There are many issues that companies face every day that could potentially be managed in a different way. The issue that I would like to review is an issue that is in the forefront of the news these days. It is hard to say when there might be some sort of resolution to this issue, based on the size and impact to the environment and economy. The most recent issue occurred on April 20, 2010.
This was when the Deepwater Horizon oil rig exploded and sunk into the Gulf of Mexico 2 days later. Along with this explosion, there were 11 people reported missing and are assumed dead. The larger problem that British Petroleum has experienced since this explosion is a blow out preventer (BOP) that failed. This failed BOP has caused a horrible oil leak that is gushing from the ocean floor.
The initial estimates were that the leak would be around 1,000 barrels or 42,000 gallons per day. This number has since skyrocketed from the initial estimates. As of May 13, this number is now thought to be as high as 70,000 barrels per day, or 2,940,000 gallons. With the amount of oil that is leaking into the Gulf of Mexico from this incident give it the potential to be the worst oil spill in US history.
The previous largest oil spill in US history was the Exxon Valdez Oil Spill that occurred on March 24, 1989. As a comparison, the Valdez spill lost 250,000 barrels of oil, or 10,500,000 gallons. It was not until 1992 that the clean up from this spill was completed. From the estimated numbers, the current spill will eclipse the Valdez spill in only a matter of days. Given the fact that the Valdez spill took 3 years to clean up, we can only speculate as to how long it might take to clean up the effects of the Deepwater Horizon. The main problem that BP is immediately faced with is how to control and stop the Deepwater Horizon leak. There have been many suggestions as to what approach they should take.
British Petroleum has had to utilize the planning process and try to implement several different strategies since April 22, 2010. While the typical planning process might take several weeks or months, BP had to speed this process up. Their goal is to try and minimize the impact to the Gulf of Mexico and the surrounding environment. Planning is necessary to help drive a structured process for making decisions about the goal they are trying to reach. There are 6 main steps involved in a formal planning process.
The first step in the planning process is situational analysis. This first step most likely started for BP on April 20th after the explosion happened. This is when all relevant information about the plan is gathered, interpreted and summarized. For this situation, it most likely included studying past events, the current conditions and trying to forecast future events. The next step in the planning process is to review alternative goals and plans that might have been identified through the situational analysis.
A goal is a certain target that is set by a manager that they hope to reach. The alternative goal that BP needs to try to achieve as quickly as possible is to stop the leak that is gushing from the ocean floor. The book Management: Leading & Collaborating in the Competitive World outlines a very helpful acronym to ensure you gather certain qualities in the goals you set. The acronym identified is SMART. This stands for Specific, Measureable, Attainable, Relevant and Time-bound. There are parts of this acronym that are a little more sensitive for BP than some of the other pieces.
The time bound is the part that sticks out in my mind. The longer it takes to contain the leak from the ocean floor, the larger the impact to the environment and to BP financially. As of May 13, the oil has been leaking from the Deepwater Horizon site for 24 days. It appears that BP has come up with many alternative plans to try and address and contain the oil leak that the failed BOP has created.
Next we will review the different plans that BP has established and how some of them have been working so far. A plan is defined as how the management staff plans to achieve the outlined goals. BP has presented several plans that they will use to try and achieve their goal. The first plan that they will try to implement is to lower a containment box over the leak that will then funnel the oil to the surface and into an oil tanker.
This will be the quickest option that they can try to put in place to stop the leak. Another option that they will try to implement at the same time is to drill a relief well, but this could take up to 3 months to complete. Once the alternatives have been reviewed, we move to step three which is to evaluate the goals and plan. All of this planning has to be completed in a very tight time frame for BP, because as the time passes, the oil continues to leak. During this step, management will review the advantages and disadvantages of the alternative goals and plan from step 2. The drilling of a relief well has a huge disadvantage due to the time frame.
This step also includes prioritizing and potentially eliminating some of the goals. Step 4 is the Goal and Plan Selection. After having reviewed and prioritized the goals in the last step, this is where the decision will actually be made on which goal and plan is most feasible. After the selection has been made, the following step is to implement plans to achieve the goals that have been outlined. As of May 7, British Petroleum has started to implement their plan of lowering a container over the leaking well. Once everything is implemented, the final step is to monitor and control the work that is being done.
The container was successfully lowered into place, however ice crystals started to form and blocked the pipe that would deliver the oil to the surface. BP has now had to resort to some of their back up or alternative plans. Some other ideas that have been presented in this process include using a smaller containment dome, shooting junk into the well to clog the hole, and siphoning the oil into a tanker at the surface. With these different plans in place, BP will have to ensure that they have a good strategy if another alternate fails.
The definition of strategy is a pattern of actions and resource allocations designed to achieve the organization’s goals. Planning and strategy go hand in hand. BP will need to use some strategic management in dealing with this situation. Strategic management is basically a strategic planning process that has six major steps. The first step is to establish a mission, vision and goals.
The mission is short statement that describes the purpose of the organization. The vision is what the organization hopes to accomplish in the future. BP has their company mission and vision statement listed on their site as their values. The sites states “BP wants to be recognized as a great company – competitively successful and a force for progress. We have a fundamental belief that we can make a difference in the world. We help the world meet its growing need for heat, light and mobility. We strive to do that by producing energy that is affordable, secure and doesn’t damage the environment. BP is progressive, responsible, innovative and performance driven.”
The second step in this process is to do an analysis of external opportunities and threats. This includes understanding the different forces that might affect the company’s mission and vision. This is a unique situation for BP, due to the fact that they are trying to live up to their values, while trying to prevent an environmental disaster that could potentially tarnish their name for quite some time. After reviewing external factors, step 3 is to complete an analysis of internal strengths and weaknesses.
There are many aspects to an organization that can be reviewed a couple of key parts to be reviewed would be resources available and core competencies. Resources can fall into two categories, tangible and intangible. Steps 2 and 3 provide a good foundation of information for step 4, which is SWOT Analysis and Strategy Formulation. Once the SWOT analysis is complete, there are several different strategies to consider based on the type of business that is in operation. For BP and this situation, I would think that they would need to implement a functional strategy. Once the type of strategy has been decided upon, step 5 is strategy implementation.
During this step, BP would need to ensure that the strategy is being implemented efficiently and effectively. Once implemented, this takes us to the final step, which is strategic control. I believe this control will not be in place until the leak has been contained. In this final step, typically there is a system to help support management in evaluating how the organization is doing with the strategy. Overall, BP has an enormous task that they are faced with. It will take good planning and strategy to resolve the issue as quickly as possible.
They are faced with having to contain one of the largest oil spills in US history. It is hard to accurately measure the true amount of oil that is leaking from the well; however there are several estimates of how much oil is leaking per day, ranging from 1000 to 70,000 barrels. As of May 13, 2010, BP has had to resort to alternate plans due to their initial attempt failing. It will be interesting to watch the news and see how BP continues to manage the situation. It is almost guaranteed that the government will intervene at some point, possibly by implementing new laws around off shore drilling.
We can only hope that the impact to the environment is not too great, but there have already been reports of dead animals and tar balls washing ashore. It is hard to think that there would be no impact with so much oil leaking into the ocean. I still remember the images from the Exxon Valdez oil spill in 1989. I can only imagine we will start to see some of the same images in the future from the Deepwater Horizon spill. Let’s hope that BP’s management staff has all the tools necessary to have a strong plan in place to rectify this problem.
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