and sour appearance before legislators showed a degree of tone deafness that is no longer acceptable for corporate leaders, management experts say.

Chiefs must recognize “the inextricably intertwined roles of symbolism and substance in the office of CEO today,” said Jeffrey Sonnenfeld, a senior associate dean at the Yale School of Management.

After two years of horrific failures in industries like autos and banking, taxpayers are more cynical about business leaders and less willing to forgive big corporate blunders. Government is playing a much bigger role in the boardroom after pumping in billions of dollars to bail companies out, sometimes calling the shots about who leads them

Amid the rapidly changing notions about the job of the chief executive, Mr. Hayward became CEO of BP— a little over three years ago. He promised to reverse the mistakes of his predecessor John Browne, who departed amid personal scandal and left a legacy of lackluster performance and poor safety practices. The firm’s reputation had been shaken by the 2005 explosion at the company’s Texas City refinery that left 15 people dead.

Although he 53-year-old Mr. Hayward brought in a system to enforce safety standards across the company just months after becoming CEO, his vision did not always trickle down. The company saw continued leaks in its pipeline in Alaska, and problems persisted with pressure-relief valves at its refinery in Toledo, Ohio.

BP has said that Mr. Hayward’s cost-cutting drive—$4 billion in reduced costs in 2009 alone—allowed the company to put more resources into operations, including safety. Yet critics have asked whether the aggressive internal trimming also nurtured a culture of cutting corners.

Mr Hayward was subjected to just that criticism during an acrimonious Congressional hearing last June.

By most accounts, it was Mr. Hayward’s inability to generate much empathy from the U.S. public that led to calls for his ouster. Besides his unfortunate public comments, as when he initially described the spill as “relatively tiny,”

He also opted in June to attend a yacht race, even as the oil slick continued to spread across the Gulf of Mexico and engineers struggled to plug the gusher.

Robbie Vorhaus, a crisis expert at Vorhaus Communications Inc. in Sag Harbor, N.Y., said that in such crises CEOs face the task of becoming human.

“All of a sudden you have an event where you are now standing in the spotlight among shrimp fisherman and local politicians and people who maybe make 20 or 30,000 dollars a year,” Mr. Vorhaus said. “A true leader needs to be able to come from the heart and make these people feel that there is a connection.”

Mr. Vorhaus said that’s where Mr. Hayward failed.

Mr. Hayward had experienced little that would have prepared him to adopt the populist touch.

He joined BP in 1982, not long after he received a Ph.D. in geology from Edinburgh University in Scotland.

He worked as a rig geologist in the North Sea, then flew around the world testing rocks for oil—from Papua New Guinea to North Yemen.

Mr. Hayward moved from specializing in science to understanding business in 1990 when he became the assistant to John Browne, then head of exploration and production who five years later became CEO.

Mr. Hayward eventually replaced Mr. Browne, who left amid a scandal connected to his personal life.

But three years on, Mr. Hayward finds himself in the midst of a different kind of scandal.

“Maybe he would have had a chance if he had been just really spectacular on his feet as the crisis manager, ” said Sydney Finkelstein, a professor at the Tuck School of Business at Dartmouth College. “but he was so abysmal at that, there was no way out.”

—Erin White and Guy Chazan contributed to this article.

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