Effective communication in a world of imperfect systems

So what is the difference between systems and communication? Well, the problem with systems is that they are unable to predict or function in situations where the organization is faced with a situation it does not know about. For most people it is hard to understand why BP could let a simple pressure valve determine the future image of the corporation. When one look at the situation that BP was faced with it was not the failure of the system that was the problem but it was the inability to understand the communicative risk that was involved.

BP or Transocean as the drilling company is called, knew from the systems that when they decided to cut costs and not maintain this simple safety feature that there was a certain chance that if a accident would happened they would be unable to shut down the flow of oil. Because Transocean did not understand the communicative aspect of such an incident happening there cost-benefit analysis did not take into account that the risk was not only to the rig and surrounding environment, but also to the reputation and image of themselves and their biggest client BP. This failure of comprehension was the biggest mistake that the company made when they decided to rely on only there systems to give information about the processes.

To me it is the combination systems and effective organizational communication that will enable companies to identify and counter future events. The systems will tell you what you already know while organizational communication collects new knowledge and ensures that it is effectively spread to the people who needs to know and can act. Of cause this requires the right type of managers and leaders but I’m convinced that leaders who are unable to work and comprehend these two aspects will cease to exist thorough a Darwinian process that have been in progress for the past ten years and that will continue for the next ten to come.

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Transocean the Unethical Company of 2010

The drilling company behind the 2010 BP disaster has issued the agenda for their annual meeting (Transocean_2011)and it is somewhat of a horror to see. The executive committee thinks that they did such a good job in 2010 that they have granted themselves over 43 million USD in compensation. Based on the 9,3 billion USD the company had in revenues in the same year. On top of that they took a substantial amount of money out as part of their long-term incentive plan.

Mr. Newman (President and Chief Executive Officer) . . . . . . . . . . .$5,400,000

Mr. Rosa (Chairman of the board). . . . .  . . . . . . . . . . . . . . . . . . . . . .$1,500,000

Mr. Brown (Executive Vice President, Legal & Administration).  .$1,500,000

Mr. Bobillier (Executive Vice President, Asset and Performance). $1,500,000

Mr. Toma (Executive Vice President, Global Business). . . . . . . . . . $1,200,000

Ms. Richard  (Senior Vice President, Human Resources and Information

Technology)…… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ……$1,200,000 

For the compensation of non-employee directors for 2010 was 4,254,066 USD.

A long-standing reputation for safety

So did Transocean learn anything in the past year? Well when investigating the document they issued it could be interesting to look at how they precise themselves in the area of safety. And behold there is a paragraph in the executive summary on the high lights of 2010.

“We are the world’s largest offshore oil and gas drilling contractor and the leading provider of drilling management services worldwide. We provide drilling services, including the equipment and personnel for operations, to our customers—the oil and gas companies throughout the world. We have a long-standing reputation for safety and for being able to manage and deliver on extraordinarily complex offshore drilling projects in challenging environments. Our vision is to be universally recognized for innovation and excellence in unlocking the world’s offshore resources.”

I think that the people they asked about safety can’t have been the US government, all the residents along the Mexican gulf including the local fishermen nor can they have asked all the scientists, experts or NGOs that have been involved in the clean-up.

This statement just shows displays the complete arrogance of Transocean and its executive board about the people they are affecting. In my mind (and I think in a lot of others) they should be sued until the end of days for what they have done.

Keeping your money safe

But luck-be-hold the board and executive committee have already taken this into account by proposing that shareholders should not be able to sue them for their activities in 2010. Or formulated as an agenda point it look like this:

“Agenda Item 2: Discharge of the Members of the Board of Directors and Executive Management from Liability for Activities during Fiscal Year 2010.

As is customary for Swiss corporations and in accordance with article 698, para. 2, item 5 of the Swiss Code of Obligations, shareholders are requested to discharge the members of the Board of Directors and our executive management from liability for their activities during fiscal year 2010.

The pending shareholder derivative claims allege the breach by our directors of their fiduciary duties based on allegations that our directors failed to monitor safety risks, including risks related to the Company’s blowout preventers, and made misleading statements regarding the Company’s safety risks, the safety of the blowout preventers, and the Company’s financial condition. In addition, other allegations have been made against us in investigations and other contexts that are publicly available and could form the basis of similar claims against our directors and executive management.”

So if any critical shareholder world be out there thinking about sue the company for its mismanagement and poor governance in 2010 then forget about it.

A final insult

These statements just underline the ethical perceptions that the top of the company has on all its stakeholders.

“We will never forget the brave crewmembers of the Deepwater Horizon, nor will we cease in our efforts to ensure such an incident never occurs again. The lingering pain of the Macondo tragedy reinforces our efforts to conduct operations in an incident-free environment, all the time, everywhere.” And “It remains our view that Transocean is contractually indemnified against all claims stemming from the environmental and economic impacts of the hydrocarbons spilled into the Gulf of Mexico from the Macondo well after the sinking of the Deepwater Horizon.”

I hereby nominate Transocean management and its executive board of directors as the unethical company of the year for their outstanding performance in avoiding all decency and totally ignoring, and disregarding their key stakeholders.