Evaluation of corporate and government crisis management during the Deepwater Horizon oil spill: A comparative analysis of the effectiveness of differing leadership styles

The Deepwater Horizon oil spill in the Gulf of Mexico on April 20, 2010 is the largest oil spill in the history of the petroleum industry. Damage done surpasses that of the 1989 Exxon Valdez tanker that spilled 11 million gallons of oil into the Prince William Sound. In this instance, unlike the Exxon Valdez tanker which held a finite capacity of oil, the rig operated by BP is tapped into an underwater oil well and continued to pump oil into the ocean until the leak was plugged. The cause of the spill was not in question, only how the clean up operation was handled. Various entities, including journalists, public bodies, academics, professional organizations and a House Select Committee investigated what went wrong. In this study, an evaluation of the selected responses was made of the behaviors and actions of some corporate and Government officials during the oil spill disaster. This study used information from official hearings, various authors, and literature garnered from several government agencies such as the National Oceanic and Atmospheric Administration (NOAA). Beyond an intensive analysis of the literature relating to the Deepwater Horizon disaster, various leadership models were used and applied evaluatively during the crisis; situational, participative, transformational, transactional, and charismatic. These established models were selected specifically for this study and were used in analyzing the leadership styles of selected managers. The study evaluated which leadership model would have been most suitable in dealing with the oil spill. Various researches have been conducted, in which there are examples of successful as well as failed crisis management strategic responses. This study looked at successful and failed approaches to crisis management outcomes.Differing Leadership Styles Running head: An Evaluation of Corporate and Government Crisis Management during the Deepwater Horizon Oil Spill: A Comparative Analysis of the Effectiveness of Differing Leadership Styles by Colin R. Aaron University of Maryland University College Dissertation submitted to the Faculty of the Graduate School of the University of Maryland University College, in Partial Fulfillment Of the Requirements for the Degree of Doctor of Management Dissertation Committee: Dennis W. Winters, Ph.D. Kathleen F. Edwards, Ph.D. Leadership and Leadership Models 2 Dedication This study is dedicated to my mother, Joyce Aaron Elcock, my six children, and my seven grandchildren. This study is also dedicated to my deceased father, John Reginald Aaron, who always insisted that an education was of paramount importance. I would also like to dedicate this study to all of my buddies from the Guyana Police Force Band who served with me during my fifteen years of service. Leadership and Leadership Models 3 Acknowledgements I owe my deepest gratitude to Dr. Dennis Winters, Dr. Claudine SchWeber, Dr. Tim Reed, Dr. Kathleen Edwards, and Dr. James Gelatt whose encouragement, supervision and support from the preliminary to the concluding level enabled me to develop an understanding of the subject. I would also like to thank Dr. Vincent Adams for his support and advice during the initial phase of this endeavor. Lastly, I offer my regards and blessings to all of those who supported me in any aspect during the completion of the project. Leadership and Leadership Models 4 Table of Contents Dedication 2 Acknowledgements 3 Table of Contents 4 Abstract 8 CHAPTER 1. Introduction Purpose of the Study 9 A Brief History of the Disaster 9 Background of the Study 11 Statement of the Problem 16 Rationale for the Study 17 Significance of the Study 17 Definition of Terms 18 Assumptions 20 Nature of the Study 20 Research Questions 20 Organization of the Dissertation 21 CHAPTER 2. LITERATURE REVIEW Overview 22 Leadership 23 Leadership Styles 27 The Five Models of Leadership used in the Study 27 What is Crisis? 36 Leadership and Leadership Models 5 Crisis Management 40 Crisis Communication 43 Off-Shore Oil Exploration 45 Government and Crisis Management 46 Elected Officials and Crisis Management 47 Examples of Successful Crisis Management 48 Examples of Unsuccessful Crisis Management 49 Contingency Planning 50 Discussion of Theoretical Lenses 51 Research Propositions 52 Contingency Planning and Crisis Leadership 53 CHAPTER 3. CONCEPTUAL FRAMEWORK Thesis statement 54 Overview of the Conceptual Framework 54 Graphical Analysis and Synthesis 55 Government Leadership During a Crisis 56 Corporate Leadership During a Crisis 57 Statements and Actions of Leaders 59 Leadership Models 59 Integration of Scholarship 62 CHAPTER 4. METHODOLOGY Overview 62 Evidence-Based research 63 Leadership and Leadership Models 6 Web of Science 64 Validity and Reliability 68 The Expert Panel and Leadership Literature 68 Summary 69 CHAPTER 5. ANALYSIS AND DISCUSSION Presentation and Summary of Findings 69 Research Questions 70 President of the United States Leadership Findings 70 National Incident Commander Leadership Findings 74 CEO British Petroleum (BP) Leadership Findings 79 Conclusion 82 Consideration of other points of view 83 Summery 83 CHAPTER 6. CONCLUSIONS, IMPLICATIONS, AND RECOMMENDATIONS Overall Conclusions 84 Implications for Management 86 Implications of Trends 87 Limitations and Areas for Future Research 88 Summary 89 REFERENCES 91 APPENDIX A Biography of Panelists 102 APPENDIX B. Speech to the nation made by the President of the United States. 103 APPENDIX C. Opening statement of Tony Hayward, CEO of BP, given to the 108 Committee on Energy and Commerce, Subcommittee on Leadership and Leadership Models 7 Oversight and Investigation. APPENDIX D. Written testimony of Admiral Thad Allen given before 115 a joint committee Figure 1. Model of Theoretical Lens. 52 Figure 2. Model of Conceptual Framework. 56 Figure 3. The main users and stakeholders of evidence-based research. 64 Table 1. Table used to chart leader actions and behaviors during the 61 Deepwater Horizon Crisis Table 2. Leadership literature Identified and literature significant to the study. 66 Table 3. Crisis literature identified and literature significant to the study 67 Table 4. Leadership findings after the Deepwater Horizon oil spill. 82 Leadership and Leadership Models 8 Abstract The Deepwater Horizon oil spill in the Gulf of Mexico on April 20, 2010 is the largest oil spill in the history of the petroleum industry. Damage done surpasses that of the 1989 Exxon Valdez tanker that spilled 11 million gallons of oil into the Prince William Sound. In this instance, unlike the Exxon Valdez tanker which held a finite capacity of oil, the rig operated by BP is tapped into an underwater oil well and continued to pump oil into the ocean until the leak was plugged. The cause of the spill was not in question, only how the clean up operation was handled. Various entities, including journalists, public bodies, academics, professional organizations and a House Select Committee investigated what went wrong. In this study, an evaluation of the selected responses was made of the behaviors and actions of some corporate and Government officials during the oil spill disaster. This study used information from official hearings, various authors, and literature garnered from several government agencies such as the National Oceanic and Atmospheric Administration (NOAA). Beyond an intensive analysis of the literature relating to the Deepwater Horizon disaster, various leadership models were used and applied evaluatively during the crisis; situational, participative, transformational, transactional, and charismatic. These established models were selected specifically for this study and were used in analyzing the leadership styles of selected managers. The study evaluated which leadership model would have been most suitable in dealing with the oil spill. Various researches have been conducted, in which there are examples of successful as well as failed crisis management strategic responses. This study looked at successful and failed approaches to crisis management outcomes. Keywords: Crisis Management, Leadership Styles, Offshore Drilling, Oil Rigs Leadership and Leadership Models 9 CHAPTER 1. Introduction 1. Purpose of the Study It is hoped that this research and its accompanying models will assist organizations in identifying and selecting leaders that will be an asset in leading and managing any organization in times of crisis. The goal of this study is to get a better understanding of the best qualities of leadership and management during a crisis. This study used evaluation research to examine the actions and behaviors of key players associated with the Deepwater Horizon oil spill disaster using various documents that were part of the public domain. These key players are representatives of government agencies and of BP, LLC. The purpose of this study is to get a better understanding of crisis leadership practiced by the three key players who were deemed most accountable for decisions made during and after the oil spill disaster. . These three key players are the President of the Unites States, Barack Obama, the CEO of BP, LLP Tony Hayward, and the National Incident Commander, Admiral Thad Allen. Research on crisis leadership concludes that the leader‘s actions during a crisis reflects the competency of an organization, because crises will test how well the organization‘s leadership structure serves its goals and withstands crisis. The approach of the research is to place emphasis on which leadership style would have been most suitable for dealing with this crisis. 1.1.2 A Brief History of the Disaster On April 20, 2010 there was a loud explosion and fire on an oil rig operated and owned by Transocean, Ltd. The rig was drilling for oil off the coast of the state of Louisiana, U.S.A for BP. The explosion and fire caused the death of 11 workers and another 17 were seriously injured. On April 24, oil was found leaking from the well for the first time. A risk analysis done by the U.S. Department of Homeland Security said the incident "poses a negligible risk to regional oil Leadership and Leadership Models 10 supply markets and will not cause significant national economic impacts" (DHS; p. 6). White House press secretary Robert Gibbs at a news conference said that he doubted this was the first accident that has ever happened and he further doubts it will be the last. A later Department of Homeland Security report on April 25, 2010, on critical infrastructure said the problem had no near-term impact to regional or national crude oil or natural gas supplies. However, a US Coast Guard remote underwater camera showed that the well was leaking 5,000 barrels of crude oil per day (bpd) and approved a plan for remote underwater vehicles to activate a blowout preventer to stop the leak. A blowout preventer is a large, specialized valve used to seal, control and monitor oil and gas wells (CNN, April 25, 2010). On May 1, 2010 the Secretary of Homeland Security Janet Napolitano announced that U.S. Coast Guard Commandant Admiral Thad Allen would serve as the National Incident Commander for the administration's continued, coordinated response to the Deepwater Horizon oil spill. She suggested that this appointment would provide additional authority and oversight in leveraging every available resource to respond to the spill and minimize the associated environmental risks (MarineLog, May 1, 2010). For approximately 86 days, oil from the BP spill plagued the Gulf of Mexico and bled as much as 5 million barrels of crude oil into the ocean (The New York Times, April 25, 2010). On June 17, 2010 the U.S. House of Representatives Committee on Energy and Commerce Subcommittee on Oversight and Investigations held the first set of hearings in which the Chief Executive of BP plc, Tony Hayward, testified before the committee. During his testimony he acknowledged that BP PLC, and the oil industry overall, needed to be better prepared for a sub sea disaster. The CEO suggested that BP must use this incident as a case study to avoid a similar failure in the future. He went on to acknowledge that so far no one as yet knew Leadership and Leadership Models 11 why it happened (Testimony of Tony Hayward, June 10, 2010). Although hurricanes and tornadoes are a normal part of life on the Louisiana coast (National Oceanic Atmospheric Administration), explosions on offshore oil rigs and the rupture of pipelines are not as common. In November 2009 at a U.S. Senate Committee on Energy and Natural Resources hearing on offshore drilling, Senator Mary Landrieu (D-La) suggested that ―The risks associated with domestic offshore oil and gas drilling are far outweighed by the benefits.‖ Research has shown that the better prepared an organization is the more likely it is to survive a crisis (Herman & Oliver, 2002). As noted by Schoenberg (2005), crisis management is similar to a multidisciplinary process, which cannot only be left to the public relations department. Effective leadership is the linchpin to a successful crisis outcome. This study has analyzed the crisis leadership of the three corporate and government officials involved in this crisis, namely; The President of the United States, Barack Obama; The National Incident Commander, Admiral Thad Allen; and The CEO of BP, plc, Tony Hayward. 1.1.3 Background of the Study When there is a crisis or emergency, every level of government and all corporate stakeholders must play a role in responding to help contain the crisis or emergency. In order to respond to a crisis a detailed level of planning and coordination is required. What is also required is an effective leadership style that will suit every phase of a crisis and avoid a complete breakdown of the system. Farazmand, (2007) argues that one of the causes of system breakdown is a failure to respond to and govern effectively during crisis situations and to manage disaster-driven emergencies which could result in the loss of legitimacy and cause system breakdown (p. 149). He also points out that: Leadership and Leadership Models 12 Crisis and complex situations require new ways of thinking and a new mind-set, a complexity-driven management system that can accurately read chaos and crisis situations with unfolding dynamics and surprises and manage crisis through what I call a „surprise management system‟ (p. 150) If the organization is to survive with its reputation and other factors (such as its operations and financial condition intact) the timeliness and effectiveness of the response to any crisis is more of a determinant of survival than is the severity of the crisis (Garcia, 2006). Timeline – Deepwater Horizon Oil Spill and its Impact April 20, 2010 – Explosion and fire on Transocean Ltd‘s drilling rig Deepwater Horizon licensed to British Petroleum LLP (BP); 11 workers are killed. The rig was drilling in BP‘s Macondo project 42 miles southeast of Venice, Louisiana, beneath about 5, 000 feet of water and 13,000 feet under the seabed. April 22 - The Deepwater Horizon rig, valued at more than $560 million, sinks and a five mile long oil slick is seen. April 25 – The U.S. Coast Guard approves a plan to have remote underwater vehicles activate a blowout preventer and stop the leak. Efforts to activate the blowout preventer fail. April 28 – The Coast Guard says the flow of oil is 5,000 barrels per day which is five times greater than first estimated. A controlled burn is held on the giant oil slick. April 29 – U.S. President Barack Obama pledges ―every single available resource,‖ including the U.S. military, to contain the spreading spill. The President says BP is responsible for the cleanup. The state of Louisiana declares a state of emergency due to the threat to the state‘s natural resources. Leadership and Leadership Models 13 April 30 – An aide to the president says no drilling will be allowed in new areas, as the president had recently proposed, until the cause of the Deepwater Horizon is known. The Chief Executive of BP Tony Hayward says the company takes full responsibility for the spill and would pay all legitimate claims and the cost of the cleanup. May 2 – President Obama visits the Gulf coast to see cleanup efforts firsthand. U.S. officials close areas affected by the spill to fishing for an initial period of 10 days. BP starts to drill a relief well alongside the failed well, a process that will take two to three months to complete. May 5 – A barge begins towing a 98-ton containment chamber to the site of the leak. BP says one of the three leaks has been shut off by capping a valve, but that will not decrease the amount of oil gushing out. May 6 – Oil washes ashore on the Chandeleur Islands off the Louisiana coast, uninhabited barrier islands that are part of the Breton National Wildlife Refuge. May 7 – BP tries to lower the containment dome over the leak, but the device was rendered useless by a slush of frozen hydrocarbons that clogged it. A fishing ban for federal waters off the Gulf is modified, expanded and extended. May 9 – BP said it might try to plug the undersea leak by pumping materials such as shredded up tires and golf balls into the well at high pressure, a method called ―junk shot.‖ May 11/12 – Executives from BP, Transocean and Halliburton appear at congressional hearings in Washington. Senate Energy Committee Chairman Jeff Bingaman says that it appears that the explosion on the rig is due to a ―cascade of errors‖ technical, human and regulatory. The executives blame each other‘s companies. Transocean is the owner and operator of the drilling rig; Halliburton is the energy Services Company that was responsible for cementing the oil well and pipes connected to the oil rig. Leadership and Leadership Models 14 May 14 – The president slams companies involved in the spill, criticizing them for a ―ridiculous spectacle‖ of publicly trading blame over the accident. May 16 – BP succeeds in inserting a tube into the leaking riser pile of the well and capturing some oil and gas. May 18 – The U.S. nearly doubles a no-fishing zone in waters affected by the oil, extending it to 19 percent of U.S. waters in the Gulf. May 19 – The first heavy oil from the spill sloshes ashore in fragile Louisiana marshlands and part of the fragmented oil slick enters a powerful current that could carry it to the Florida Keys and beyond. May 26 – A ―top killer‖ maneuver starts, involving pumping heavy fluids and other material into the well shaft to try to stifle the flow. May 28 – President Obama tours the Louisiana Gulf coast on his second visit – ―I am the president and the buck stops with me,‖ he said (abc NEWS/Politics, May 28, 2010). BP CEO Tony Hayward flies over the Gulf. BP says the disaster has so far cost the company $930 million. May 29 – BP says the complex ―top kill‖ maneuver to plug the well has failed, crushing hopes for a quick end to the largest oil spill in U.S. history already in its 40th day. June 1 – BP shares plunge 17 percent in London trading, wiping $23 billion off its market value, based on the news that the latest attempt to plug the well has failed. U.S. Attorney General Eric Holder says the Justice Department has launched a criminal and civil investigation into the rig explosion and the spill. June 2 – BP continues work on a new plan to try to capture most of the escaping oil. This involves using robot submarines to cut off what is left of the leaking riser pipe, then lowering a Leadership and Leadership Models 15 containment cap over the wellhead assembly. Some difficulties are encountered with the cutting operation. U.S. authorities expand fishing restrictions to cover 37 percent of U.S federal waters in the Gulf. June 3 – After previous sharp declines, BP shares rise more than 3 percent on market hopes that the latest plan to control the leaking well may make some progress. The six-week-old crisis has wiped a third off of BP‘s market value since the crisis began. July 15 - The oil flow into the Gulf finally stopped when BP installed a 75 ton cap that prevented any more crude oil from escaping. (Reuters, Compiled by David Cutler, London Editorial Reference Unit; Editing by Pascal Fletcher) The tragedy that unfolded as a result of this sequence of events shows that the absence of effective leadership can paralyze all governance and administrative capacities. The frequency at which such crises are occurring has generated an increase in interest and attention by the media and the public at large. However, this increased attention has a tendency to dwell only upon the responses to crises (Sementelli, 2007), and not on the type of leadership that is best suited to deal with a crisis. In today‘s changing world, leaders of organizations must be equipped to deal with the rapidly changing external and internal environment (Lim & Ployhart, 2004) along with the quality of their descriptive, reflective and reactive responses. In addition to the changing internal and external environment of organizations and their milieu, leaders are confronted with a variety of natural and man made disasters. ―These disasters serve as a constant reminder that crises come in many forms‖ (Snyder, Hall, Robertson, Jasinski, and Miller, 2006; p.169). A crisis situation can sometimes cause widespread disruption, so concern for capable organizational or situational leadership is well justified. In times of crisis, leadership becomes an integral component of a successful organizational crisis outcome. Leadership and Leadership Models 16 Strong effective leadership is imperative to organizational survival. However, leaders of organizations who are adept at handling the regular day-to-day issues may not necessarily be qualified and prepared to handle a crisis of significant dimensions (Muffet-Willet & Kruse, 200