Communication and leadership: the bp Oil experience

1. In 1992 BP came as close as it has ever come to disaster. It made a loss. It cut the dividend. For a long-established and reputable international business this was profoundly shocking. This article deals with how BP in general and BP Oil, its refining and marketing business, in particular, moved internal communication from being a soft option to a strategic imperative to help turn the business round. And fundamental to the move was the recognition that communication is a line management responsibility, and that communication is a two-way process between staff and management.

2. Crucial to the turnaround, as BP’s chairman and former chief executive David Simon says, was the commitment and motivation of the people who work for BP. The challenge was to keep this while transforming the way BP operates. The company had to change from one where employees were protected from the hard facts of commercial life, where a job with BP was a job for life, to a company where knowledge and understanding of performance provide the motivation, where returns and the need to manage costs were accepted as the day-to-day way of working for everyone in the organization, from the managing director to the truck driver.

3. The results of this new way of behaving are stunning. In less than five years BP’s share price has trebled. Group chief executive David Simon’s original financial targets of cutting debt by $1 billion a year, making $2 billion a year profit and holding capital spending to $5 billion a year were achieved a year early. BP Oil moved from close to bottom to top of the industry league table for return on assets. The business continued to be profitable even while global refining margins, reflecting the difference between the cost of crude oil and the finished product such as gasoline, fell at one stage to their lowest level in ten years.