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Crisis management, with specific emphasis on leadership during organisational crises: A Dissertation proposal

| March 28, 2015

Unlike the stable conditions of the past, risk has become a key aspect of every area of life as the way in which modern society has been constructed has led to a series of striking changes in the conditions of risk management (Borodzicz, 2000, Smith, 1990). For example, Rasmussen (1997) highlights three key things that are making industrial risk management more difficult. One of these changes is the increasingly fast pace of technological change, which is moving at a faster pace than the changes in management structures. A second change is gradually increasing scale of industrial installations, which means that the potential for large-scale accidents is also increasing steadily. A third change is the increasingly fast pace of information and communication technology, which has led to a greater degree of integration and coupling of systems than every before. For these and other reasons several researchers have argued that system failure is inevitable (Smith, 1990) and therefore crises have become a part of the fabric of today’s dynamic society rather than been unusual or uncommon (Mitroff and Anagnos, 2002).

However, while all organisations must be in readiness for dealing with crises, some activities have a greater possibility of causing dramatic damage and so call for more preparedness. For example, the risk of oil spills is a major environmental challenge that has to be considered when coastal refineries, oil terminals, deepwater ports, and so on are being proposed and when offshore lands are being leased for oil exploration and development (van Dorp and Merrick, 2009). Also, there is always the potential of oil spills when oil is being drilled and transported (Elhakeem et al., 2007), as well as due to issues such as substandard ships, oil smuggling, and military action (Elshorbagy and Elhakeem, 2008).

This possibility became a reality in 2010 when the Deepwater Horizon drilling rig exploded on April 20, resulting in oil gushing from the sea floor and left 11 workers missing and assumed to be dead (Machlis and McNutt, 2010). While the oilrig was owned and operated by Swiss offshore drilling contractor called Transocean, it leased to BP plc (BP), the third largest energy provider after Shell and Exxon. BP is also the largest company in the UK and the fourth largest company in the world. Despite record profits, BP has been plagued by a series of industrial disasters, including the 2005 explosion of their Texas City refinery, the 2006 explosion of their the Toledo, and the rupture of their Alaskan pipeline in 2006. However, these three recent disaster that BP has had to manage did not seem to prepare the most recent CEO Tony Hayward to deal with the Deepwater Horizon Oil Spill and two months after the crisis the job of managing the company’s public relations (PR) passed to Carl-Henric Svanberg, BP’s chairman, and the daily management of the oil spill response was passed to Bob Dudley, BP’s managing director. Dudley took over from Hayward as CEO in October 2010 only three years after Hayward took that position in 2007. The business community also seems to have given Hayward’s leadership performance a thumbs down, with Harvard Business Review blogs in the months following the oil spill carrying headlines such as “BP’s Tony Hayward and the Failure of Leadership Accountability” (by Harvard Business School professor Rosabeth Moss Kanter) and “I Want To Live Like Common People: BP and the Great PR Divide” (by business consultant and author Michael Watkins).

So, what went wrong? What lessons can be learnt by Hayward performance as a leader during this crisis? This research examines the issue of crisis management, with specific emphasis on leadership during organisational crises, using the case of the recent Deepwater Horizon Oil Spill, also known as the BP oil spill or the Gulf of Mexico oil spill, which is the largest oil spill to have occurred in American waters (Machlis and McNutt, 2010).
This paper has three additional sections. The second section is the preliminary Literature Review, in which the research on crisis management and leadership are review. Section three is covering the Methodology, which describes how the research will be carried out. The paper concludes by outlining the research timeline.

Literature Review
This section briefly discusses crisis management and leadership, the two key areas of literature that will help to examine Tony Hayward’s leadership during BP’s most recent organisational crisis.

Crisis and Crisis Management
There is no one definition of the term ‘crisis’ (Keown-McMullan, 1997), however a guiding definition is that a crisis is an event that impacts or has the potential to impact the entire organisation (Mitroff and Anagnos, 2000). A crisis can also be described as a major, unforeseen circumstance that can potentially jeopardise an organisation’s employees, customers, products, services, fiscal situation, or reputation (Callan, 2002, Augustine, 1995, Santana, 2003). This definition is in line with the theory that a crisis is characterised by three elements: high threat, short decision time, and an element of surprise, indicating that each crisis contains an urgency that necessitates decisions and actions to be taken immediately by the people involved (Keown-McMullan, 1997, Reilly 1987).

While the idea that a crisis as a negative state of affairs is still the most popular construal in the literature, the idea of a positive outcome from a crisis situation can also be found in some definitions and discussion (Keown-McMullan, 1997). For example, Fink (1986, p. 15) defines a crisis as:
…an unstable time or state of affairs in which a decisive change is impending – either one with the distinct possibility of a highly undesirable outcome or one with the distinct possibility of a highly desirable and extremely positive outcome. It is usually a 50-50 proposition, but you can improve the odds.

This definition implies that, if managed effectively, a crisis can bring a desirable outcome. Indeed, it has been suggested that an organisation can experience a ‘successful’ crisis that actually leads to improved firm’s performance (Boin and ’t Hart, 2003). Such an outcome is possible because crisis “focuses attention on how tasks are managed and draws new patterns of cohesion, a successfully handled crisis can benefit an organisation” (David, 1990, p. 90). This therefore reinforces the fact that the effective management of crises is important. It should thus entail the execution of well-coordinated actions to limit any damage and preserve or rebuild confidence in the organisation under crisis. It is also important that crisis management should start before a crisis arises and may extend after the ‘actual crisis come to an end, such as after the oil has stopped gushing into the sea (Fink, 1986). Based on this, Santana (2003, p. 308) defines crisis management as:
… an ongoing integrated and comprehensive effort that organisations effectively put into place in an attempt to first and foremost understand and prevent crisis, and to effectively manage those that occur, taking into account in each and every step of their planning and training activities, the interest of their stakeholders.

Particularly important during major crises such as the BP oil spill, which affects many different stakeholders, is crisis communication. Crisis communication, which involves communicating with a range of stakeholders, generally relates to the public relations element of crisis management, and is arguably the single most important aspect of the organisation’s response to the crisis. It therefore requires communication with internal stakeholders, including employees and shareholders, and external stakeholders, such as customers, the media, and the surrounding community, about what occurred and how the organisation is managing the crisis (Callan, 2002).

Effective Leadership in Crisis
Leadership is one of the most discussed topics in times of crisis because, to most people, the importance of leadership is clear since effective organisational leadership:
…provides a sense of cohesiveness, personal development, and higher levels of satisfaction among those conducting the work; and it provides an overarching sense of direction and vision, an alignment with the environment, a healthy mechanism for innovation and creativity, and a resource for invigorating the organisational culture (Van Wart, 2003, p. 214).

As with trying to define ‘crisis,’ there are also many definitions of ‘leadership’ (Stodgill, 1974). Some researchers present established definitions of leadership, for example Kotter (1999, p. 10) defines leadership as “[t]he development of a vision and strategies, the alignment of relevant people behind those strategies and the empowerment of individuals to make the vision happen, despite obstacles.” Alternatively, some researchers present more general definitions of leadership that may apply equally well to leadership in organisations as to leadership in other settings. For example, leadership can be seen as “a process whereby one individual influences a group of individuals to achieve a common goal” (Northouse (2004, p. 3).

Leadership is particularly important in crisis situations and Boin and ’t Hart (2003) argue that crisis and leadership are closely related phenomena. Since crisis situations are times of uncertainty, people inside and outside the organisation look to leaders to ‘do something’ and thus the visibility of top management, particularly the CEO, during a crisis assures the public that the crisis is being tackled at the highest levels (Halverson et al., 2004, Sadgrove, 2005). Top managers must also actively engage in long-term corrective and preventive actions to avoid being involved in crises time again (Augustine, 1995). Additionally, leaders need to understand the dynamics and psychology of a crisis if they are going to respond well because crisis events require the organisation to make considerable changes to its ‘standard operating procedures’ while still responding to the crisis (Borodzicz, 2000, Santana, 2003). This seems to be have been missing in the case of BP, as the company has found itself in several crises situations over the past five years that have done major damage to its image and left it seemingly unable to respond well to new crises. In the latest oil spill, the leadership performance of BP’s CEO, Tony Hayward, was not well received. According to Boin and ’t Hart (2003, p. 544):
When crisis leadership results in reduced stress and a return to normality, people herald their ‘true leaders’… But when the crisis fails to dissipate and ‘normality’ does not return, leaders are obvious scapegoats.

The question to be investigated in this research is: What lessons can be learnt by Hayward performance as a leader during this crisis? The way in which this question can be answered is described in the next section.

This section briefly outlines how the research will be undertaken and therefore covers issues including the research strategy, research design, sampling design, data collection, data analysis, and ethics.

Research Strategy and Design
In this research, a case study approach will be used, which Robson (1999, p. 146) defines as “a strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real-life context using multiple sources of evidence.” A case study approach was chosen because, in this research, “a ‘how’ or ‘why’ question is being asked about a contemporary set of events, over which the researcher has little or no control,” which are the three conditions for using case study research laid out by Yin (2003, p. 9). This research strategy will be used as part of a qualitative methodology because qualitative research examines the ‘why’ and ‘how’ of human behaviour and so does the case study methodology (Yin, 2003).

In line with this, data will be collected using semi-structured in-depth interviews. Semi-structured interviews were chosen over alternative approaches, such as focus groups and surveys, as this method will allow researcher to guide the research and probe for deeper answers, elaborations, and examples to allow further explanation of specific topics and at the same time cover a wider scope if undiscovered issues should arise (Robson, 1999). Additionally, semi-structured interviews allow interviewees to tell the interviewer what they consider most significant (Marshall and Rossman, 1999). Semi-structured interviewing starts with more general questions or topics rather than the formulation of detailed questions ahead of time and so structured and unstructured questions will be outlined prior to the interviews based on the research question framework (Marshall and Rossman, 1999). In this research, relevant topics will have to be initially identified as well as the possible relationship between these topics and the issues.

Sampling Design and Data Collection
In this research, data will be collected using purposive sampling. Unlike random sampling in which every combination of respondents from the sampling frame has a known probability of occurring, purposive sampling is used in the research when the research selects those respondents that are most appropriate for the study (Robson, 1999). Purposive sample is powerful because it allows the researcher to choose respondents that have the most information for in-depth analysis related to the central issues being examined. The richest information is not likely to be available from the ‘typical’ case and so using purposive sampling will allow examine in detail the root causes of a given issue and its consequences (Flyvbjerg, 2006). In line with this, data will be collected in face-to-face interviews with three middle level managers within BP over a period of one week in January. These managers are responsible for teams of professionals and would be able to provide insight into leadership issues in the organisation, allowing them to accurately articulate ‘rich’ descriptions of their experience of leadership at BP. Each interview is expected to last between 30 and 90 minutes and the interviews will be transcribed within one week of having conducting them to ensure that no additional material or observations were lost or forgotten (Marshall and Rossman, 1999).

Data Analysis
This research will use qualitative content analysis to interpret the data collected. Content analysis is often recommended for analysing semi-structured interviews because it allows the researcher to identify themes, concepts, and meanings and is a way of classifying content (Krippendorff, 2004). As there is existing (but incomplete) theory about crisis management, this research will use a directed approach to content analysis, which allows existing theoretical frameworks to be validated (and sometimes extended) (Hsieh and Shannon, 2005). In the directed approach to content analysis, extant theory will be used to form codes that will be used in the initial analysis. Data that do not fit into these predetermined codes will be identified and later analysed to determine whether they represent a new category or a subset of a current category. Data that cannot be coded will be identified and analysed later, as suggested by Hsieh and Shannon (2005), to determine if they represent a new category or a subcategory of an existing code. While this method has limitations, the accuracy of predetermined categories can be increased by using an audit trail and audit process (Krippendorff, 2004).

Access and Ethical Considerations
Access to the organisation is to be gained via a close colleague that is a currently on staff at BP. For ethical reasons and in order to comply with the ‘Qualitative Research and the Data Protection Act 1998,’ before every interview the researcher will give participants an informed consent form, explaining that the interview will be recorded and that they have the right to withdraw at anytime and withhold any information that they do not wish to share (Marshall and Rossman, 1999). The participants will then be required to sign a consent form before the interview commences.


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