BP Slices Management Layers

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BP Slices Management Layers

LONDON -- In an effort to improve performance by simplifying operations, BP outlined in a written statement a company restructuring plan that calls for the consolidation of business segments, the elimination of up to four management layers on the corporate level and the possibility of asset sales.

The plan will ensure that BP's resources are shifted to the front line, "with operating managers freed from corporate bureaucracy and the burden of unnecessary overheads," the statement said.

"It is clear that BP's overall strategy remains robust. We have great positions in many of the major hydrocarbon basins of the world as well as in the markets of key economies and we are preparing for the longer term by building a new, low-carbon energy business," company chief executive Tony Hayward said of the performance aspect. "Our problem is not about the strategy itself but about our execution of it. BP's performance has materially lagged our peer group in the last three years. It has been poor because we are not consistent and our organization has grown too complex. At the root of all this is a need to change our behaviors."

The plan, outlined in a worldwide message to staff by Hayward, calls for the consolidation of its business units into two segments -- Exploration & Production, and Refining & Marketing. Currently, a third segment, Gas, Power & Renewables, will be incorporated into the other units, while a separate division, Alternative Energy, will manage the company's low carbon efforts and future growth opportunities outside of oil and gas, the company stated.

The two business segments will consist of several strategic performance units, which will be the company's main operating entities, it stated. Each of these segments will be profit centers with closely-defined remits and rigorous business objectives, according to the company.

At the corporate level, the infrastructure will be "rigorously reviewed," and will see centralized functions slimmed and moved to the two business segments. In addition, parts of the company will see up to four levels of management cut. Process standardization, including safety, was already introduced at the corporate level and will be applied across the group, the company stated.

"What we are doing represents a fundamental shift in how BP works," Hayward said in the statement. "Managers will be listening more acutely, particularly to front-line staff. We will make sure individuals are fully accountable for things they control. We will respect professionalism and excellence as key to the success of our businesses -- something we have not always done. Continuous improvement is what will drive performance, as opposed to short-term, unsustainable initiatives."

The strategy comes as a result of a six-month review of the company’s operational performance, which found wide-ranging duplication, overlap and excessive organizational complexity, the company stated.

While there will be some medium term cost reductions, the major benefits will be a result of improved operational efficiencies over the longer term, the company stated.

Hayward stated the company's three priorities are safety, people and performance, adding that there has been good progress on the safety issue. The focus on people would ensure the company deploys the "right skills in the right places" and allows staff to exercise professional judgment without "unnecessary interference," he said in the statement.