Roger Vielvoye
International Editor
British Petroleum Co. plc under new chairman Robert Horton has begun a corporatewide process of fundamental change in the way it conducts business.
The "culture change" at the London major will capitalize on a series of reorganization and rationalization efforts in the late 1980s that led to the sale of assets worth $7 billion and cuts in personnel to 120,000 from 132,000.
Objective of the new management strategy is to turn BP into the most successful oil company in the 1990s by developing a more efficient and flexible organization fit to handle the uncertainties of the coming decade.
Horton assumed the chairmanship in March and immediately launched Project 1990, designed to make the company less hierarchical and restore flagging staff morale.
The overall aim is to pare BP's legendary bureaucracy by slimming the corporate center and decentralizing more financial authority to the four principal business sectors.
Individuals throughout the company are being encouraged to take responsibility and exercise initiative, unleashing talent within the company suppressed by the bureaucracy.
The company also wants to eliminate a feeling widespread among employees that BP was only seriously interested in the future of high fliers that are destined for senior management.
FIRST STAGE
Planning and announcing Project 1990 and implementing its first stage has proven relatively easy.
In the first days of the management revolution, BP cut away at the complex system of interlocking head off ice committees-the heart of a rigid command and control structure that enabled corporate headquarters to monitor and second guess operational staff around the world.
Ninety percent of the 86 head office committees were eliminated. They were deemed the root cause of BP's cumbersome decisionmaking process and a major contributor to stifling individual initiative throughout the company.
The responsibilities of most committees have been delegated to individuals. Informal staff networks now come together to handle specific projects for as long as needed.
BP is planning similar decentralizations of power throughout the corporate structure with networks springing up at all levels.
SECOND STAGE
The second stage is more difficult to deliver because it involves taking the new culture to all of the corporation's 120,000 staff worldwide.
Horton's first 9 months in office have raised expectations of staff who thought they had been forgotten in successive upheavals that followed the company's restructuring.
Through an intensive series of workshops throughout the group, managers are being prepared to introduce the new culture to each business sector.
However, even optimists in senior management say it could take at least 2 years to implement. Outside management consultants who have seen similar cultural change exercises in big nonoil corporations say it could take 5-10 years to create a newly openminded, freethinking BP employee unburdened by the last vestiges of the command and control structure.
While the corporation is striving to regenerate itself from within, it is also presenting a new face to the outside world.
The traditional BP shield has been given a modern facelift. In addition, BP Oil, the downstream affiliate, is in the final stages of introducing the new look to all its service stations around the world.
First response from the public has been good, as judged by an all around increase in gallonage.
STRUCTURAL CHANGES
Previous BP Chairman Peter Walters had initiated most of the structural changes in the company during his 10 year stewardship.
A major divestment program was activated to dispose of many acquisitions made in the late 1970s and early 1980s.
BP, like many other overdiversified majors, decided to return to its core business. The concept of the integrated energy and mining company was killed, triggering the sale of its minerals and coal operations.
BP also acquired full control of the old Standard Oil of Ohio affiliate. Walters, with Horton heading the U.S. operation, started the full integration of Sohio into the mainstream of the corporation.
Newly privatized Britoil plc was also snatched from under the noses of other possible predators. Concurrent with integration of Sohio, Britoil was also squeezed into the company. The combined consolidations were costly in terms of jobs.
Under Walters, the 11 business sectors were cut to just BP Exploration (BPX), BP Oil, BP Chemicals, and BP Nutrition. But the old style command and managerial structures had remained in place.
PROJECT 1990 ROOTS
Project 1990 has its roots in the final year of the Walters regime.
The board was jolted by findings of a 1989 survey of its 150 most senior managers that showed the sequence of diversification, followed by vigorous asset trading and then restructuring, had left them without a clear vision of the group's strategic goals.
The top managers also told the board that the bureaucratic structure of the company was a major hindrance to efficient operations at a time when the industry in general required fast managerial response and greater operational flexibility. The committee system also was seen as an impediment to collaboration between the various businesses within the corporation.
Later in the fall the board sounded the opinions of 4,000 other BP employees. The message was the same: restructuring and rationalization had undermined morale.
Horton, then deputy chairman, put together a team to devise a management structure and style that would satisfy the growing internal desire for fundamental change. The team was given a free hand-the only limit was that BP would remain a corporation. Unraveling the company into a conglomerate was not on the agenda.
PROJECT IMPLEMENTATION
A series of top management seminars preceded the unveiling of Project 1990 to the corporation in the biggest internal communications campaign the company has seen.
Project 1990 also required a different style of headquarters. The center underwent the sort of rationalization experienced previously by the business sectors.
The surgery at head office called for the loss of 2,050 positions, 900 of them redundant. The majority of the redundancies were among computer specialists and building maintenance and cleaning services that are now being contracted out.
However, 160 head office managers out of a payroll of 540 also went. The corporate planning and control staff was reduced to 11 from 72.
The final stage of the planned staff cuts will take place in the U.S. This month BP America will abolish 110 jobs in Cleveland, 25 of which are already vacant.
Corporate staff in Cleveland will be trimmed to 380 from 900 through transfer of 190 people into the businesses they support and by moving 210 people into a new organization in Cleveland that will provide BP and other clients with building services.
Falling staff numbers and sale of assets through more careful portfolio management has hindered introduction of Project 1990 in some areas.
BP now accepts it is almost impossible for personnel to immerse themselves in the new culture if they are unsure whether they will have a job at the end of the year.
PERSONAL CRUSADE
Horton has made the successful implementation of Project 1990 a personal crusade.
Throughout the corporation, staff have been evaluating how the chairman and other senior executives who advanced to the top through the command and control system would adapt to the culture they were promoting so earnestly.
As part of the new culture, the chairman concentrates on strategy and external relations while the deputy chairman, David Simon, is the chief operating officer.
Unofficial verdict from the staff is that Horton and Simon have adapted to the cultural change better than some of the other senior figures in the company.
Both directors participated in cultural change workshops and were reported to have listened carefully to the points made and were responsive to ideas coming through.
The most important of these gatherings took place in September when the 40 top people from the company met to review progress and discuss strategy.
From this meeting, it was agreed that certain powers be reserved for the corporate center to ensure continuity along broad lines without hindering ability of various business units to take advantage of decentralization and moves to stimulate personal initiative.
These reserved powers include overall corporate strategy, the new business culture, tax and finance, general aspects of law, the BP brand and BP shield, corporate communications and government affairs, training centers and corporate development, some human resources policies including performance appraisal; health, safety and environmental policy, research and development strategy, and information technology strategy.
The four businesses and the center agreed that key aspects of these nine activities will be common throughout the company and not spun off to the operating businesses.
John Bishop, who heads the cultural change team at the London headquarters, said the most important thing is that for the first time there was personal interaction among people at this level that was open and frank.
"Everyone came away with a terrific buzz. Here was an event that moved and motivated us to get the change moving."
STRIKING A CHORD
Horton has reportedly struck a chord among staff with his statements about the need for personnel to lead a balanced life.
He sees no merit in continually working 10-12 hr days. Empowerment of employees should eliminate the need for consistently long hours, he contends. Managers found at their desks working into the night, week after week, will be told they are not delegating properly.
Horton concedes there will be times when 80 hr weeks are required, but, as he told one of the prelaunch seminars, people do not need to work these hours for their whole career. There must not be a macho culture which makes people think they need to, he said.
NEW AWARENESS
Bishop said one of the most important points to emerge since the launch of Project 1990 in March was increased realization that behavioral change was more important than most people ever suspected.
Project 1990 had set broad objectives through its vision and values statement-open thinking, personal input, empowerment (devolution of authority), and networking.
Some of the business streams had already made a start on versions of the final objective. BP Chemicals was most advanced, followed by BPX and BP Oil, with the nutrition business only just starting to make progress.
The corporation also had to introduce change in headquarters through a series of workshops. The top 300 people are being taken through 3 day sessions, 25 at a time.
Bishop said the workshops concentrate on BP's new vision and values and how the change will be delivered to the organization. The sessions are designed to give enthusiasm and vision from the top to inspire change throughout the corporation.
By February 1991 the initial process will be over, and the company will have chosen priorities to make the culture change work.
Bishop added that Project 1990 had not abolished the hierarchy but BP was certainty a much less hierarchical organization at headquarters and within operating businesses.
"There is still a hierarchy but there are many less layers.
"It is still needed. But we are trying to act in a less hierarchical fashion," he said.
EXPECTATIONS
Bishop said Project 1990 had raised expectations and made people believe that something really was happening.
Staff wanted to participate and were anxious to see the openness, the trust, and the new procedures in action.
The devolution of responsibility is working at different levels. Some people are prepared to take it, and managers are prepared to push responsibility down. But among others, there has been a fear of taking on new responsibility and reluctance in some managers to let go of their traditional power.
The company has not been able to introduce the new culture into all levels of the organization immediately.
"There is now a great understanding in the company that this is going to take time.
There were some who thought it could be done quickly.
"It's not like that," Bishop said.
BPX CHANGES
BPX's first venture into a new culture came in September 1989, when chief executive John Browne announced a new strategy broadly based on concentrating on core assets with a special focus on larger scale projects or activities grouped around existing infrastructures.
At the same time, plans called for expansion of frontier exploration.
Since the strategy was announced, BPX has sold $2 billion worth of assets, mainly in the North Sea and has lined up frontier exploration deals in Yemen, Ethiopia, Viet Nam, Angola, Gabon, Congo, South Korea and the deepwater Gulf of Mexico.
The most significant deal under the new strategy was with Norway's state oil company, Den norske stats oljeselskap AS (Statoil). The two companies will cooperate in developing a joint presence in the European gas market, and Statoil will join BP in frontier exploration. This has already led to a preliminary agreement on exploration in the U.S.S.R.
The new strategy also calls for a smaller payroll. Since last September, 1,900 people have been let go. Staff contraction is complete in all BPX's locations outside North America.
Doug Webb, head of human resources at BPX said the organization had been a command and control organization.
"We had to try to shift the way we were doing business from command and control to a more participatory and facilitator style of management. We needed to do this to unleash the talent we had in our people. We discovered that command and control does not get you near that."
Webb said it was one thing for a command and control manager for 15-20 years to recognize the need for change, but implementing the new system was something entirely different, calling for tough decisions.
BPX CULTURAL CHANGES
BPX is introducing the culture change to the staff through employee evaluation workshops.
Webb said 18 workshops around the company had been "fantastic in getting rid of bureaucracy."
One of the first such workshops was held in Alaska. It was organized for control and accounting with separate workshops for people on each of two shifts.
"We were able to get rid of a lot of bureaucracy and simplify our operation. Workshops took a vertical slice through the organization.
"We found every level had different kinds of bureaucracies. Changes have been made but it does not mean we will not have future workshops as bureaucracy has a nasty habit of coming back in.
Looking at staff reactions to the new culture, Webb said some managers had come through a lot easier than others.
"Some will never come to it. We will have some managers across the company that will have to go because they cannot accommodate themselves to the new style. There will not be very many like that."
Empowerment, he said, requires conditions where personnel could think of new ways of working and being more creative.
It meant giving them space and responsibility but not abdication of the manager's responsibility.
"He is still the manager, still the boss, and he still has to say no from time to time."
BPX is plowing new ground in personal development of employees. Webb said every employee would have an opportunity for personal development planning.
"The strongest organization is one where people are continuing to grow, continuing to improve skills. It may mean they do a better job as an electrician on the North Slope through training and courses. It may mean for some career movement.
"We are encouraging people to look realistically at what they want to do with their lives. What are their goals, what do they really want to accomplish? Some people may say what really makes sense is to stay with BP another few years and then go out and pursue a career or interest in other companies or in other ways.
"We are not in any way going to discourage that. We have lots of skills in this organization and we can accommodate some more easily than others."
Webb said an employee takes the initiative in his personal development plan. The line manager brings a reality check.
The company started pilot projects in Anchorage and Houston about a year ago and has seen some very good results.
On the British side of the organization, employees were coming to terms with the fact that BP was no longer necessarily a job for life.
BPX has also started upward appraisal of managers and supervisors.
Workers do this anonymously and send their appraisals to a third party who consolidates the results and holds a meeting among the manager, an outside adviser, and the staff.
Webb said the idea is to devise an action plan for that manager to help him improve his performance over the coming years, based on feedback from people who work for him.
ENVIRONMENT, OPERATIONS
Another part of the new culture is accepting that BP will be a leader in health, safety, and the environment.
Webb said accepting the environmental challenge is part of a license to operate.
"In Alaska we have tremendous costs associated with our operations, some of them unfortunately associated with the Exxon Valdez. But there are other costs to prepare us for an emergency or a crisis should there be a pollution incident. We took the initiative to ensure we are prepared, and that is costing a great deal of money."
The new culture is best demonstrated by BPX's efforts to develop a new operational style to handle the small and marginal fields that will form the bulk of future development prospects in the North Sea.
A small, self-empowering team was put together in its Glasgow office to draw up commercial development plans for Andrew field in U.K. North Sea Block 16/28. The field was found in 1974 and has been the subject of several development studies but always was been shelved in favor of other, easier projects.
BPX decided that fields like Andrew will be sold if they cannot be developed. it is using what it calls the breakthrough concept, which devolves much of the responsibility for performance and budget to a self-organizing, self-empowering team that has selected its own leader. Members of this team also will form the nucleus of a development team.
The team has a core membership of six but has grown to 15 when needed. It has introduced a new, flexible operating style more suited to demands of the 1990s than the 1970s, when BP had enormous project teams to develop some of the biggest fields in the North Sea.
Webb says Andrew-style teams will set a pattern for the future. The company wants to see other, similar groups using the breakthrough approach to projects.
At the moment, there is nothing like Andrew development under way in other parts of the company. But the company is looking at doing the same thing in Aberdeen and Anchorage.
BP OIL CHANGES
BP Oil, with a 58,000 worldwide payroll, has the biggest task in implementing Project 1990.
The division has already started its workshop program to spread the philosophy down into the various affiliates.
While the principles are the same, BP Oil has to take into account ethnic and regional differences in its various worldwide operations.
As John Orange, head of the team bringing cultural change to BP Oil, points out, there is a world of difference between a retail network in Brisbane, Australia, a distribution operation in Cleveland, and the central planning team at London headquarters.
Before Project 1990 placed greater emphasis on employee participation, BP Oil was well aware of benefits this could bring, particularly in relationships with customers and for feeding information from customers back into the system.
BP Oil's senior managers soon will have the workshop experience needed to take project 1990 through other parts of the organization.
But it will be up to each unit to decide what is best for the organization in terms of utilizing staff talents and skills. This side of Project 1990 cannot be done from the center.
BP management thinks Project 1990 is going well throughout all four business sectors and headquarters. Whether the staff feels the same way will emerge from an intensive survey of employees next year.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.
