It doesn’t feel entirely right to pick on BP. Beside the fact that the Deepwater disaster is a human and environmental tragedy, BP has just made itself too easy to target. But there’s an important lesson about the tug of war between risk- and reputation-management that’s worth some thought.
First, back to BP as easy target: The company has failed to slow the leak since the April 20 explosion. Most scientists seem to believe BP’s estimates of oil leakage are far too low, yet it has resisted requests to install the sophisticated equipment needed for more accurate assessments. At various times CEO Tony Hayward has told reporters: “Almost nothing has escaped,” “The Gulf of Mexico is a very big ocean; the amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume,” and “I think the environmental impact of this disaster is likely to have been very, very modest.”
Now, on to the tug of war: if you’ve helped manage a crisis, you know it involves the need to balance multiple competing interests. Part of the ongoing debate among the BP team has to be how to walk the line between showing the public it accepts full responsibility without suggesting to the courts that it owns all liability. At stake are the huge remedial and legal costs the company faces on one hand (Exxon’s Valdez-related costs were over $4 billion) and the harder-to-measure reputational costs on the other. (InterBrand measured the value of BP’s brand at about $4 billion last year – it will be interesting to see how far it falls.) On the daily measure of market cap, BP has lost $56 billion in value since the explosion.
What started me thinking about the battle between BP’s risk- and reputation-management efforts was its blame-shifting Senate testimony; let’s just assume that strategy was crafted while its PR team was out of the room. As you think back over BP’s various actions and statements, imagine a political cartoon that shows an arm-wrestling match between BP’s general counsel and head of public affairs. Its very first press release after the explosion emphasized that Transocean owned the oil rig – the GC’s cartoon wrist has a slight advantage, as the public is still assessing responsibility. On May 4, the company pledges to pay all legitimate claims regardless of government-imposed limits – public affairs now has the upper hand. Until CEO Hayward added, “This is America — come on. We’re going to have lots of illegitimate claims.” The GC’s hand is now on top. By the time BP blamed Transocean in its May 11 Senate testimony, the spill was already branded in the public (and political) consciousness as BP’s— the general counsel’s wrist is pressing his opponent’s toward the table.
You get the picture – and you can play the game yourself up through today’s events and beyond. I’m not saying it’s an easy balancing act, but I don’t think this one is going to look like the model. The only thing wrong with the arm-wrestling analogy is that it seems pretty clear BP will lose in both the courts of law and public opinion. With both hands slammed to the table, we’ll wonder to what degree BP beat itself. Any guesses?