Monday, July 26, 2010

BP Failed 'Surprise Governance'

Re the FT, BP Chief Tony Hayward is out. And as the Wall Street Journal reflected today on its editorial page, "You don't preside over an environmental catastrophe of such magnitude and survive in such a job, at least not if you run a publicly held company in the private economy."

Directors & Boards has some experience with ousted BP CEOs. Back in 1992 I published an article written by Robert Horton (pictured), chairman and CEO of what was then called British Petroleum. Shortly after the article's publication (and not in any way causally related), he was deposed in a palace coup. His ouster followed a slump in earnings but, in the estimation of close observers, his abrupt departure was more related to personality and culture clashes with the board and other top executives as he endeavored to shake up the oil giant.

A rereading of his article, which I titled "Surprise Governance," still persuades me that he had it right in the advice he offered to business leaders on how they must be mentally thinking and personality poised to meet sudden threats that come at them. His advice certainly would have applied to Tony Hayward and the current BP board and management:

• "Faced with the unpredictability of almost every aspect of business in today's chaotic world, the average corporate leader might be forgiven an erosion of will, if not a failure of nerve. Whatever happens, however buffeted by surprise, a company must respond effectively to every event. It is up to the company's leaders to see that it does."

• "When you never know how your company is going to be surprised from day to day, the great need is to meet each surprise with more knowledge and creativity. One thing about surprises is that rarely do you get to repeat a previous solution."

• "No company can ever draw up sufficient policies governing what might have to be done on the spur of the moment. Individuals must be quick to see connections and grasp the implications of events. And they must be given the power to respond without bogging down."

• "In today's business world, the people in place must learn to meet surprise with flexibility and grace. The prime value is shifting from respecting experience to treasuring understanding."

• "Beyond all the other attributes out of business history, today's global manager must learn new traits of flexibility, collegiality, openness, and trust."

"By definition," Horton noted, "the businessman cannot plan for surprises — a surprise foreseen is an oxymoron." True enough, but per Horton what should not be an oxymoron is a prepared board, one that is ready to tackle surprises with that enlightened combination of flexibility and grace. That was not the BP board.

Portrait for Directors & Boards of Robert Horton in 1992 for his article.