BP Texas

City
Case Analysis and
Comprehension
Hamza Wasim SEC C MBA 2
19/9/2014
About the Case:

This case details the accident prone history of British Petroleums global operations. It
specifically talks about the crisis BP faced in 2005. One of BPs biggest refineries, located
in Texas came under scrutiny in 2005 when an explosion there killed 15 and injured
more than 500 workers. This unprecedented disaster led to a severe backlash for BP,
and it was investigated by 3 teams, 2 independent and 1 by BP. The two independent
teams were Chemicals Safety Board and a team of 11 members led by the former
Secretary of State of the United States, James Baker.
The Problems:

Two key problems were identified by the teams. The first was the cost cutting which
resulted in the mediocre safety standards and protocols, lack of appropriate trainings
and checks and balances in the health and safety policies, and a general disregard of
health and safety by the workers in the facilities. The second was the detrimental effect
that the cost cutting had on the machinery at the plant. In fact, key components had far
exceeded their optimum lives. BP had actually tried to address the first problem in 2004,
but the company had not created a coherent and viable safety process and systems, but
had instead concentrated on the individual safety of the employees by implementing
reactive safety protocols for the employees. Herein lies the biggest problem: BP didnt
a) replace the old and dangerous machinery and b) develop a proactive system to signal
eminent failure of the machinery.

Analysis:

I believe that the strategic goals of the company were wrong. The company was
focusing all of its efforts on cost cutting and this had a butterfly effect on the policies
and plans developed and implemented by all its departments. The company, in 2004
realized that they were sitting on top of a potential pressure cooker which was about to
explode, and due to budget constraints, all it could do was hope its employees would
react fast enough to get out of harms way before the death toll began to rise. In other
words, it trained its employees on individual health and safety whereas it needed to
take more comprehensive steps in replacing the machinery and revamping the whole
health and safety process. The HR department was primarily at fault, because none of
the health and safety staff were performing up to the standards associated with the
industry. If accountability of the safety staff and the employees at the company had
been properly addressed through proactive systems, then this disaster couldve been
mitigated.

Question/ Answers:

A1. I believe that the breakdown was also a breakdown of the ethics of the company
rather than just the breakdown of the safety systems. This was because there had been
numerous occasions in the past where the top management had been informed of the
low standard of the infrastructure that was being used in Texas City. An example of this
would be the 2003 external audit which prompted the company to take steps to
improve health and safety. Despite having the knowledge that the infrastructure was
breaking down and not in any fit state to function they still continued running it and
instead of finding a way to improve it, they just implemented a personal safety protocol
system for employees that lowered their own chances of injuring themselves. This was
just window dressing so they could claim that the injury and safety problems were being
handled by the company. The root cause of the problem on the other hand was
completely ignored.

A2. The OHSA is aimed at such situations and shouldve taken action to counter this. But
the case shows that the situation was completely disregarded, and there are a number
of reasons for this. The first is that while standards did not improve the employee injury
rate did fall the last year due to the start of their personal employee safety protocols
which might have lulled them into a false sense of security that the conditions were
improving. Another more likely situation was discovered on a little more research that
OSHA itself has very little influence in these matters. Many companies are top
management are not worried by OSHA because we can see that in the past 40 years
OSHA has only ever convicted 12 people.

A3) OHSAs inability of finding the problems could be explained by the fact that BP
couldve been told of these problems but it couldve just decided to ignore these
problems and instead couldve focused on ways to lower the employee injury rate
rather than improve structure and this was what led to the problems to begin with.

A4) The three most important steps are as follows:
Create a formal process safety system to ensure uniform rules are followed at
every plant
Create accountability in the safety personnel and the top management so that
they cannot ignore such issues.
Replace any machinery when it is an a state where it will be a hazard for workers

A5) The safety officers at each plant must analyze every piece of machinery and create a
report of them periodically, and send this to the top management. The top management
could then use this for more informed decision making. If anything is not done then with
this process it can be traced easily if it was the top management that was not doing
their job or the safety personnel thus quickly establishing accountability with immediate
consequences for failure.

A6) The strategic goals of the company were to minimize costs and maximize profits,
and the HR department played a fundamental role in seeing BP achieve these.What they
did was get rid of safety protocols and established only the bare minimum of what was
required in the form of personal safety protocols and that was the only thing that they
had done. This cost cutting could have been done in many other ways or in other
departments but in such an industry they should not have contributed to the cost
cutting by cutting safety protocols.