The BP oil spill teaches hard lessons about what boards have to do when faced with an epic crisis. The Gulf tragedy is unprecedented, and the challenge cannot be minimized, but these are precisely the kinds of events that require board leadership at its best. And these are the first things a board should do when disaster strikes:
Take charge. BP’s board let management, most visibly CEO Tony Hayward, stumble through the crisis for two months, making mistakes under pressure. The chairman fared badly as well. A strong board needs to anticipate crises, make sure disaster plans are in place for every conceivable contingency, and know in advance the best person to become the face and voice of a tragedy, however unexpected. When crisis hits, the board has to manage the response, project leadership and act decisively. Naming Managing Director Bob Dudley as the new point person for the spill is the first publicly visible decision by the BP board since the disaster occurred. [For today's NYT coverage of Dudley's appointment, click here.]
Stop the bleeding. There is no bigger challenge in a crisis than a problem without a solution. In BP’s case, the only way to stop the bleeding in the Gulf is to plug the well, and without a disaster plan in place to inspire confidence, BP has come off as unprepared and inept. BP’s only choice is to communicate openly, honestly and decisively, reporting daily on progress, problems and next steps. Whether or not the decision to withhold a dividend and establish an escrow fund were the right things to do to attempt to mitigate criticism, BP now has to make good on a pledge to safety, accountability and meaningful change.
Choose the right spokesperson. Because BP’s Mr. Hayward is not known as a hands-on operational expert, and Mr. Carl-Hendric Svangren, new to the oil business and to his chairmanship, is viewed as an industry outsider, they were unable to inspire trust. Mr. Dudley may bring welcome operational expertise and the ability to communicate effectively to victims and to shareholders. As with BP, the best spokesperson is not necessarily the CEO or chairman, but for every situation the board should know who is.
Prepare to change course. The board changed the face of the crisis by replacing Mr. Hayward as chief spokesperson, and hopefully Mr. Dudley will navigate BP through the summer or however long it takes to plug the leak. The board should be readying a post-spill plan that rewrites BP safety standards and marshals the support of the entire oil industry. Damage control is about more than liabilities – with an event like this, it has to be about change. And BP needs a succession plan in case the fallout of this crisis leads to a change at the top. Succession planning remains a major responsibility of every board to assure continuity, minimize disruption and instill confidence.
We hope never to see the likes of the Gulf crisis again, but every board should know what its company’s version of The Spill would be. And every board should get ready.
Roger Kenny is vice chairman and head of the board practice at CTPartners, a global executive search firm.