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Deep Horizon Oil Spill Disaster

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Question:

Discuss about the Leadership For Deep Horizon Oil Spill Disaster.
 
 

Answer:

Introduction

Oil and gases industry is one of the biggest industries in all over the world. They are high contributors to the economy and GDP of the nation. They are also known for various kinds of pollutants they release in the environment. They generally release hydrocarbons in the environment and create a whole lot of land, sea and air pollution (Akhtar, Khan and Mujtaba, 2013). There are many kinds of hazards that are created by the oil firm. One of them is oil spill. It is one of the most common environmental hazards that are created by the oil companies. Many cases have been registered all around the world regarding similar hazards. Oil spills results in degradation of land as well as it also affect the life persisting there. Most disastrous affect was on the aquatic life as most of the oils spills occur in deep oceans. Hydrocarbons are responsible for destruction of many coral reefs all around the world which is not good for many of the flora and fauna species (Al-Majed, Adebayo and Hossain, 2012). All the firms in the industry are making hard attempts to make sure that this kind of hazards does not occur.

In order to avoid oil spills companies make larger amount of strategic plans. Apart from this companies also take managerial initiatives so as to control such cases. The way in which these disasters can be controlled depends on the ethical leadership of the management and leaders (Atteya, 2012). Companies make several strategies so as to reduce such cases. The leadership approach that is followed within the firm determines the chances of oil spills. Various kinds of stakeholders get affected with such hydrocarbon release. It is essential that all the stakeholders must be involved in this kind of ethical decision making. Organisational behaviour also affects the approach that is being used for reducing oil spills (Antonovsky, Pollock and Straker, 2014). It is also essential for the sustainability of the firm and environment. Governments all around the world have become strict on the unethical working process of these oil companies and are forcing firms to avoid incidents of oil spills. BP oils are one of the biggest companies in the Oil industry (Asghari and Rakhshanikia, 2013). It has also faced many oil spills cases.

This report highlights the ways in which factors that are responsible for Deep Horizon Oil Spill Disaster. It also showcases the causes of Oil Spills and its implications for the management’s decision making, Organisational structure as well as communication. The role of leadership in avoiding such disasters has also been illustrated in this report. Some other factors like the strategy and the initiatives that are taken by the firm to avoid such incidents have also been reflected in this report. A comprehensive detailed explanation of effective leadership styles, principles, business ethics and organisational behaviour has been provided in the later part of the report.

Company profile and Deepwater Horizon Disaster of 2010

British petroleum is one of the biggest companies in the overall world. It was established in the year 1909 as the Anglo-Persian Oil Company (Ávila, Pessoa and Andrade, 2013). It was discovered by William Knox after eight years of search. In the later years its 51 % of stake was purchased by the British government as they needed petroleum supply for the people. Majority of the ownership of the company was released by the government in the year 1970s when the firm was selling most of its shares so as to increase the productivity of the firm (Creasy and Anantatmula, 2013). This was one of the initial privatisation measures taken by the government of UK. When the government shared its final 31 % share in the year 1987 the performance of the British petroleum was floundering. In the year 1992 company faced huge lose up to 811 million dollars. Due to this company adopted many kinds of cost cutting measures so as to avoid the situation of bankruptcy.

This company applied many kinds of strategies for excessive growth of the firm which involved strategies such as merger with its rivals Amoco and ARCO. Due to its excessive brand management and environment friendly business initiatives helped it to make a considerable amount of profits (Cullen and Parboteeah, 2013). Apart from this it is also to be understood that even after such measures being taken there was an oil spill case in the year 2010. This challenged the whole brand management initiatives of the firm.

BP oil spill also known as Gulf of Mexico oil spill or Macondo blowout was an industrial disaster that started from April 2010 in the Gulf of Mexico on the BP operated Macondo Prospect. It was responsible for killing of eleven people. It was understood to be the world’s largest ever recorded oil spill in the history of petroleum industry. An estimate by the US government approximated that it was total discharge of around 4.9 million barrels (Dahl, 2013). When the spill got uncontrollable then it was declared to be sealed in 2010. As per the reports in the year 2012 site was still leaking. Many of the strategies were implemented so as to safeguard the lives of aquatic species with the activities such as floating booms, controlled burns etc.

The effect of this massive oil spill was recorded in many parts of the world where sea beaches were flooded with hydrocarbon pollutants. Many dolphins and other aquatic animals died at the infant stage of their life due to heart diseases.

 

Causes of Oil spills

In order to analyse the actual reasons of Oil spills many researches were conducted by various researchers. The US government in its report of September 2011 pointed out that the sill was the cause of the defective cement that was used in the construction of well. This report founded British Petroleum as the main culprit along with the rig operator Transocean and Contractor Halliburton (Freudenburg and Gramling, 2011). Some other researchers suggested that it was due to cost cutting decisions adopted by the company that they used inadequate safety system. The report also concluded that spills was a result of systematic root causes and absent significant reforms in both industry practices and the policies of government. Due to the spill in the oil rig there was an explosion where 11 people were never found even after the search operation. Deepwater Horizon was the semi-submersible, floating, mobile and dynamically positioned oil rig which was capable of operating up to 10000 feet deep. To be precise it was analysed that at night of 20 April 2010, high pressure methane gas got expanded into the drilling riser and rose into the drilling rig. This was the place where it ignited and exploded and hence the whole platform was engulfed in the explosion.

In various other reports it was founded that there were low grade of construction materials that was used in the well which resulted in generation of cracks after few years of operations (Harlow, Brantley and Harlow, 2011). There were total of eight different safety negligence measures which caused such a large Oil spill.

  • Dodgy Cement: This was considered to be the most crucial reason for this incident. The cement at the bottom of the borehole did not create a seal. This resulted oil and gas began to leak through its pipes and come to the surface. The standards that should not have been used were utilised for the constructive. This was done to reduce the cost of construction (Heller, 2012). Along with this lesser amount of centralisers were put for measuring the cement evenness as well as no bond logs were used for testing the integrity of the cement.
  • Valve failure: This was another important reason for the oil spill where the bottom of the pipe was sealed in two ways. First it was filled with cement and second it contained two mechanical valves designed to stop the flow of gas and oil. Both these failed which allowed gas and oil to travel up the pipe towards the surface.
  • Pressure test misinterpreted: There are certain kinds of pressure test that is conducted for determining whether the well is sealed or not (Hoffman and Devereaux Jennings, 2011). The results of these tests were miscalculated and interpreted which led them to come to a conclusion that well was under control.
  • Leak was not early noticed: Even when there were some failures in the construction process and there was bad estimation of whether the well is under control or not, crew that was working at the surface should be able to detect the flow of gas and oil in the upward direction. This could have been done by checking the increase in the pressure inside the well (Inkpen and Moffett, 2011). Even when the pressure was increased to similar level before 50 minutes of the actual explosion nobody took it seriously and the high pressure was expected to be as just a leak.
  • Valve failure before the explosion: Around 8 minutes before the rig exploded, a mixture of gas and mud began pouring onto the floor of rig. The crew on the rig immediately attempted to close a valve in the device that was installed to prevent blowout. This valve lies on the floor over the top of the borehole of the well but this valve also failed at that moment.
  • Overwhelmed separator: The crew members had the choice of deviating the mud and gas away from that of the rig. This could have vented it safely through pipes over the side. Instead of this the flow was diverted to a device on board the rig designed to part small amount of gas from the flow of the mud. The so called mud-gas separator was quickly overwhelmed and the flammable gas began to destroy the rig.
  • No gas alarm: This rig had an on board gas detection system which should have sounded the alarm and triggered the closure of ventilation fans to prevent the gas reaching to the area that was potentially cause the ignition like rig’s engines (Khdair, Shamsudin and Subramanim, 2011). This system also failed at the right time.
  • No battery for BOP: The explosion crashed the control lines the crew were utilising for making the failed attempts to close safety valves in the blowout preventer. The blowout preventer was having its own safety mechanism using which two separate systems should have closed the valves automatically when it got from the surface. One of the systems seemed to have had a flat battery and other inappropriate switch. Hence the blowout preventer did not close.

All this series of incidents were responsible for mistakes or failures that led to the Oil Spill. There were several implications that were caused on the decision making, organisational structure and the decision making.

Decision making after the incident

After the incident took place there were several questions that were raised in the public regarding the decision making process of the company (Kleinnijenhuis, Schultz, Utz and Oegema, 2015). The question was also raised as to whether in concert with the chaotic mix. There was a considerable change in the process of decision making after the incident. Since the leadership was new at the time when the disaster took place and hence they took many changes in the style of decision making. They added larger numbers of people in the decision making (Shultz, Walsh, Garfin, Wilson and Neria, 2015). Some of the officials from government also become part of the decision making process as they were also looking at the safety measures which was to be adopted inside the firm.

Implications of Organisational structure due to incident

After the incident took place significant amount of changes in organisational structure was noticed in the cited firm. Government also become the part of the decision making process and there officials were positioned at several positions for few years so as to check the safety standards inside the company (Wickman, 2014). All the executives were made responsible for the decision making. Strong bureaucratic arrangements was transformed into a more flexible and organic structure (Liu, Y.Y., Weisberg, Hu and Zheng, 2013). The hierarchical departments were converted into smaller teams. More junior level staffs or managers were included in tackling of the strategic issues. British Petroleum also adopted an organisational structure with cross functional teams. Some changes were also noticed in the participation of external members in the decision making of the company.

 

Implication on the communication due to the incidents

Implications of the incidents were also noticed on the communication that has been followed within the company (Ruggiero and South, 2013). It became the role of leader to make an effective communication with all its stakeholders. Since most of the plans were made by the management and employees point of view was not listed. There was a single sided communication which was challenging the ethical concerns of the firm also (Marquardt, 2012). Both the companies Transocean and Halliburton both blamed the leadership of BP for the lack of communication which was also the reason why the incident took place. After the incident took place effective communication system were placed at all the work stations of British Petroleum. It was noticed that at the time of the incident that took place there were no extra system that was placed for informing the people who can come for rescue. Company leadership created a system where all the grievances and ideas of the employees were heard.

Ethical leadership issues for the stakeholders

Ethics being a part of the business in the modern times and hence it has become an issue to manage ethical leadership (Mohamed, Sapuan, Ahmad, Hamouda and Baharudin, 2012). There were number of stakeholders that were attached with the company and have the responsibility of maintaining the ethical consciousness of the firm. Leadership always have the role of acting as a crucial guidance for employees as well as they must be responsible for moral development in a firm.

Since there are many kinds of ethical challenges that comes in front of the company and hence many kinds of ethical leadership issues arises in front of the stakeholders from time to time (Barron, 2012). Stakeholder does not only have to think about the profit margins but also have to check the implications of business on the society. There are various kinds of issues are faced by the ethical leadership for the stakeholders are as follows:

  • Consistency: It has become difficult in the present day business to maintain the consistency in the ethical practices of the firm. It is hard to stick to the rules and regulation of the firm following firm’s own ethical standards which serves as an aspiration for their workers. This indicates that company stands by the core values
  • Policies: Making ethics is a critical and complex process and maintaining it is more difficult. To ensure clarity a firm needs to have clear policies in terms of mission statements, practices, rules and regulations (Mulabagal, Yin, John, Hayworth and Clement, 2013). At the time an employee is hired within a firm a formal copy of the written policies needs to be given. This helps in reducing the loopholes that might reduce the exploitable loopholes.
  • Maintaining environment within the firm: This is another issue in front of the stakeholders to maintain the internal culture of the company in a way that it reduces the burden on the employees. The culture must give them rights to speak out on the topics they want to (Muralidharan, Dillistone and Shin, 2011). For British Petroleum it is essential that they have an open door policy where employee can approach to their supervisors regarding any issue they notice.
  • Gray areas: There is an issue in the ethical leadership when faced with moral gray areas. This was the area where the stakeholders of the BP lagged the most. For example in order to reduce the expenses during the bankruptcy of the company they started to reduce the expenditure on safety measures. The safety regulation under the ethical practice suggests company to upgrade safety equipment on the timely basis which will cost large amount of money (Wheelen and Hunger, 2011). But what firm did was to rationalise its present equipment to be fine. BP bended its rules which resulted in deep water oil spill incident.
  • Some other measures: Cost cutting measures were adopted by BP. In this process only they did not cared about the amount of money they need to invest in safety and construction of the units. This is not in the goodwill of the company.

Stakeholders that are facing these ethical leadership issues

  • Government: It is the role of the government to make the policies related to ethics and force companies to follow all these. Governments are facing the issue that they have to ensure that there is ease in doing business within the country while ensuring that all the rights of people attached to it are safeguarded (Obasan Kehinde and Hassan Banjo, 2014). Maintaining the ethical values as well as promoting business within the state is always difficult. In the case of BP oil Spill government had to compensate to the people that was affected by the Oil spill while ensuring that BP business shall not get affected.
  • Environment: In the case of petroleum industry firm’s need to ensure that environment does not get affected by their operations. Many types of strategies are made in order to make sure that least amount of damage to the environment is caused by the operations of the firm. There were many aquatic life animals that died due to Deepwater Oil spill and also destructed the beaches of the many coastal areas. Larger area of the sea water got affected due to the Oil spill incident. This also destroyed many of the tourist places.
  • Investors: Increasing the profit of the investors while ensuring that ethical concerns are properly managed is an important issue of the firm. They always have to check that resources were properly managed within the firm so as to make cost cuts in unnecessary activities (Odida, 2011). It was due to the cost cut measures that such an incident took place in the year 2010.
  • BP Company: One of the major challenges that come in from of the company is to ensure its growth while making sure that they stick to their basic ethics. The issue of making policies which satisfies each and every stakeholder is a difficult task for the Company. This company faced a huge amount of loss in terms of brand name as well as in economic terms due to the deepwater Oil spill incident of 2010. This disaster resulted in many kinds of legal issues for the firm. All this happened because they did not followed ethical practices while they were constructing their well just for saving some money.
  • Residents: People who were living in the Coastal areas in the regions where oil spill incident took place were badly affected by the accident. There were claims by millions of people that they need compensation as they faced huge financial loses. The beaches were flooded with hydrocarbon contents which resulted in the destruction of tourism spots. These tourist spots were the source of income for many of the local people. There were many residents who were dependent on the sea foods and death of large amount of aquatic animals rose problems for them.
  • Employees: There were many employees who were affected by the disaster. There were around 11 people who died in the incident. Many crew members faced fatal injuries. The biggest issue to the ethical leadership of the employee of BP is to maintain the environment and culture within the company in more positive manner (Oyejide and Adewuyi, 2011). Employees are the units that work on the ground levels and hence they need to act as whistle blower when they see any illegal practices being followed inside the firm. Employee must support the company leadership so as to strengthen the ethical policies of the British petroleum.
 

Deepwater horizon Oil Spill was a disaster of strategy and leadership

It is the role of the leadership to make strategy and it is important for them to manage the ethical practices that are being followed within the organisation. Deepwater horizon Oil Spill was one of the best examples that how the bad approach in the management of ethical concerns related to business can result in failure and can cause serious disasters.

I believe that since the company was facing huge financial problems hence the leadership of British petroleum decided to adopt many cost cut measures. In the investigation done by the US government suggested that due to the cost saving approach of the company they constructed well with cement that did not touch the industry standards (Bourque, 2018). In my view the strategy of making cost cut in various fields like staffing, management of resources as well as adopting new safety measures resulted in such a huge loss to the stakeholders.

Fault in the leadership style of the company resulted in huge amount of loss to the firm. The leadership was slow in taking decisions. It was the top management of the company that decided to cut of the cost that is required in updating of the communication mediums (Spencer and Fitzgerald, 2013). This resulted in disruption of work process and also information was not delivered on time.

Leadership had to make sure that all the safety measures are taken. This would have reduced the chances of system failure which would have saved the whole rig and life of the employees working there (Yang and Wang, 2014). It is always the role of the management to set up monitoring standards that is capable of checking all the work procedure. This was not present at the oil rig which has led to incident. According to the report that was given by US government it was identified that the earlier signs of system failure was not taken seriously by the leaders present at the work station.

BP executives were present there on a mission that they have to make the drilling before the storm season. Fast drilling was done to get troublesome well completed and capped before storms were coming. Even after the company had the best of drilling records due to fast drilling the risk got enhanced (Page Centric Training, 2018). Transocean people had no powers to tell anything to the petroleum giants that they are making the operations unsafe as in the investigation also they said that BP officials worked with only one bottom-line i.e. to save money.

On the larger note BP people have not enforced ideas of proceedings more cautiously in the face of an unsatisfactory test as to whether there was a gas leakage from the well. The transocean people were under the business and financial pressure to get things done. Leadership of both the company focused on approach based on business issues and not the safety of the whole system. Even when the transocean people detected the foul they did not had the veto so that they can report to the leadership of BP. There were so many indications that there was gas leakage as well as the mud was flowing to the surface but everything was neglected and the crew was busy in showing off the Horizon’s impressive capabilities to the important people.

Training of the safety measures was necessary and the crew members present at that place was not able to detect the initial signs of disasters (Valvi, and Fragkos, 2013). Since there was lot of alarms snoozing at the same time hence the managers present in the control room were unable to understand he actual cause which led them to temporarily setting of the alarms. General Master Alarm was set off which did not automatically activated at the time when gas was leaking in higher amount. It was the role of the leadership to provide the training regarding such riskier situations. Ms Fleytas who was the in charge and one of the first crew members who checked that all alarms were blinking said that she had not been provided with the training regarding how to set down the whole system in case of any similar situation occurs and hence she was unable to shut down the system when such faults arise. Apart from this she was under the pressure as the VIP inspection was going on and hence she was unable to take big decision (Smith, Smith and Ashcroft, 2011). Top management at the rig was also busy in the inspection and they were unavailable for taking major and immediate decisions.

In strategic sense there were no particular people who could be blamed for occurrence of such incidents. Lack of in charge of various activities were absent as well as there was no clear command structure, creating ripe conditions for manipulating safety protocols (Pranesh, Palanichamy, Saidat and Peter, 2017). There was no particular strategy of how to respond to similar situations. Even the leadership did not wanted to have a second round of test when first test gave positive results.

In my view when the management started to feel that everything was alright and started to make superficial decisions problem got worsen. In the investigation it was also got surfaced that there was no structural decision making at the lower levels so that immediate decisions can be done with ease. There was no training provided to the employees regarding the immediate action that has to be taken when such incidents happen.

Leadership lessons from the incidents

As in the above section of the report the strategic and leadership failures have been illustrated. There were many leadership lessons that could be learned from the accident.

  • There must not be any strategy that could produce initial benefit to the company and are capable of bringing chaos to your subordinate’s efforts.
  • When a leader arrives at any pace they must do not add chaos to the place rather they should make things better as in this incident inspection of the VIPs created the mess (EPA, 2018).
  • There must be real work even at the time when inspection is going on so that they can also get the actual view of situation. Here in this case it seemed that people where looking busy rather than working.
  • There must be specific individuals at every place that could be blamed for the every task. IN this case there was person that was present at the place that could check the problem and take decisive decisions when there were alarms all around.
  • It is to be noticed that lack of communication between the staffs of two other companies did not have their say in the strategic affairs and BP leadership did not indulged them in checking the situation of the place.
  • Training related to safety measures in such situations must be provided to all the staffs which lagged in this case. Leadership had not given the powers to employees for taking decisions.
  • Preparedness for such situations is necessary and leadership must ensure that all the measures have been taken for combating with similar situations.
  • It is an abdication of responsibility that hiding behind the blurred lines of responsibility and ignoring the safety concerns of the place (Skogdalen and Vinnem, 2012).
  • Training does not work out when there is no clear line of responsibility and there is no way of interacting with the senior officials and telling them about the problems of the place.
  • One of the biggest lessons that is taught by this incident is that crisis expose dysfunctional organisational cultures. Since in this case Tony Hayward sanctioned many of the extremely risky decisions and ignored the implications of using low quality safety measures.
  • Leaders of the two partners need to work in collaboration rather than blaming each other for any failures.
 

Forestalling such situations in future

There were many leadership lessons that came out of the incident that took place on September 2010. There are several steps that could have been done in order to avoid similar situations in future. As it can be seen that there was major faults in the leadership approach as well as the strategy that was made in the process was also not very significant. If I were the CEO of the BP Oil I would have taken many steps in order to avoid similar situations in future. This can be understood in some of the ways:

  • Effective leadership style: In the modern days of business it has become essential for the leader to adopt leadership style that is more flexible and fits according to the situation (Corkindale, 2018). In my view I would make the decision making system more open so that everyone gets the opportunity of participating in the strategic affairs. I would instruct all the executives to have a continuous interaction with the low level workers as they have the real idea of what kind of problems lies at the workplace. It is always essential that I take the path of ethical leadership so as to have a balance between the interests of the investors as well as maintain the concerns of other stakeholders. In the present business scenario it is essential to have a leadership approach that is concerned with the environment while managing profits (Reader and O’Connor, 2014). I prefer to choose more democratic style of leadership so that burdens on the employees can be reduced to significant levels and hence they can also feel free while doing their work. This also helps in bringing positivity at the workplace which is necessary for bringing best outcomes from them.
  • Leadership principles: In order to avoid similar situations in future there are many leadership principles that has to be implemented (Shuen, Feiler and Teece, 2014). One of the basic things that have to be taken care of is to introduce basic ethical principles in management and making sure that they are being followed inside the firm (Page Centric Training, 2018). I will make sure that I have the proper knowledge of the environment that is present for the business and the situation of the society in which company is operational. It is also crucial to become more technically and tactically proficient as a leader so that other subordinates also follows the same path way. I will make sure that sense of responsibility among the subordinates is developed so that they can also take major decisions when required. It is also essential that I am able to take important decisions at crucial times that too at faster rate. This will enhance the confidence of subordinates. Working for the welfare of the shareholders will be my first priority. It is also my responsibility that I inform everything to my subordinates so as to make sure that they also feel attached with the company and works with more responsibility. Apart from this to avoid similar situations in future I would implement a culture where workers from other partners have their say in the working process.
  • Business ethics: In the present day business ethics is something on which most of the leaders do not focus while making decisions. I will make sure that all the ethical practices and processes were clearly written so that there must not be any confusion related to the practice may not occur. I will make sure that there is a continuous monitoring of the overall operations so that all business ethics must be maintained. This also results in the goodwill of the firm (Rosendahl, 2012). I will not compromise with the safety of the employees in order to reduce the expenses of the company. I will make sure that there is regular test of the whole system which could have saved the lives of so many people as it can be seen that number of systems failed at the same time.
  • Organisational behaviour: Inside the firm there are many employees who come from different cultural backgrounds (Salazar-Aramayo, Rodrigues-da-Silveira, Rodrigues-de-Almeida and de Castro-Dantas, 2013). Hence it is essential for me to understand their behaviour while working I helps me to take care of the needs they have. This approach of mine will also address the concerns related to the safety of the employees. It will also help me to make sure that what kind of training has to be given to whom. This will also embed a sense of responsibility in the minds of the workers. Providing more authorities to the employees helps in solving problems that are related to the work station. I will also try to ensure that the organisational behaviour inside the firm is according to the need of the company and helps in achieving positivity at the workplace and fastens the pace of growth.

Conclusion

From the above based report it can be said that British Petroleum which is one of the market leaders in the industry must apply ethical practices in their business. Deepwater oil spill was a result of many kinds of failures that arise at the same time. This also happened due to the reason that basic business ethics were not taken care off while operating business. In order to save company from bankruptcy many of the cost cutting measures were taken by the company which also involved reducing the expenses in safety measures. There were many kinds of strategic issues in the whole working process which caused Oil spill and its implication can be seen in the management of decision making, organisational structure and communication. There was significant impact on the stakeholders attached with the company due to the accident that took place on September 2010. There were lesson related to the leadership that can be learned by others so that they can stop any similar in the future. Apart from this it is also essential for the new leadership to make changes in the leadership principles, business ethics so as to avoid such incidents in future. Effective leadership with ethical approach needs to be adopted so as to make whole organisational structure more safe and productive.

 

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