October 10, 2007
BP in turnaround
On Thursday, BP will apparently give some of the details of the planned restructuring to be launched by Tony Hayward, the new chief executive who took over unexpectedly rapidly at the beginning of May.
Since a story last month by my colleague Sheila McNulty, based on a leaked note of a staff meeting in Houston addressed by Mr Hayward, that announcement has been known to be imminent. And analysts are already beginning to talk it up as one of the things that they believe will mark a turn in the tide for BP.
It is not expected to be the sort of restructuring that results in large-scale redundancies, although some jobs may go. Instead, it is intended to rectify what is seen both inside and outside the company as an excessively complex, fragmented structure that was allowed to develop under Lord Browne, the previous chief executive. Bain has been called in to advise on making the organisational structure simpler.
After what will certainly be a pretty dismal set of third quarter results, if perhaps not quite "dreadful", things are beginning to look up for BP, with some key projects coming on stream. Greater Plutonio in Angola started production at the beginning of October, Atlantis in the Gulf of Mexico is on course to do the same before the end of the year. The refineries at Texas City and Whiting are set to get back to full capacity by next year. So even if Mr Hayward basically did nothing and coasted along for a bit, BP’s operational and financial performance would improve sharply over the next few months. Where he will earn his money, though, is if he manages to sustain that improvement.
Analysts are beginning to turn positive. As Neil McMahon of Sanford Bernstein put it - mixing his metaphors, but you get his point - "near term catalysts suggest that this ship is turning".
All the same, we should remember that launching a restructuring is the easy bit. Making it work will be much harder. And BP has been here before - several times - with past attempts to address what were seen as organisational weaknesses. Some of them ended up making matters worse, and are among the complexities that Mr Hayward now wants to undo.
The most entertaining and insightful take on Mr Hayward’s aspirations came from my eminent colleague Lucy Kellaway, picking up on our report that he had said he wanted a "leadership style that really listens". As she puts it: "Listening is only the first of four increasingly hard things leaders do. After they have listened, they must think. Then make a decision. Then implement. The fourth one is always the hardest." That is true in every company; it is true with a vengeance at BP.
