BP's taking responsibility, then showing action crucial in crisis

Four-year-olds and many companies have one thing in common: They often struggle to admit wrongdoing.

Four-year-olds and many companies have one thing in common: They often struggle to admit wrongdoing.

They can both have that "Who me?" expression on their faces when something goes wrong and attribute a mishap to an alien force from another galaxy. That's why BP's handling of the issues surrounding its maintenance of a major Alaskan pipeline and its partial shutdown deserves attention.

In August, BP cut production in half at the Prudhoe Bay oilfield after government-mandated inspections turned up serious corrosion, which if not remedied could have led to a damaging oil spill. With the price of a gallon of gas hovering at $3, the timing couldn't have been worse. The media and government officials were quick with their criticism. And some skeptics even wondered whether the shutdown was a devious attempt to drive gasoline prices even higher.

BP had the added issue of its environmentally friendly positioning in the marketplace. Its ads - Beyond Petroleum - focus on its efforts to play an active and positive role in the environment, and obviously, a lack of attention to keeping up maintenance at a critical oilfield doesn't fit the image BP wants to project.

Too often, a company faced with a similar PR nightmare will circle the wagons, arguing that it has broken no law. While that might be true, it misses the point and can further damage a company's reputation, credibility, and even its stock price.

BP knew better. At a congressional hearing this month, Bob Malone, head of BP's US operations, took the blame. He said: "BP's operating failures are unacceptable. They have fallen short of what the American people expect of BP, and they have fallen short of what we expect of ourselves."

His colleague, Steve Marshall, president of BP Exploration in Alaska, added, "I deeply regret this situation occurring on my watch."

These are extremely simple statements, but they went a long way toward taking the sting out of the fiasco. More to the point, they underlined that the company accurately read the public sentiment and realized that it needed to take responsibility for the events and not rush for cover.

That said, those statements alone would not have been enough. The public, regulators, and investors also wanted to see that the company was going to take action. In BP's case, the company also hired three independent corrosion experts to review its maintenance policies and recommend how it could do a better job. In addition, BP hired Stanley Sporkin, a respected former federal judge, to review employee allegations that since its acquisition of Arco in 2000, the company had ignored proper maintenance procedures at Prudhoe Bay.

These actions were critical in easing the crisis for BP. Stakeholders want a company to both take responsibility and to demonstrate it has a plan of action to turn the situation. This two-pronged approach is key when a company has bad news to deliver. Excuses don't work. Instead, taking responsibility and outlining a timely action can turn a bad situation around.

Fred Bratman is president of Hyde Park Financial Communications.

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