Death By Reorganization -- Literally -- at BP, Per the Gulf Oil Spill Report

A newly released 371-page technical report on the Deepwater Horizon disaster reads like a what-not-to-do list for managers everywhere. And tucked inside is a particularly startling discovery: a poorly devised and executed reorganization of a BP business unit contributed to the fatal explosion and ensuing oil spill.
The series of management failures by BP, Transocean (RIG) and Halliburton (HAL) were well documented in the oil spill commission's final report released last month. But this latest report from the commission's chief counsel highlights how the reorganization lead to numerous problems, including a breakdown in communication and lack of accountability.

That's never a good thing. But in this case, it was a particularly big problem because the three companies failed to give staff the proper training, tools and information to do their job effectively. As a result, the companies were forced to rely on human judgment and timely intervention to avoid a potential disaster -- both of which were hampered by the reorganization.

Problem 1: A project, divided

Prior to the reorganization, BP's exploration unit was organized by project with all of the engineers and operations personnel for a given well reporting to the same manager. But in early April, BP changed that and created separate reporting structures for engineering and operations. These two areas suddenly became distinct functional groups within the exploration business unit.

The timing couldn't have been worse for the Macondo well project, which BP was trying to complete at the time. Employees were distracted by the reorganization. As they tried to adjust, communication suffered and caused delays to the project. One manager told BP investigators that it was easier and faster to make decisions under the old structure.

Managers also said the new structure created some friction between departments and confusion about who was in charge.

After the reorganization, the BP well team leader wrote his supervisor: 'Everybody wants to do the right thing, but, this huge level of paranoia from engineering leadership is driving chaos ... What is my authority? With the separation of engineering and operations I do not know what I can and can't do.

His supervisor's response:

I've got to go to dance practice in a few minutes. Let's talk this afternoon. For now, and until this well is over, we have to try to remain positive and remember what you said below -- everybody wants to do the right thing.

This latest reorganization appeared to have been met with some dread by employees and as a result was starting to affect performance before it even got underway. One VP noticed the early warning signs and in an email questions Gulf of Mexico managers about recent subpar performance, asking "What's getting in the way ... reorg uncertainty?"

Curiously though, there's no evidence that this VP or anyone else took action to address staff concerns or correct problems with the reorganization itself.

Problem 3: Too many leaders, too little talk

Under the new structure, each team had two separate leaders reporting to different supervisors. The structure caused confusion; communication between teams broke down and in many cases important information didn't get to where it was needed.

The BP onshore engineering team was aware of risks with the Macondo job, but failed to tell its own employees on the rig. For example, the onshore team knew there were numerous ways that cementing the Macondo well could go wrong. There's always some uncertainly with cement jobs, but BP employees ended up making choices that increased the likelihood of a cement failure. Of course, the cement did fail and caused the Macondo well blowout.

But the onshore crew didn't emphasize this added risk to the people who were conducting tests on the cement job. They also didn't highlight these risks to the Transocean and Sperry Drilling staff who were monitoring the well for problems, let alone involve them in any discussion about how to improve the odds of a successful cement job.

Right up to the well blowout, managers and staff remained unclear on who was in charge of what. The problem was compounded when employees who had experience with the Macondo well were moved. In at least one case, an employee, who had no prior experience with the Macondo well was put into a leadership position.

Problem 4: Accountability + confusion = disaster

The reorganization also created confusion as to who was accountable at various stages of the project. One employee later told investigators he had no idea who was accountable for ensuring compliance with BP's standards on drilling safety.

In the end, important tests and assessments of the well were never conducted. For example, BP's engineering standards required the Macondo team to conduct a formal risk assessment on the cement barriers in the well. But nobody on the team even brought it up. There also was confusion about who was accountable for making sure the cement slurry design was adequate and that staff was properly trained to interpret tests on the cement.

Photo from U.S. Coast Guard, Deepwater Horizon Response
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