When Robert Horton
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When Robert Horton left his position as Chairman and CEO of BP, the company was in financial trouble and the employee morale was notably low. The company was experiencing losses, the debt-to-equity ratio was out of control, and the company had positioned itself in so many diverse markets that most of the employees had no idea what the company mission and goals were. When David Simon took over as CEO, he was faced with the daunting task of turning the wayward company around. Simon accomplished this task for three reasons: he diagnosed and modified the organizational culture; he possessed important leadership skills; and he knew how to motivate employees.
One of the biggest deficiencies of Hortons management was his attempt to Americanize the BP culture. Britain was not ready for Hortons high profile leadership style and in his attempt to rid BP of the top heavy and stuffy management he left a feeling that the change was being imposed rather than nurtured. Through continually cutting costs, Hortons strategy became equivalent to downsizing and the employee morale continued to deteriorate. In addition, it was not feasible to expect a company to change its culture overnight as Horton tried to do and imposing the culture of another country did not go over well either. When Simon entered, he recognized that the strategy was not necessarily the problem but that the management style and culture had to change. There were certain conditions present that were conducive to facilitating change at BP and in turn made Simons job slightly easier. The company was experiencing a crisis in their financial health which really drew attention to the consequences of the current culture. A sudden turnover in leadership allowed Simon to step in at the optimal time to begin changing the culture. In addition, Horton left a weak culture that employees wanted to change (Hunsaker 325). A combination of these factors and Simons vision for change allowed BP to transform under the reigns of a new CEO.
One of Simons greatest advantages was that he was a leader not just a manager. Simon possessed many essential leadership traits such as knowledge of the business, honesty and integrity, and drive (Hunsaker 369). The case highlights Simons great knowledge of the business with a quote from a colleague who said “he knows the figures like the night sky.” His honesty and integrity were shown through his ability to make hard decisions that were not always popular but still keep the support of his employees. The drive Simon possessed was magnified through his years of school and his progression through the company. The case illustrates Simons drive with the story of him being told by a teacher that he should go into industry. She was implying he was not an intellectual but this criticism only fueled his drive. These are just a few of the characteristics Simon possessed in addition to being a good communicator and being able to inspire trust.
In addition to possessing these leadership skills, Simon also possessed the skills necessary to motivate his employees to perform at their highest capacity. A recurring employee complaint was the ambiguous nature of company goals. The case tells us that in order to alleviate this, Simon set simple goals which were achievable in the short-term so that employees could see their progress. Not only was this a way to enhance employees commitment to goals but it also helped reward the employees in timely manner. Simon also had the ability to empower his employees to achieve as he was described as having a “sophisticated and unique talent for guiding people without them really knowing he is doing it” (Davidson).
All of the examples mentioned above worked well for Simon because he was able to excite employees and get them all working toward the same goal. By doing this he changed the culture of BP and in time improved overall company performance. Although Simon did great things for BP, his approach was not without flaw. One thing Simon could have done better was to concentrate more on the companys long-term strategy. It could be argued that with such a strong focus on reducing costs in a limited number of assets, Simon focused too narrowly on short-term results and thus the sustainability of his strategy is questionable. This intense focus was in spite of the realization that most of BPs oil fields were rapidly approaching maturity and that several of the previously planned areas of expansion posed both technical risks and political instability.
Simon and Brownes vision for BP was not for BP to be the biggest company in the oil industry but to be the best performer in their market. The case states that in order to do this, Brown wanted to create an organization with distinctive assets that competitors would have difficulty replicating. According to David Knott, “His [Simons] No. 1 priority was to improve profitability of the asset base.” Distinctive assets included oil fields, technology, relationships and even the company culture. We are told in the case that Browne knew continuous development would have to take place both in the organization and management processes and through the encouragement of personal initiative and creativity in order to achieve this goal. It was decided that BP needed to narrow its focus to finding, extracting, shipping, refining, converting and selling petroleum (Davidson). By selling off the non-performing assets and flattening the organization, BP employees were given a chance to increase initiative and creativity.
During the 1980s it was very popular for companys to invest in diversified markets. BPs focus on diversification in the 80s was not that different from many other oil companies but for BP it resulted in out of control costs and poor or no return on their assets. In addition, the diversification created a sense of detachment from the company mission and goals. In order to get the company back on track Simon and Browne worked to make BP into an “asset based organization.” To do this they had to carefully examine the assets they currently had and determine which ones were worth keeping and which ones needed to be sold. In 1992 the company had asset sales of $1.5 billion and was able to pay down some of their debt and begin to get back to focusing on their core competencies (Knott). With the assets that remained they wanted to figure out a way to make them grow faster than those of competitors (Guyan). One specific goal of BP was to “outperform Exxon in return on capital, a key performance measure in the oil industry and one by which Exxon has done consistently well” (Bahree). Return on capital is a ratio used to measure how effectively management is using its capital and therefore results in a