'Like many multinational organisations in the 1980s-1990s, BP adopted a new organisational design in response to changing environmental conditions and new organisational priorities and strategies'. How and why might BP’s organisational design and its relationship with the broader environment be contributing factors in the Gulf of Mexico oil spill? Discuss using relevant organisational theories.
Alongside with Shell and ExxonMobil, British Petroleum Amoco (BP) is one of the world‟s largest energy companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items. As cited by (Skjaerseth and Skodvin 2001), with the multinational companies linked in worldwide operations, the oil industry constitutes a global industry operating in a global market. The first part of my essay will analyze BP‟s organisational design and its relationship with the broader environment in a chronological order. I will then go on to examine its possible contribution in the Gulf of Mexico oil spill in the second part of my essay.
However, it should be noted that due to the limited scope, my essay will not be able to cover the full extent of the studies. Instead, only a few relevant organisation theories will be examined around the cornerstone of my stand and will be based entirely on the points discussed in my essay.
Organisation Theory Assignment 2
2. Organisational Design
Organisation design involves strategic decisions, and is viewed as a path to effective strategy execution. As an organisation grows, it becomes increasingly difficult to manage without more formality and some delegation of authority. Therefore, large organisations develop formal structures, with specialised tasks, detailed rules and guidelines to dictate work procedures. Hierarchical relationships serve as the foundation for authority, responsibility, and control. Having explained the importance of organisational design to the efficiency and success of an organisation, I will now analyse the organisational design approach which BP undertook from 1980s to current. 2.1 BP’s Organisational Design in the 1980s – early 1990s and its Influences from the Environment
In the 1980s, BP faced stiff competition from private oil companies and other Stateowned national oil companies (NOCs). Between 1982 and 1986, oil prices have been low with the oil industry competing intensely (Stonham 2000). According to Grant and Cibin (1996), oil prices followed a sharp downward trend and industry profits declined in tandem. As such, BP had to resort to changes in its corporate tactics in order to survive. The change in organisational design due to influences from the environment is explained by Burns and Stalker (1961, cited in McMillan, 2002) who concluded that if an organisation is to achieve maximum performance then its structure must fit with or match the rate of change in its environments. As emphasized by Stonham (2000), the era of low prices had an important effect on the structure of oil companies and their shifting strategies. „Conforming to institutional demands wins social support and ensures survival to an organisation, not because it makes more money or better products, but because it goes along with accepted conventions‟ (Hatch & Cunliffe 2006, p.86).
To cope with the change, BP embarked on an organisational design change in 1990s, also known as „Project 1990”, which was spearheaded by then, BP‟s chairman cum CEO, Robert Horton. This project placed great emphasis on delayering, consensus, and Organisation Theory Assignment 2
teamwork among managers to cut the old hierarchy. As cited by Grant and Cibin (1996), decentralisation amongst the companies extended beyond the transfer of decision making and support functions from corporate head office to divisional level. With decentralisation, companies are able to make speedy decisions and increase cost...
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