Change Management In British Petroleum During 2014-2016: Critical Evaluation

Background of the problem

British Petroleum has faced serious challenges during price drop of oil from 2014 until date. Strategic change management refers to the approach taken by British Petroleum in re-directing resource use, process of business, allocation of budget and other operational modes that has serious impact on organization reshaping.

This report provides an evaluation of changes that has been implemented by British Petroleum. Driving factors responsible for the change within the organization are also assessed identifying the role of leadership in process of change management. Changes affecting elements within McKinsey’s 7S framework model of change are evaluated with potential challenges and issues to be faced within implementation process. Kotter’s 8-step model to change management has been used for analysis of the change. Role of leadership in change management process has been discussed in this report. Finally, this report provides justified recommendations provided for improving the change management process in British Petroleum.    

Critical evaluation of changes implemented by British Petroleum during the period of 2014-2016

Background of the problem

During period of 2014-2016, a price drop occurred in oil and gas sector due to crisis. This decrease in price led to profit decreasing in various firms operating in oil and gas sector. Such companies included National and international oil companies, service providers of oil field etc. According to Cameron (2015), during such crisis, organizations use choices strategically to improve the situation and maximize profits. Strategies, which are usually implemented in this situation, comprises acquisition, mergers, cost efficiencies, restructuring, diversification, redundancies, new market entry, exiting market and divestments. Changes implemented are usually difficult for organization and employees leading to arising of various issues. Therefore, change management is required to mitigate such issues.

Background of the company

British Petroleum Plc is a globally acclaimed gas and oil organization of United Kingdom having world’s fourth largest revenues and is the third largest company of gas and oil globally. Having revenue of US$ 183 billion, it operates in power generation, energy renewal, marketing, production and trading. The largest activities in renewal of energies that is involved by British Petroleum are solar, hydrogen, bio fuel and wind energies. Having a total reserve of 18.07 billion barrels of equivalent oil the company invests approximately US$1 billion each year for development of renewable source of energy (Bp.com 2017).  

Driving factors responsible for the change in British Petroleum

External factors of change

Political	Due to decrease in price of oil, the British government to decrease tax rate, foreign trade regulation and decreased transportation cost. Due to global inflation, the revenues earned by British Petroleum decreased to about 68%.
Economical	Cycle of business, interest rates, supply of money decreased due to decrease in oil price. Inflation occurred in economy that caused around US$ 1 billion each year during the crisis period’s first few months to compensate the price fall.
Sociological	Decrease in oil price increased the standard of living for people in UK. People owning cars and automobiles starting using them more frequently that led to potential loss for British Petroleum. The affected consumerism led to decrease in company’s profit growth to 52% (Cummings, 2014).
Technological	The existing technology used by British Petroleum was advanced and required around 23% of the profit earned to maintain. With decrease in oil price, British Petroleum found it difficult to maintain the technological framework.
Environmental	Decrease in oil price combined with oil spills increasing in British Petroleum led the company to confront serious controversies.
Legal	Due to failure of exploration, an underlying 60% profit fall of 800 GBP was observed making the price of crude oil to decrease from US$ 100 to US$48. Clegg (2017) stated that due to this decrement, the share price of British Petroleum fell by 15% to around 4.20 GBP that made shareholders taking legal actions against the company for not adopting policies to improve and develop its business.

Table 1: PESTEL analysis of British Petroleum

(Source: Bp.com 2017)

Internal factors of change

Decreasing oil price

Due to drop of oil price in 2014 British Petroleum, suffered loss in business which if continued might cause the company to shut down. Approximately the price of gasoline fell by 38%, 52% and 49% in UK respectively. Such reduction in oil price caused British Petroleum to suffer loss of about 68% that made them to devise new strategies (Frankland et al. 2013). Such change is also accompanied with requirements to cut down unnecessary cost through lay-offs that will lead to job cuts affecting every employee level within British Petroleum from higher-ranking officers to lower ranking officers.  

Background of the company

Need for restructuring

Divisions of North America and Europe required restructuring in their units and divisions within British Petroleum. The units and divisions were too old and mandatory to handle current crisis and they were inefficient in managing locations of North America and Europe. Hence, British Petroleum was driven to change management and implement better strategies that will enhance and develop their existing division and units within the organization (Free et al. 2013).

McKinsey’s 7S model of change 

Strategy	A strategy that was implemented by British Petroleum was cutting down jobs, cost cutting and investment in alternative market during the crisis. Clear priorities, quality portfolio and distinctive capabilities were the key strategies used by British Petroleum. Selling its assets were one of the strategies used by British Petroleum to raise US$ 3 billion to US$ 5 billion. As per Galliers (2014), cutting down excess investments are the other strategies used by British Petroleum ranging between US$ 24 billion to US$ 26 billion. The oil spills that caused around 90% of the loss incurred to the firm were strictly measured to be controlled for maximizing profit.
Structure	Restructuring of the organization involved, job cut down of approximately 480-920. Such huge job cut down resulted in creating serious dislike as well as sense of low morale among all employee within the organization. Division unit creation in regions of North America and Europe was also checked along with deal of future acquisition or merging.
System	System of the change will be smooth ensuring that no employee are harmed emotionally or is suffering from any complicacy or fear of losing job. After change management was to be taken place within British Petroleum, it was ensured that employees get proper information that states clearly the objectives of their job description. Extensive high technologies were used for preventing oil spills in the oceans by ships during transportation (Goetsch 2014).
Shard value	Goals, which are subordinate in nature, were used as core values that provide evidence of ethics and work culture within the workplace.
Skills	Employee workability and competency skills were tested before employment. Any candidate possessing skill should be discussed openly with other employees. The change was to ensure that skilled employees are retained and any employee lacking sufficient skills are terminated.
Staff	British Petroleum hired staffs from all around the globe with necessary skills for providing solutions to the crisis faced due to price lowering. Because of this, the staffs were asked to devise and propose new strategies that would enable the organization to maximize its profits to about 95%.
Style	Leadership styles was adopted within the employees of British Petroleum to ensure that organizational objectives are met and cooperation along with team working is learnt among the employees. Through such learning employees will become competent to change management within British Petroleum.

Table 2: 7S Framework

(Source: Hamraz 2013)

Kotter’s 8 step model to change management 

1. Creating urgency

For executing a change to occur, a sense of urgency is required to be created within the organisation, which in case of British Petroleum was to implement new business objectives. Potential threats were identified devising strategies to mitigate the issues as well as assessing the opportunities for achieving profit (Haslam 2014). Cost efficiencies and restructuring are the possible new potential opportunities that were thought.  

1. Guide team building

Team building is guided through strong leadership and vision by combining key people of an organisation. Efficient change management leader’s builds team through identifying emotional commitment by subordinates. Weaknesses of the British Petroleum were identified that includes division and unit restructuring within British Petroleum along with low fund that was planned to be mitigated by acquisition deal by selling its assets and raising funds to about 20%.

1. Vision for change creation

Creation of values and creating vision for change within organisation is also executed through proposing new objectives on the altar of old objectives that led to cost inefficiency for British Petroleum until 2015 to about 45% (Hornstein 2015). Strategies were devised along with determination of values that sequentially arranges organisational future that enabled the firm to create and sustain its vision.  

1. Vision communication

The vision perceived by the CEO of British Petroleum was communicated among employees for  incorporating the vision among them ensuring organisational objectives are achieved by attaining teamwork and with competence. Improved perception was also distributed completing a US$8 billion share to the shareholders.

1. Obstacle removal

Change leaders are hired and resistance to change are removed strategically in this process. In case of British Petroleum, the major obstacle of funding was removed through selling its assets and preventing excessive oil spills by ships.

1. Wins creation of short-term

Creating short wins through highlighting simple objectives gradually leads to larger goal attainment. If the smaller objectives are piled up and hence fragmentation of larger objectives leading to complicacy, employees will be motivated through potential pros of the short-term achievements. Employees of British petroleum were motivated through creation of simple but precious objectives for the company.

1. Change being a foundation of building success

Building of sustainable environment is only attainable through creating a foundation for organisation to facilitate the change. This included setting of goals, continuous goals and improvements helping British Petroleum to overcome complicacies arising in case of oil price dropping.  

1. Corporate culture anchoring changes

Corporate culture should be present within the organisation and progression details should be provided to each employee to ensure no communication gap is present. Key members and contributors to development process should be identified ensuring the legacy is remembered. Hence, British Petroleum maintained its corporate culture ensuring the employees to get motivated regarding the change.

Driving factors responsible for the change in British Petroleum

Role played by leadership in change management process of British Petroleum

Leadership is very much essential to implement a change management process for handling major transitions, right personal skills and navigating upheavals significantly within organization. Scope of projects is very much important for leaders to be understood prioritizing tasks which is very much essential to achieve organizational objectives (Langley et al. 2013).

Leadership not only provides guidance to employees during change management but also mitigates any issues arising due to change within the organization. Whenever a change takes place, issues arise from employees having either emotional negative sentiments towards the change or disapproval of the change fearing their possible loss of employment.

In British Petroleum, deepwater miss happening increased due to les proficiencies leading to oil spills. Clear communication was provided to employees of British Petroleum providing greater training to employees based on functioning individually with projects. Safety training were presented providing skills and necessary competencies required for the project and prevention of oil spills.

Training and development is also provided by leaders to ensure employees perform their utmost potential accordingly and provides job according to requirements. According to Van der Voet (2014), the leader collects and analyses the information of their employees identifying their competencies and weaknesses. Based on these data collected the leader usually assigns a job and communicates accordingly to employees to motivate them and provide them the courage to face change management and cooperate with the change. A leader is also responsible for persuading the employees to follow the change without any potential resistance and revolt.

Potential challenges that will be faced during implementation process of the change management will be non-cooperation from employees. The CEO having old bad controversy of firing employees through cost cutting strategy of severe origin, will not be respected by the employee rather feared for cutting down employee strength.

As per Mir (2014), implementation of divisional units in various locations will also require expert solutions on mitigation of practical problems. Issues that will arise usually will contain lack of training and development alongside lack of proper supervision. Most importantly, the lack of improper supervision will cause the operation to be unsuccessful leading to monetary loss.

Efficient training and development will be required by the managers to cope up with existing market trends beside organizational superiority. Most of the organization has old employees to train new junior employees and coach them besides mentoring however due to extreme cost cutting strategy; they will be bound to fire employees ranging from top management level to junior staffs

Recommendations for improving change management process within British Petroleum

Training and development

Change management process can be improved through training and development among employees to greater extent that will ensure that the change management goes through efficiently and perfectly without any problems or issues. Most importantly, the CEO is advised to ensure that communication level should be maintained so internal and higher authoritative communication is not transferred to other levels creating a communication gap. Moreover, it should also be kept in mind that organizational objectives are maintained along with the improvement of change management process.

Critical evaluation of changes implemented by British Petroleum during the period of 2014-2016

Organization readiness

The readiness of the organization to adapt changes must be measured that helps to determine whether the organization is ready for the change or not. Further interactive forms and workshops will be arranged for discussion over the change that is going to be followed.    

Change monitoring

All the necessary changes that have been implemented within British Petroleum must be observed carefully along with regular audit reports to be carried out by administration. It should be ensured that the organization does not get

Conclusion

It can be concluded that the strategy devised to escalate the current scenario of the organization from a point of crisis to a development level is very essential for British Petroleum to regain its market excellence. The strategies include restructuring of the organization to promote development of divisions and units, employee job cutting to an extent of 900 approximately and future possible merging. All these strategies to be implemented will be considered regarding the implementation complexity that will arise and which will be mitigated by the organizational strategies. The feedback from employees collected will be used for evaluating the organizational readiness level of the employees and the organization itself.  

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