Wednesday, 3 October 2007

BP's Peer Assist / Hot Spots

I'm working my way through Lynda Gratton's Hot Spots.

One of the key elements of hot spots is boundary spanning. As an example of this, Gratton provides BP's peer assist process, which she has talked and written about for several years.

This is a process that was introduced by BP's former Chief Executive, John Brown, to break the organisation into small businesses in order to encourage learning and avoid duplication across the separate businesses. The process fundamentally shifted the organisation from a vertical axis to a horizontal axis, creating groups within the separate 150 business called peer groups, each made up of up to 12 business units all operating in the same area. Brown then introduced two sets of conversations, peer assist and peer challenge, which held the top two business units in a peer group responsible for the performance of lower two units. And BP linked 50% of managers' bonuses not to how each individual business unit behaved, but how these two lowest performers behaved. So instead of one oil refinery manager competing with another, which is what would normally have happened, the top one would go to the lowest and say, "What can we do to help you?" It has gradually become a part of the culture for peers to help each other.

Of course, it's always a risk to profile any organisation as an example of best practice (think for example, of the companies listed in In Search of Excellence). And BP seems to have already moved on from peer assist.. On the 3rd August, the FT noted that
BP has called in Bain to simplify the company's structure.

BP apparently blames Brown's complex organisational structure* for its recent problems with lapses in safety. Explaining this in an e-mail to staff, a senior vice-president said:

“It’s not difficult to find examples where our complexity has driven inefficiencies, negatively impacting performance in one way or another, and I am sure each of you could cite specific examples. Many of you will agree that complexity has often reduced BP’s efficiency and diluted our focus on delivery of the core business. That’s why I welcome having Bain’s help.”



So what does this change mean for boundary spanning and the development of hot spots? Not that much really. Gratton provides peer assist as an example of a 'signature process': 'a process that differs significantly from general views of best practice' ie demonstrates best fit. This signature is a 'direct embodiment of the history and values of the company and its top executive team'. So it's no wonder that when the executive team changes, and particularly when this team needs to signal a break from previous problems, the signature processes should be adapted too (although I do think to be effective they need to be maintained over a relatively long term).

As Gratton explained at a presentation I attended a few years ago:

“There is no right answer here. As a management team you have to be intelligent and sensitive to all the data that you have got and make adjustments.”


* Note I'm not doing any work at BP so I can't confirm whether this simplification relates to the peer group structure, and to the peer assist and peer challenge processes. But it does seem likely.