Systems thinking refers to understanding a system by scrutinizing the linkages and interactions between the various components that form a major part of the system. Systems thinking is concerned with making authentic inferences about systems by developing a deep understanding of the underlying structure (Haines 2016). It is more concerned with the product, technology, people and processes. It is one of the way in which the problems are approached that considers the various elements in a system that influence each other. Moreover, it involves knowing the root cause of a problem and understanding the relationship between the various causes.
The Systems Engineering Body of knowledge (SEBoK) provides knowledge sources and references of the organized systems thinking and states that it is more concerned with the product, technology, people and processes. Project management has a deep relationship with the systems thinking approach. The project management and the systems thinking share many concepts in common such as life cycle approach for conceptualizing, designing and implementing systems and projects.
Undertaking systems thinking in terms of business value, organisational forms, structure & culture will define the approach to business success. Risk management, value management and system engineering will support the relevance of system thinking to project, program and portfolio management. Additionally, various tools and techniques like general system management, portfolio management process cycle, organisational maturity and many more which are accountable for the real life case study of Deepwater Horizon are enlisted in the subsequent paragraphs along with the relevance of the approach to project, program and portfolio management.
General system management is a concept which manifests to manage the simpler and complex systems within an organization and encompasses various activities, principles and guidelines to support & resolve IT systems & their issues. In system management, different departments or systems work together and collectively they can pursue multiple goals. In such types of managements, project manager work as a leader who collaborates effectively with its team, assign tasks to its team member and inform everyone what is needed to be implemented at the specific time allowing the deadline.
In the case of BP Deepwater Horizon, it comprised of various levels of management that was formed in a matrix structure, which made it difficult for anyone to make decisions quickly. Later on, the decision-making responsibilities were extended to the employees along with the other levels in the organization. The decision-making authority relating to meeting the performance targets was no longer limited to the regional operating companies of BP instead, the authority was extended to the asset managers present onsite. The BP’s asset managers were responsible for the meeting of the performance targets which was extended to the employees on the site. The compensation of the employees was now dependent upon the performance of the employees as well as the overall performance of the site. This model was known as ‘Asset Federation’ and it laid emphasis on compensation of employees according to their performance (Mello et al. 2017). The site managers managed the assets autonomously and there was some incentive of sharing best practices on risk management among the various exploration sites of BP.
Systems thinking has proven to help organizations identify and create new opportunities for themselves, their stakeholders and their customers. An organization is effective when systems, people and strategies are aligned and competencies are well developed. The organizational structure makes a clear framework of staff responsibilities, their daily roles, communication, relationships and authority, which are purposefully designed to carry out organizational goals, tasks, to achieve objectives (Alexander, A.T. and Miller, K., 2016; Scolobig, A., Prior, T., Schröter, D., Jörin, J. and Patt, A., 2015; Hankinson, G., 2015). There are three types of organisational structure which is included in project, program and portfolio management and these are :
However, in the case of BP Deepwater Horizon, Matrix structure is being utilised because it was a complex project and comprised of various levels of systems management. Along with this, Organisational Culture in Deepwater horizon means doing things around your workplace. It is the shared values, beliefs, and assumptions that govern organizational behaviour, including safety Organisational culture of Deepwater Horizon lacked in safety process. Therefore, It requires a change in Systems and development philosophy, perhaps even a change in culture. Depending on the existing culture of the organization, this may not be easy to implement and may require a great deal of change management to accomplish. With the right change management, and a lot of hard work, Systems thinking can take hold in an enterprise and deliver very positive results in an organisation culture.
Systems thinking supports transformative, innovative and strategic risk management. The issues in the BP Deepwater Horizon oil spill were management problems and poor risk management. Various reports showed that the safety board investigator and the rig operator did not test the blowout preventer’s individual safety systems. Only the device as a whole was tested while the various components were neglected. The preventer’s manufacturers had suggested individual tests but the company followed its own standard set (Gutierrez-Miravete 2013). another cause of the oil spill was considered to be the failure of the cement at the base of 18000 feet deep well that was considered to have oil and gas within its bore. it was found that the cause of the accident was poor risk management, sudden changes in plans, ignorance of critical indicators, lack of well control response and lack of emergency bridge response training by the companies. The other factors considered were the violations of the federal regulations. It was considered that BP and its contractors violated the laws related to the safety and protection of health and environment. It failed to conduct reliable tests of the pressures of the wells and did not notify the federal regulators about the changes in the drilling plans of the company.
The Deepwater Horizon event has huge implications for risk management in general. In BP’s case, the lack of effective cost, quality, and risk management are interrelated and reflect a general organizational culture of being reactive rather than proactive. When planning the project, BP had several proactive measures they could have invested in to minimize the impact of a potential well blowout. For example, they could have built a relief well which would have decreased the time to cap a blowout from weeks. The BP’s should have proper risk register which should include various risks and their tolerances, impact and risk response.
A dynamic and good risk management process is always proactive, and not reactive. It seeks and strives to reduce all the probabilities of any occurrence of any kind of adverse events and hence reduce the overall magnitude of their impact. (Roseke, 2012).
Portfolio alignment is a weak element in a good Project Portfolio Management practice. An alignment directs the decisions related to resource allocation in an organization and helps the project manager in the prioritization of the project list. Alignment helps in translation of strategies into actionable plans (Patanakul 2015). Alignment makes a project more adaptable to changes by enabling rapid response to the changes. Portfolio alignment helps in making better decisions that is supported by business intelligence. It also helps in reducing the deviations in the budgets and improving the accuracy in the forecasting of the financial aspect.
The portfolio alignment of BP Deepwater Horizon was poor as the company had initially underestimated the problem and had overestimated its capability of handling the issue. Due to improper project management, the company did not take any initial actions as crisis management (Martinsuo 2013). It was after two days of the occurrence of the disaster that the company took steps by mobilizing vessels and aircrafts. The company was even unable to ascertain the actual amount of leakages caused. The improper project management and risk management caused further delays in finding solutions to the issue.
Hence, there was a need of proper alignment in the case of BP Deepwater Horizon because aligning project portfolios using corporate strategies, considering the purpose and the goal is the best method to ensure and confirm that our organization is rightly focusing on specific and right kind of project. The Portfolio alignment helps evaluate, assess and align various strategies, with project portfolios, in line with organization’s objective, and ensures that they accomplish the right results (Patanakul, P., 2015; Svejvig, P. and Andersen, P., 2015).
The company value is evaluated by its cash flow The VBM – Value -based management encounters that the Value is generated when companies try to invest their capital on returns, which exceed the capital cost.
In Deepwater Horizon case, BP had lost approximately 55% of shareholder value after the oil spill incident as the share prices fell from $59.48 to $27. The share prices gradually recovered but could not reach the before oil spill level. The company had to spend huge amounts for the relief well drilling and for settling other claims (Turner 2014). Hence, there was a need of proper implementation of VBM. By proper implementing VBM, it brings several benefits. The restructuring can also achieve tremendous value continuously, generating high impact, realized in enhanced economic performance.
Portfolio management process cycle is the process that an investor follows in order to meet his investment objectives. It involves expressing the objectives of the investment in terms of risk and return (Kerzner 2013). Portfolio Management Process involves the management of assets. The various components and sub components forming the portfolio would comprise of identity of project, Reviewing and Prioritizing, Categorizing/Accepting or Rejecting, Plan (Assigning of Resources), Execute & Support Projects, Monitoring and Communication of Progress along with Reviewing and adjusting portfolio.
Conclusion
Weighing up all considerations, it can be concluded that various applications, uses and tools & techniques of systems thinking help in dealing with some ‘wicked problems’ that often arise in the projects that are not capable of being handled by the standard tools and techniques. The systems thinking tools and techniques help in managing the projects that involve continuous cycle of cause and effect and also provide benefit to program, project and portfolio management. Systems thinking helps in understanding the issues that involve understanding of people, coordination of thinking and behavioural processes.
Organizations today, strive under pressure to create innovative ideas and better thinking in order to grow successfully executing new business strategies. Some businesses spend a significant amount on portfolios and programs that do not align with their corporate objectives. . In this tentative business, economic and competitive marketing environment, a high quality and standards of efficient business, strategic management can develop an effective and competitive advantage, lowers risk, and reduce costs to make the organization a top performer.
The issues in the BP Deepwater Horizon oil spill were management problems and poor risk management, which could be solved by implementing a strong systems thinking approach as the systems thinking involves the various conventional tools that help in dealing with these issues as not capable of being handled by the standard tools and techniques. The systems thinking approach can help in solving the issues as it works with the reality and facilitates a systematic learning process that involves examination and discussion of the different viewpoints
This cycle is the process that investors follow to ensure meeting their investment objectives for the projects they are investing in. this cycle this cycle ensure that all the on-going enterprise activities of the project are aligned across the portfolio of project. In a report it is stated that the portfolio management cycle was followed in the project but single mistake like making project economical made the workers to make only single packing of the well. This only mistake led the project ton such huge disastrous incident (Bartlit, Sankar, & Grimsley, 2011).
Organisational maturity is an effort that is planned to make changes in the organization operations. These changes are aimed to help the managers and workers on the project to do their jobs with responsibilities better than ever before. This is a multidimensional effort that comprises of seven dimensions which are: Organizational leadership, Organisation’s culture, Systems and Orders of Organisation, Changes in the organisation, Skill of organisation’s employees, Organisation structure, and Learning of the organization. With a maturity in multi-dimension it is easy to identify and analyses risks associated with a project.
In case of BP Deepwater Horizon of Mexico this organizational maturity has seen in restricted dimensions like the project management had made a mistake of covering the pre-existing well of no use with single layer of concrete cover. Being risk prone task for the project management have not shown enough maturity in considering seriousness of task (Bartlit, Sankar, & Grimsley, 2011).
References
Amaral, Antonio’, Araujo, & Madalena. (2009). Project Portffolio Managemetn Phases: A Technique for Strategy Alignmentq. World Academy of Science, Engineering and Technology, 58, 560-568.
Bartlit, F. H., Sankar, S. N., & Grimsley, S. C. (2011). Macondo: The Gulf Oil Dissaster. National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling
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