BP - Bad Pressure
Businesses are under pressure. Pressure, from their customers, for quality and price and pressure, from their investors, for revenue and profit. With the BP disaster in the Gulf of Mexico we have another example of how it is one of these two pressures that unfortunately always wins out in the end - the investors and the drive for revenue and profit.
The New York Times is reporting this morning that internal BP documents show that it had been aware of problems with the Deepwater Horizon rig for at least a few months (and up to eleven months) prior to the blowout. According to one expert in the field, given the hints of a problem that were so apparent, the right thing to do would have been to shutdown the operation until one could figure out the causes or the solution. Of course that was not done. Why is that? The answer seems obvious though it is not explicitly mentioned in the article - revenue.
We, the consumers and the customers of BP, do not have enough clout. We are not well enough organized to cause an influence on the operations of a corporation such as BP. Sure we speak up once in a while but we are powerless to make them change their behaviour in the short-term. In the long-term we can have an impact by choosing to buy products that do not contain or use petroleum. However since corporations tend to be run with the short-term in mind, we just do not have a lever that influences current decision making within a corporation. At least not one that is as effective as the one another group wields.
We, the investors, on the other hand, are very well organized as the evaluation of the company happens on a second by second basis on a stock exchange. Every quarter the investment community demands a report on quarterly earnings and profits and every year the annual report. Bonuses and stock option payouts in the corporate world are very much dependent on the metrics tracked by the investment world. These are short-term metrics that drive corporate behaviour.
So there is pressure.....pressure to perform and to satisfy those investors. To perform no matter what and to take risks (some would say calculated - read acceptable - risks while others would say dangerous or unacceptable risks). It would seem that the calculated risks gang at BP won the day.
Word of debris in the well, of problems with the valve, of testing at lower pressures, of document versions with opposite meanings all point to some sort of knowledge that something, at some point, was going to go badly wrong. But that point was determined to be too far a way - too long-term - to worry about at the time. Ooooops. That was a bad calculation.
It is time that corporations take a closer look at the long-term. It is time that they begin weighing more heavily in their decision making process the impact of their actions beyond the quarter or year. It is time that metrics other than revenue and profit begin being part of how they are evaluated by investors. Time that we the customers and investors begin demanding this from them.
Let me know what you think about what you have just read. Please and thanks!
The New York Times is reporting this morning that internal BP documents show that it had been aware of problems with the Deepwater Horizon rig for at least a few months (and up to eleven months) prior to the blowout. According to one expert in the field, given the hints of a problem that were so apparent, the right thing to do would have been to shutdown the operation until one could figure out the causes or the solution. Of course that was not done. Why is that? The answer seems obvious though it is not explicitly mentioned in the article - revenue.
We, the consumers and the customers of BP, do not have enough clout. We are not well enough organized to cause an influence on the operations of a corporation such as BP. Sure we speak up once in a while but we are powerless to make them change their behaviour in the short-term. In the long-term we can have an impact by choosing to buy products that do not contain or use petroleum. However since corporations tend to be run with the short-term in mind, we just do not have a lever that influences current decision making within a corporation. At least not one that is as effective as the one another group wields.
We, the investors, on the other hand, are very well organized as the evaluation of the company happens on a second by second basis on a stock exchange. Every quarter the investment community demands a report on quarterly earnings and profits and every year the annual report. Bonuses and stock option payouts in the corporate world are very much dependent on the metrics tracked by the investment world. These are short-term metrics that drive corporate behaviour.
So there is pressure.....pressure to perform and to satisfy those investors. To perform no matter what and to take risks (some would say calculated - read acceptable - risks while others would say dangerous or unacceptable risks). It would seem that the calculated risks gang at BP won the day.
Word of debris in the well, of problems with the valve, of testing at lower pressures, of document versions with opposite meanings all point to some sort of knowledge that something, at some point, was going to go badly wrong. But that point was determined to be too far a way - too long-term - to worry about at the time. Ooooops. That was a bad calculation.
It is time that corporations take a closer look at the long-term. It is time that they begin weighing more heavily in their decision making process the impact of their actions beyond the quarter or year. It is time that metrics other than revenue and profit begin being part of how they are evaluated by investors. Time that we the customers and investors begin demanding this from them.
Let me know what you think about what you have just read. Please and thanks!
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