What led to the disaster at BP's Deepwater Horizon oil rig? It would be easy to say that it was a technical problem. True, the blowout preventer, a critical fail-safe mechanism on the ocean floor, failed. But the problem goes much deeper than that (excuse the pun). Poor management strategies and management practices lay at the heart of the problem. And as with the recent global financial crisis, it seems that both the regulators and management, were unclear about their roles.
"Who's in charge?"
That's the question that was put to the rig's captain, Curt. R. Kuchta by the Coast Guard and Minerals Management investigating committee. On April 20th, before the explosion, there had been a disagreement between a manager from BP (the well's owner) and a manager from Transocean (the rig's owner).
"It's pretty well understood amongst the crew who's in charge". Kuchta answered.
"How do they know that", asked an investigator.
"I guess I don't know, but it's pretty well .... everyone knows." He replied.
"Who's in charge?" is indeed the critical question all managers need to ask. In their haste to be more collaborative and effective, many organisations confuse reporting structures with methods of decision making. The two, whilst complimentary, are quite separate.
For example, when an oil rig is first being built and installed, there is a collaborative effort between the well owners, the rig builders and the regulating authority. This is a project working much like a matrix structure in place in many organisations where various stakeholders work together to achieve results.
For start-ups and project teams, matrix structures work extremely well. All involved have clear roles, objectives and tasks. And most importantly, the project is time bounded. However, once the project is completed and there is a need for day-to-day management, matrix structures are less successful. "Who's in charge?" is the critical question that must be answered very clearly.
Because they take time - and only because they take time - committee decision-making in times of crisis, does not work. So, for example when the troops are in the battlefield and the enemy is almost upon them, holding a meeting to decide what to do can only bring one result. Disaster.
Thus management needs to be very clear, through well defined organisation structures, as to "Who is in charge!" It's then a decision for each manager as to the type of decision-making needed for each situation. Such decision-making can range along a continuum from full group consensus to sole decision by the manager with no discussion.
Then there's the role of the regulators. In this case (as was the case with the Civil Aviation Authority and the airlines), the Minerals Management Services were unclear as to who their real customer was. Was it the US government or the oil industry?
Apparently, for many years the Minerals Management Services have had the dual role of promoting oil exploration in the gulf and setting the regulations. As I've argued previously, regulators cannot be marketing to and regulating, the same people. Compromises (generally with the regulations) will always occur to try and attract more business (after all, money does win out!).
Regulators should always have only one customer: the government. And their sole responsibility must be to ensure the regulations are set and maintained. If the government then wants to encourage more business, they should set up a separate entity that is solely responsible for marketing the industry.
President Obama has been looking around for who to blame for this disaster. And with due cause, he has picked on BP. However, as with other industries such as banking and the airlines, he should also look at how well the various regulating authorities are set up and managed, and in particular, making sure that they realise what their exact roles and responsibilities are. Most importantly, who there real customer is – him.
There are two very clear messages for managers to learn from the Deepwater Horizon disaster. Make sure that the structure enables everyone to clearly answer the question "Who's in charge?". Then once that's clear, managers need to be competent and confident in applying a range of decision-making processes depending on their needs and the situation.
