BP's board expected to announce that Tony Hayward will step down as BP chief executive
As the first reports of the Gulf of Mexico oil-rig explosion trickled in to BP’s London headquarters in April, BP chief executive Tony Hayward wondered whether to fly immediately to the United States.
One veteran of the company advised Hayward to keep his head down, saying, “There’s no sense being Napoleon unless you can be certain of victory.”
Hayward went anyway. In the end, it was a battle he couldn’t win, but one he couldn’t avoid, either. The oil spill has inflicted severe damage on the gulf, financial blows to BP and mortal wounds to Hayward’s career.
On Monday, BP’s board is expected to announce that Hayward, 53, will step down on Oct. 1. The departure, say people close to the company, will be his decision as much as the board’s. Hayward, a geologist who has spent his entire career working for BP, is said to recognize that he has become a liability as the company tries to move forward.
The board will probably turn to Robert Dudley, who grew up in Mississippi and who joined BP from Amoco after the two firms merged. Dudley would be the first American to run the company once known as British Petroleum.
The company issued a statement Monday saying that “no final decision has been made on these matters,” and adding that “any decisions will be announced as appropriate” following a board meeting to be held in London Monday evening (midday Washington time).
Hayward lost the real battle at BP long before the April 20 rig explosion: the battle to change the oil giant’s corporate culture and improve safety. In 2005, two years before he became chief executive, cost cuts and sloppy procedures led to an explosion at BP’s Texas City refinery, killing 15 people. The Chemical Safety and Hazard Investigation Board’s lead investigator blamed a “history of budget cuts and underfunding.” Lax maintenance also led to pipeline leaks in Alaska’s North Slope.
Although BP’s prior lapses were well known, fixing them was another matter.
Hayward tried to send the right signals when he took charge in 2007. He wrote an e-mail to employees saying that BP executives needed to listen better. He renovated BP headquarters, shrinking the chief executive’s office to less than half the size of the palatial quarters of his predecessor, John Browne.
Hayward reshuffled the middle management ranks. And he vowed to focus “like a laser beam” on safety, a phrase that members of the House Energy and Commerce Committee threw in his face during a June 17 hearing.
Yet interviews with consultants and with former and current BP employees suggest that Hayward failed. The firm stressed, often to a comic extent, personal safety while not paying enough attention to safe processes.
Robert Bea, a professor and oil industry expert at the University of California at Berkeley, remembers a meeting at a Normandy resort in May 2008. Earlier, BP had hired Bea to write a report about the human element in safety. But BP boiled down his observations to a skit, which was performed by a dozen actors.
“I was sick to my stomach,” Bea said. “It was making light of serious things.”
One of the firm’s many other management consultants recalls being scolded for holding a cup of tea and an attaché case as he walked up some stairs. He was supposed to keep one hand free to grab the railing if he stumbled.
A former BP executive said every briefing, even on non-technical issues, started with people describing an experience that taught a safety lesson. “It was like prayer in school. I dreaded these things,” said the executive, who like other current and former BP employees spoke on the condition of anonymity to preserve their business relationships.
Meanwhile, important safety issues were neglected. A former BP executive, without any background in drilling, was given just four hours of training before being sent to oversee safety on an offshore rig. And U.S. refineries continued to accumulate citations for safety violations.
“They confused personal safety, which is easy to achieve but which tends to be non-catastrophic, with safety of process,” one consultant said. “I don’t think Tony got that.”
The company’s overlapping organization structures didn’t help. “We had endless conversations about safety, but not a lot about execution,” said one of the former BP executives. “It was difficult to know who was the senior person responsible for any given thing.”
Many of BP’s cultural problems date to its late 1990s acquisitions of Amoco, Arco and Sohio. Under Browne, BP had assembled a new American empire. Because he did it when oil prices were low, he transformed BP from a mid-size company into a supermajor.
The culture of this sprawling giant differed from its U.S. counterparts, and Browne was proud of that. Exxon was seen as rigid and unimaginative. Browne told an American academic that “the whole purpose is to release the creativity of the very talented individuals who work for us. We want them to be entrepreneurs, not bureaucrats doing exactly what they are told from above.”
“BP DNA is very specific,” said a retired executive. “It is very admirable and very British at its best. It is about discretionary judgment. The American approach is prescriptive. It is box ticking.”
To some extent, BP’s method worked. Industry experts say BP has pushed the edge of technology. Last year, it drilled a Gulf of Mexico well in water twice as deep as the Macondo well and twice as far beneath the seafloor. Hayward came from that risk-taking engineering part of the business.
“So that comes back to the question: What was Tony trying to change?” said a consultant who has worked in the oil industry. “It would be wrong to say Tony was trying to change or reduce the innovation. He admires technical people who innovate.”
Safety became “an overlay on a very distinctive set of behaviors,” he said, adding that BP said, ” ‘Well, on top of what we do, we’ll also do safety.’ I think that’s been shown to be not as effective.”
Some BP insiders said the real problem dates to Browne, who built a management elite with around 200 talented people in London. He was the epitome of this cadre: educated at Cambridge University, a friend of then-Prime Minister Tony Blair and a fixture on London’s cultural scene. Browne promoted the idea that BP now stood for Beyond Petroleum.
Many insiders were unhappy. One former executive said BP was like an army with an elite officer corps, but with no staff sergeants to make sure orders were carried out on the front lines.
Hayward tried to make BP more consistent. “The old BP that Tony wanted to leave behind was the company that could get on a fantastic roll and then end up in the ditch again,” said a current BP executive.
Hayward also had a dim view of the “beyond petroleum” image. He said that the core of BP was petroleum, and that alternative-energy projects would have to prove they could be profitable.
While outwardly more humble and less urbane than Browne, Hayward, who received his doctorate from the University of Edinburgh, was a product of his predecessor’s elite management system. Hayward had been one of Browne’s “turtles,” an executive assistant stint that gave him an overview of BP and an inside track to higher management.
Despite the symbolism of downsizing his office, some BP insiders say Hayward was not a man of the people. After BP Chairman Carl-Henric Svanberg and top BP executives, including Hayward, visited the White House and agreed to create a $20 billion escrow account for claims, Svanberg said oil giants cared about the “small people.” Svanberg, who is Swedish, meant ordinary people, but people took offense.
One former BP executive said, “Tony never would have said he cared about the small people: That’s because he doesn’t.”
But Hayward said other things that were seized upon as examples of insensitivity. He said he wanted “my life back,” a cry of frustration but one that angered Gulf Coast residents who fear they will never get theirs back.
“If you take this from the standpoint of the board of directors,” said Michael Useem, professor of management at the University of Pennsylvania’s Wharton School, “you’ve got to ask yourself is there somebody better, because Hayward has been so damaged.”
Hayward still has many defenders. One retired executive said that when Hayward was chosen, he “was an excellent executive for what they required: reconstruction of the company with a focus on safety, and I say that unashamedly because I think he’s done a lot to increase safety and reduce risk.”
The former executive said Hayward is partly the victim of an American hunt for someone to blame.
Hayward’s experience also might say as much about the difficulty of managing large, sprawling companies as it does about him. The merger wave of the late 1990s fused giants that wouldn’t have been allowed to combine during antitrust’s heyday. Firms said they needed to be big enough to compete with state-owned companies and to finance exploration in expensive frontiers, such as the deep water offshore.
BP will now see whether Dudley does any better controlling the far-flung empire.
“BP has very talented people,” said Fadel Gheit, oil analyst with Oppenheimer & Co. “Sometimes you say it’s time for a change, just for the sake of change. Why do baseball teams fire the manager? It’s the same team, but maybe with this guy the chemistry would work better.”
