Month: June 2010

The President as Crisis Manager

As a result of the BP oil spill in the Gulf, Barack Obama has learned – let’s hope he’s learned – some lessons about leadership in a crisis.

Some of the criticism leveled at the President, such as the BP mess being “Obama’s Katrina,” seem a little off base and the media driven storyline about Obama needing to show a little temper was mostly just a made for cable controversy. Still the facts are that with the oil company clearly not acting quickly enough and ultimately not having a real plan to contain the damage from the big blow out, residents of the Gulf region and the county looked to Obama to lead. His record is, in my view, at best spotty.

Many Americans embraced the Sarah Palin “drill, baby, drill” notion during the last campaign, but at the same time those same folks are no fans of Big Oil. In a new USA Today poll, 71% of those surveyed say Obama should get tougher with BP. His speech from the Oval Office tonight seems likely to take a harder line, but that’s only part of the lesson from this crisis and its comes late in the crisis management game.

Most executives learn – sooner or later – that the most difficult thing to uncover in a crisis is quality information upon which to act. It became pretty clear pretty fast that the information deficit in the Gulf would be a major problem. While BP tried one Rube Goldberg fix after another, the President and his people came late to the realization that BP was making it up as they went. In short, there was little reliable information about the best strategy to contain the growing spill and all the ideas seemed to be coming from the less than credible company that caused the crisis in the first place. Everyone involved also seemed to lack good intelligence on what the moving oil slick would likely mean to the Gulf coast.

Obama needed better information earlier and faster. Lesson number one.

Most executives also learn – eventually – that you can’t delegate responsibility when you’re the top guy. For days after the explosion on the Deepwater Horizon, Interior Secretary Ken Salazar was the administration’s face on the scene. Nothing against Salazar, but we all know where the buck stops. The President and his advisers should have realized that this was his crisis to manage, and manage aggressively almost from day one.

So, lesson number two. Obama should have taken charge much sooner and more forcefully. I think, and again hindsight is easy, that he should have insisted on face-to-face meetings with BP leadership in the Gulf and in DC. Realizing that the government doesn’t possess the expertise to plug a blown out oil well a mile deep in the ocean, he should have raided major oil companies, universities, the national labs, private industry and foreign sources for the best available talent to manage the containment. I think the most profound criticism to level at the President is his failure to take the containment job away from BP early on. If he can fire the CEO of GM, he certainly has the moral authority to take over in this case. He should have.

Who is to say whether better solutions would have been forthcoming, but such a move would have clearly signalled that he was in charge and not relying on the company to address its own obvious failures.

Another lesson: when all is said and done this disaster will largely be about who pays and how much. Apparently the President is now insisting on a BP escrow account to be available to finance the clean up, pay claims, etc. Better late than never, but still very late. Money won’t fix all that will need to be fixed in the Gulf, but money will certainly do until something better comes along. Obama could have displayed real toughness by both taking control of the containment effort and forcing BP to put real money on the table a lot earlier.

Finally, I expect the President has learned another valuable, but painful lesson from this long ordeal: its hard to mobilize the government to effectively deal with a crisis that is both big and unpredictable. Katrina not withstanding, we generally have pretty effective national response to natural disasters – flood, hurricanes and the like – we struggle when the crisis is outside the usual box. Hard as it is to believe, federal agencies – state agencies for that matter – are rarely or routinely called upon to work together and coordinate an overall approach to a problem. They tend to be isolated, siloed organizations where even top managers, in say, the Transportation Department don’t know their counterparts over at Interior. It is a problem endemic to any large organization, but it can be particularly acute in government.

As John Kennedy famously said when the right hand of his government didn’t know what the left hand was doing – “there is always some dumb SOB who doesn’t get the word.”

That’s why any President – or Governor or CEO – needs to be able to reach down in the bureaucracy and crack heads in the interest of action. Action in government, where most folks practice survival skills full time and are horribly risk averse, even during a crisis, requires aggressive, demanding leadership.

A final lesson from history. When the great (and flawed) Winston Churchill took over as British Prime Minister in the dark days of 1940, he insisted, against almost unanimous advice, on reserving to himself the portfolio as Defense Minister as well as Prime Minister. Critics said it was too much for any one man, particularly one pushing 70 years of age. Winston was told he needed to delegate the day-to-day running of the war and focus instead on the big picture strategy.

But Churchill, who knew a few things about human nature and leadership, understood that he would get the credit or blame for every military success or failure regardless of whether some other figure had the official title. Churchill insisted on being in the middle of every decision, pushing, prodding, selecting personnel and reading reports and issuing demanding memos. He craved the responsibility and, while he certainly didn’t get every call correct, he inspired great confidence and dogged determination just when both were needed the most.

In a crisis – the Battle of Britain or a oil spill in the Gulf – the top guy is the responsible party. Might as well make the most of it, a lesson President Obama now seems to be embracing, finally.

Lessons to Learn

I’ve been asked a dozen times since the BP oil spill developed in the Gulf of Mexico what I would have advised the company’s executives as they face what may prove to be – or already is – a truly catastrophic environmental disaster. Alas, BP hasn’t called, but of course I have some ideas about what they might have done differently.

The general consensus has now developed that BP has irreversibly lost the PR battle, with some now comparing the lackluster response to Exxon’s handling of the Alaska spill years ago, and has yet to win the battle to stop the oil flow.

Could it have been different? Hard to tell, but maybe.

Rule number one of a real crisis, I think, is simply that it is almost impossible for any entity – corporate, governmental, etc. – to move fast enough. The first hours in responding to a disaster, particularly such a public disaster, almost always establish the public perception of how well the crisis is being handled. The first hours and days of the Gulf spill now seem like a blur. What was happening, who was in charge, was this really bad, could it be quickly contained? Instinctively, I think, most people watched the television pictures of the burning oil rig and concluded that this would be a real mess. Meanwhile, BP and the government seemed slow out of the blocks.

So, BP – and the government – failed the first test of crisis. They couldn’t or wouldn’t move fast enough. In the early hours of a major crisis, action is always better than talk.

What might BP have done differently? I have five suggestions for what could have been done and one guess about why none of it happened.

First, how might it have changed public perception had BP’s CEO, the much-beleaguered Tony Hayward, immediately gone on television – from the Gulf – and announced that he was asking the state of Louisiana to establish an account, that the state would control, in which BP would immediately deposit – pick the number – $250 million as a down payment on the clean up? Real cash, not a promise to pay all “legitmate claims” might have made a powerful statement that the big oil company was really serious.

Additionally, BP might have announced that it was immediately suspending al offshore drilling every where in the world while it conducted, with the help of outside experts, its own assessment of safety and emergency response.

Hayward could also have humbly asked for an immediate meeting – in the Gulf – with President Obama, the Secretary of the Interior, the top Coast Guard officials, the heads of Exxon-Mobil, Royal Dutch Shell and the governors of the Gulf states. The purpose of the meeting: establish an immediate crisis response team, seek the best possible industry help to determine the best way to stop the leak and contain the oil and, most importantly, get all the responsible folks in the same room and on the same page.

It might have also helped BP’s credibility from the first moment had Hayward admitted what almost all the rest of us suspected – the company did not know the extent of the leak, did not fully understand the cause, didn’t have a sure fire solution to contain the oil and fully expected the worst with regard to the environmental consequences. It is remarkable what a humble admission of “we don’t know and we need help” will do to retain credibility and, frankly, buy time to get organized and really figure out what to do.

Hayward should also have become the sole face of the company’s response. He should have camped out in the Gulf, constantly meeting with local officials, business people, environmentalists and fishermen, and working the media. He should have aggressively engaged the President and his administration rather than appear to be a reluctant participant in the whole process by suggesting he wanted “his life back.”

Here is a bet as to why BP seemed to do nothing in the first days except to say it took responsibility while seeming to downplay what was really happening. I’m betting the company’s lawyers took charge of the response and the overriding objective became to contain the financial and legal liability for BP and its shareholders. I can almost hear a smart, articulate attorney telling the CEO that he must do nothing that would eventually be used to shape the inevitable legal cases that will drive BP’s liability.

Don’t get me wrong, the lawyers must be in the room when a crisis is unfolding, but in a career of helping manage various kinds of crisis – nothing admittedly this big – I have concluded that the “right thing to do” is almost immediately in conflict with what constitutes the best legal strategy for the entity responsible for the crisis. It’s hard for any CEO – even the most well intentioned – to ignore the legal advice he will receive, but doing the right thing – and fast – is almost always the better long-term option than to craft a response that is driven largely by legal considerations.

Now, as the President heads back to the Gulf today, the New York Times reports that he will demand a BP escrow account, summon the company’s executives to the White House and generally ramp up the public pressure on the company. Some might argue it’s a little late.

It is easy to second guess while looking in the rear view mirror, but I think, had BP acted faster and more decisively by putting real money on the table and seeking help and buy in from the industry and government, it could have taken charge of the unfolding narrative in the first hours and saved itself some major and long-lasting PR heartburn.

Tomorrow, some thoughts on lessons for the President in the government’s response to the spill.