For firms who require a turnaround, Boards need to realize that when they bring in a new CEO or executive team, the measurements need to reflect industry strategy. For example, when the board at BP brought in Tony Hayward to fix the bleeding of expense dollars, they got what they asked…almost. Hayward’s mandate was to meet all legal requirements for drilling in deep water (aka the Gulf of Mexico) and to be profitable. Hayward went about systematic cost cutting measures across the organization. Within the Gulf operations, the operational team designed a deep water drill facility that met government regulations but was not considered best practice according to the industry.
Hayward was measured on cost cutting and he met that target.
The estimate of oil that spilled into the Gulf was up to 100,000 barrels per day.
Perhaps the board and investment world should have raised the measurements for the CEOs of resource companies to include best practices as a risk mitigation strategy for the world in which we live.
This book is an interesting read for anyone who wants a deep journalistic assessment of the Gulf Oil spill: