BP to Reveal Revamped Structure

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BP to Reveal Revamped Structure

LONDON -- Tomorrow is the day that BP is expected to announce the outline of its planned restructuring, as the company's new chief executive Tony Hayward attempts to streamline the business and improve its efficiency, according to media reports.

As CSNews Online previously reported in September, citing a Financial Times report, Hayward told a "town hall" staff meeting in Houston that he would be announcing a streamlining of the company's organization this month. He said BP's financial performance was at its lowest since the crisis of 1992-1993, the report stated.

Hayward, who took over when former chief executive Lord Browne resigned May 1, is expected to try and simplify BP's structure, consolidate units and clarify management roles, according to a new Financial Times report.

Reuters, citing sources familiar with the matter, reported that Hayward will announce cuts to management layers, as well as standardization of procedures to address poor performance, but no cost-savings targets will be set.

"It will be more of the Exxon model," one source told Reuters, referring to Exxon Mobil Corp., the world's largest non-government controlled oil company by market value. BP ranks No. 3 by this measure, behind Royal Dutch Shell, the report noted.

Exxon employees report along functional lines, and the company insists on standardized safety and operating procedures across the organization, analysts said.

A note from the staff meeting quoted Hayward as saying: "There is massive duplication and lack of clarity of who does what... We will reduce the number of organization units. [We] will reduce the number of layers from the workers up to the CEO from 11 to about seven."

He also talked about changing the company's culture and behavior, saying: "[We] need a small number of standards and [to] enforce them across the board," and that BP should "get out of the mindset that everyone has a say in the decision."

The overhaul of BP's organization will not be achieved within a set time scale, and it will involve asking BP staff lower down the management chain how things can be improved, sources told Reuters. "Tony is a very different man .. He's going to be much more flexible, more collegiate," a source said.

In recent years, an inefficient organizational structure was seen as a contributing factor in BP's poor performance relative to its peers, including failures that led to a fatal explosion at its Texas City refinery in 2005, the Financial Times reported.

Neil McMahon of Sanford Bernstein, in a note on Tuesday, identified organizational change as one of the signs "this ship is turning," the FT report said.