In March 2007, a blog entry I wrote received quite a lot of attention in the South African press. In it, I suggested that certain industries had the potential to get themselves into a lot of trouble if they chased the goal of improved efficiency to its logical conclusion. The Economist (“Browne Out“, 18 Jan 2007) had pointed out that oil companies have so stripped out costs and employees, that all their engineers work on the ragged edge of their abilities and capabilities. I wrote:

If (and when!) they have problems, oil companies are unlikely to have the capacity to respond quickly and effectively in emergency situations. Ruthlessly cutting costs eventually strips out the ability of a company to do what it has to do. It stretches staff, and demoralises them as well, often beyond their ability to cope with situations that arise. In oil companies, as in other industries, this can have catastrophic results, in the glare of public scrutiny.

Obviously, a lot of media attention is currently focused on BP and its catastrophic oil spill in the Gulf of Mexico. Greenpeace is going to town with a campaign to “rebrand” BP (see it here). But, behind the obvious story is another even more damaging one.

US Occupational Safety and Health Administration records show that in the last 3 years, BP has had 760 “egregious and willful safety violations” (download PDF report here). To put this into some industry perspective, during that same period Sunoco and ConocoPhillips both had 8, Citgo had 2, and Exxon had but 1. Yes, that’s the same Exxon that used to hold the record for the worst US oil disaster! One violation for them, and 760 for BP. That sounds like a disaster waiting to happen, doesn’t it?

I can’t comment on that, nor on the response (or lack thereof) by the OSHA. I can say that it currently looks as if BP are going to take responsibility and sort things out. But that will run up against the point I was making three years ago – what capacity do they have now that they’re in crisis?

There is obviously a case for efficiency. But there is also an immensely big case to be made for carrying some excess capacity in your company. It allows you to give employees some time to think. It means you can slow things down just a touch, and do them properly. It provides space for creativity and innovation. It enhances work-life balance, and therefore quality of life for employees. So, possibly the profit won’t be quite as good as it might have been. But the long term sustainability of your company is much more secure.

I hate to be proven right with my predictions of the worst. But, in this case, BP, “I told you so”. Hopefully the rest of us can learn some lessons here too.

TomorrowToday Global