Tony Hayward shifted in his chair just slightly as he thought about what he was going to say. The soft-spoken Englishman liked to choose his words carefully. Sitting in Bob Malone’s office at BP’s office tower in west Houston, Hayward was giving one of his first press interviews as chief executive, six weeks after taking over from his mentor, John Browne. Wearing a pink shirt that was open at the collar and dress slacks, Hayward leaned back in the black leather chair and crossed his legs. He seemed both relaxed and reticent, as if he knew that his words would form the foundation for rebuilding BP.
Even before Browne’s career ended in scandal, as he was fighting BP’s mandatory retirement rules, Browne had tapped Hayward as his successor. Hayward had been one of Browne’s turtles, and, like Browne, he’d spent much of his career moving between the company’s finance and exploration operations. He’d been head of BP’s vaunted global exploration and production division for four years, overseeing the company’s crown jewel as it searched for some of the world’s biggest oil discoveries in some of its most hard-to-reach places.
Hayward’s face was framed by protruding ears and set with blue eyes that rested atop cheeks that appeared perpetually sunburned. His thin features gave him a boyish appearance despite his 50 years. He was a company man through and through, just as Browne had been. Both had spent their entire careers at BP. The oldest of seven children, Hayward had been educated in public schools and had studied geology, first at Aston University in Birmingham, then later earning a doctorate from the University of Edinburgh. Like Browne, he had shuttled among BP postings all over the globe—London, France, China, Scotland—but it was a chance meeting in a place far removed from the global oil industry that altered the trajectory of Hayward’s career. In 1990, Hayward helped to organize a leadership conference in Phoenix, Arizona, and Browne put in an appearance. Browne was so impressed that he asked Hayward to become one of his personal assistants, an inner circle of rising executives that Browne was grooming for bigger responsibilities. For Hayward, who’d been focused solely on the exploration side of the business, this meant an education in finance.
After a couple of years under Browne’s tutelage, Hayward was dispatched to Colombia, where BP was tapping the huge Cusiana field, and then later to Venezuela. He spent almost five years in South America, and his time there shaped his views of how BP should operate. As BP’s top executive in Venezuela, he attended the funeral of a young worker who had been killed in a BP oilfield. At the end of the service, the man’s mother approached Hayward and began striking him on his chest, screaming, “Why did you let it happen?”1
Hayward may have been Browne’s protégé, and their career paths may have had some similarities, but Hayward lacked Browne’s fondness for the limelight. In some ways, he was determined to be the opposite of Browne, insisting on a low profile. He wanted to focus on BP’s operations, on improving safety across the company. There would be no Vanity Fair accolades, no “Sun King” profiles, no speeches before the World Economic Forum in Davos, Switzerland, where the monied elite mingle with celebrities and world leaders. He removed the artwork around the head office that Browne had accumulated. Hayward’s focus, instead, was on making BP a “great operating company,” and that primarily meant improving safety. “We have to have a work environment where people don’t get injured or killed, period,” he said. But at BP, that was easier said than done. Richard Leining’s death at the Texas City refinery, just weeks after Hayward became chief executive, was “a vivid, tragic reminder that we still have a very long way to go.”
BP, as the Baker Report found, spent a lot of money and effort on reducing personal injuries. In the parking garage outside BP’s Houston offices, a five-mile-per-hour speed limit was strictly enforced. Employees were forbidden to talk on cell phones, even with hands-free devices, while driving on company business. But reducing accidents didn’t address the broader process issues that could lead to catastrophes like the explosion at Texas City. Hayward knew that the company needed a different approach, an end to the “manage to failure” philosophy that had led to the Texas City blast and the corrosion problems in Alaska. It needed to invest in systems that would make the refineries safer even if workers made mistakes. Process safety, after all, was supposed to take human error into account.
Even before he’d been officially named CEO, Hayward set the tone that would distinguish his leadership from Browne’s. In a “vision statement” published on BP’s internal computer network months earlier, Hayward had made what many saw as his pitch for the top job. He characterized employees’ perception of BP’s management as unresponsive and dictatorial and said that if BP were going to fix its operational problems, it would require “behavioural changes that will have to start at the top of the organisation.” He criticized a management style that “made a virtue out of doing more for less.”2
Rarely had an energy company executive inherited such an abysmal corporate track record. Lee Raymond, for example, took over as chief executive of Exxon almost four years after the 1989 spill in Alaska, and by then the company’s cultural turnaround was already under way. Long loathed by environmentalists for the Valdez spill, Exxon Mobil had reinvented itself, creating a culture that placed a priority on safety, even as it turned out stunning financial results year after year. In the ensuing two decades, Exxon built a reputation for exemplary operations. As a result, in the previous three years, government inspectors had found only a single safety violation at Exxon’s refineries, which include the country’s two largest. At BP’s, they found more than 700. (BP’s numbers were exaggerated because of its repeated safety violations. OSHA now counted its violations differently from other companies’. At other refineries, 25 corroded valves would count as one violation. At BP it would count as 25 separate ones. While this inflated BP’s numbers, it also underscored the magnitude of the task that Hayward had inherited.)
Hayward also took office amid the three criminal investigations, and jump-starting the huge cultural change that his fundamentally staid company needed fell squarely on him. BP wasn’t just shaking off recent history. For decades, it had functioned more as a part of the British government than as an independent company, and it still carried some of the plodding, bureaucratic characteristics of its heritage. Two months into his tenure, Hayward took full aim at the Browne era. BP’s operations were too complex, he said, and they needed more transparency and accountability. The company had too many top managers, and he proposed eliminating 100 positions at the corporate headquarters. He unveiled plans to hire more than 1,000 engineers and improve BP’s safety procedures worldwide.
He shuffled management, adopted new policies, invested in safety, and sought to make BP’s operations the standard for the rest of the industry, much as Exxon Mobil had done after the Valdez spill.
One of Hayward’s first acts as CEO was to replace the company’s refining chief, John Manzoni. Hayward also scaled back Browne’s green agenda. As a geologist, he knew that BP’s future was still inextricably tied to fossil fuels. While research into alternative energy would continue, the company would drop the “Beyond Petroleum” slogan.
Hayward had a five-year plan for restoring BP’s past glory, but he also couldn’t lose sight of what had happened in the previous five years. He wanted to move the company beyond its past, to own a future that would learn from past mistakes and build an even stronger company. Sitting in Malone’s office, Hayward fumbled for the right words to sum up BP’s current state: “We know when we get it right, we can do really good stuff. I sort of say, BP’s a little bit—when we’re good, we’re stunning, and when we’re bad, we’re really not very good at all.”
Inside BP, though, the problems from the Browne era were taking their toll. Some midlevel managers were losing faith in the leadership, and the division between the British arm of the company and the American one seemed to be growing. Too many senior managers in London didn’t seem to grasp the magnitude of the problems in the United States, or weren’t willing to listen. While the U.S. leaders were emphasizing safety, the British managers discounted this initiative because it was coming from the Americans. The public statements that Hayward and other executives were making about improving safety weren’t being fully implemented. Hayward himself failed to inspire BP’s workforce in the way that Browne had. While his strategy of improving operations may have been exactly what BP needed from a management standpoint, he lacked the charisma to rally the troops. He was perceived “as an arrogant British schoolboy” by many in London, one midlevel manager said.
However, Hayward’s turnaround plan got a boost from world events. By the time he became chief executive, global oil prices were beginning an ascent that would take them to a record $147 a barrel by the summer of 2008. The steadily rising prices enabled Hayward to fund increased safety measures without compromising BP’s financial results. “Having high prices actually gave us a bit of a breathing space to get on and do what we needed to do,” he would say later. “We would have been in much greater difficulty if we’d also been faced with a low price environment, so we had a bit of cover to get ourselves sorted.” Unlike Browne, though, Hayward didn’t enjoy a steadily rising stock price. BP shares traded in the same range for most of his tenure.
Hayward’s broad strategy for BP wasn’t all that different from Browne’s. Though he would stress safety more—how could he not after everything that had happened?—his fundamental philosophy was the same as his mentor’s. BP would continue to do what it did best: find the biggest and most lucrative oil and natural gas deposits in the world. That, Hayward believed, was the company’s role as one of the world’s biggest energy companies. Smaller firms could play it safe. BP and the other majors had to “live on the edge of the energy space,” he said. “They should do the most challenging, the riskiest projects that need the biggest amount of technology and capability.”
However, BP didn’t have the biggest amount of capability. It prided itself on its oil-finding prowess, and it had a long string of successes, but the Thunder Horse incident was a reminder that the company’s engineering ranks had been depleted by Browne’s cost cutting. If the company wanted to continue pushing the technological barriers, if it were going to continue drilling in ever-deeper water, it had to replenish that capability; it needed more engineers. Hayward launched a hiring push, but the effort was hampered by poor timing. With prices rising, energy companies were expanding, and the demand for engineers and other specialists had intensified. BP was trying to hire top talent at the peak of the market, and the company’s recent operating problems were driving good candidates to its rivals. Nevertheless, Hayward managed to add hundreds of engineers and bolster maintenance personnel at BP’s refineries and pipelines as well. To offset those increased costs, he slashed more than 7,000 jobs in other areas, many of them midlevel managers. As a government-controlled company, BP had grown top-heavy over the decades as jobs had been seen as lifetime appointments, without regard for whether they supported the actual business. Hayward wanted to turn the corporate structure on its head, to have overhead that supported operations, rather than having operations to support overhead.
By mid-2008, his efforts seemed to be working. The criminal cases were settled, making what he hoped would be a clean break from the past. The friction between managers and employees at the refineries seemed to be easing. Despite all the improvements, BP’s costs hadn’t changed from the previous year, and the company went on to report an annual profit of more than $21 billion, a decline from Browne’s final years.
While Hayward embraced the role of reformer, he was also a career insider, and his pride in BP ran deep. He could admit the company’s mistakes, but he also never lost sight of its successes, and he still believed that the successes defined the company. Hayward, like Browne, was willing to embrace the Baker panel’s report, going so far as to say that he considered it “a real gift for BP.” The company would learn from its past. It understood that much needed to be done. It would make changes. But it wouldn’t accept the root causes identified by the CSB. It wouldn’t admit that the effort to control costs, which continued under Hayward, had any bearing on safety. “Everything that we can find suggests that the budget cuts per se did not contribute to either the tragedy at Texas City or the spill in Alaska,” Hayward insisted. “We spent a lot of time looking at that and there is no way you can say there is a direct correlation.”
That steadfast refusal to link the budget cuts to the disasters had become ingrained in BP’s management mindset. To admit that a demand for cost cuts had led to more than a dozen deaths would, of course, only embolden the plaintiff’s lawyers, who, despite more than $1 billion in settlements, were still pursuing the company. Hayward, like Browne before him, used the narrow scope of the Baker panel as a shield. Because the Baker panel didn’t investigate how cost cutting at the corporate level affected refining operations, the company sought to focus on its findings and brush aside the CSB’s.
Despite the difficulties under which Hayward became chief executive, his tenure had its triumphs. Hayward, who had run the exploration division and had had to break the news about Thunder Horse to Browne in 2005, got to oversee the platform’s finally achieving “first oil” and beginning production. For many within BP, it became a symbol of the company’s re-birth. “Finally. Finally. This is a triumph for technology, engineering and perseverance over what is a very very challenging operating environment,” Hayward said. The company rolled out a video of the massive platform, set to the music of the Australian hard rock band AC/DC’s “Thunderstruck.” They printed shirts that declared, “The horse is loose,” and “Let the thunder roll!” After three years of catastrophe and turmoil, BP finally had a triumph about which it could brag. The symbol of the company’s problems was now a herald of future success.
Under Hayward, BP appeared, at least outwardly, to be making good on its promises to focus “like a laser” on improving safety as well. The Texas City refinery returned to its full capacity, with more than $1 billion worth of improvements, new safety systems, and a new attitude toward maintenance. Bob Malone, who had earned the respect of workers, managers, and union officials, retired in early 2009, convinced that the cultural changes in the U.S. operations were on track. To outsiders, it wasn’t clear that this was the case. Three more workers had died at Texas City since the 2005 explosion, but the fact that the rate of fatal accidents hadn’t slowed seemed to be overshadowed by a focus on everything that the company had done and spent on improvements and policy changes.
The death of Joe Gracia in 2008 was a reminder that “we still have a long way to go,” Hayward said, but many of the sweeping changes at the refinery weren’t prompted by its tragic track record. In the fall of 2005, months after the deadly explosion, Hurricane Rita battered the Texas and Louisiana coasts, damaging the refinery and forcing BP to shut the plant down for the first time in 40 years. BP used the shutdown to begin “rebuilding the refinery piece by piece,” Hayward said. Gradually, portions were brought back online, but the refinery didn’t return to full capacity until the end of 2008. Hayward was pleased with the overall progress, even touting the vigor with which BP had embraced changes in process safety. To describe the company’s progress, he used one of those awkward expressions for which he would soon become famous. “We created a burning platform internally in BP,” he said. “I was pretty vocal about what the issues were and how we needed to change them. That was a burning platform.”
Hayward’s analogy seemed awkward, even before the Deep-water Horizon disaster. What’s more, it wasn’t entirely accurate. BP hadn’t gained the momentum that Hayward liked to portray, and the “burning platform” of change masked the embers of familiar lapses that were still smoldering within the company.