Chirag 303 OB Assignment EXXON

7/30/2019 Chirag 303 OB Assignment EXXON

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Organization BehaviorInternet Exercise

forExxon Corporation

&Exxon Valdez Oil Spill Crisis

Based On

www.crisisexperts.comAnd

www.crisis-management-and-disaster-recovery.com

`

Submitted by-

Chirag Chauhan

Roll No.-303

MBA (Tech) Manufacturing

Mumbai Batch of 2013
http://www.crisisexperts.com/http://www.crisis-management-and-disaster-recovery.com/http://www.crisis-management-and-disaster-recovery.com/http://www.crisis-management-and-disaster-recovery.com/http://www.crisis-management-and-disaster-recovery.com/http://www.crisisexperts.com/


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EXXON VALDEZ OIL SPILL CRISIS, 1989

What happened?

9.13 pm, March 24th 1989, the Exxon Valdez was bound for Long Beach in California.

The shipping lane was at the time obstructed by icebergs, so the Shipmaster asked, and wasgranted permission to use the inbound lane. Around 11 pm, Shipmaster left the Third mate

and another shipmate at the helm. The ship was on autopilot and about 12 pm, the Exxon

Valdez struck Bligh Reef. Around 41 million liters of crude oil was spilled.

The Exxon Valdez was a ship that was carrying around 200 million liters of crude oil.

At around 12:04pm on March 24th 1989, the Exxon Valdez ran aground at Prince William

Sound Bligh Reef, in Alaska and spilled around 40.9 million liters of this oil.

What caused the accident?

The Exxon Valdez encountered icebergs in the shipping lanes and Captain

Hazelwood ordered Claar to take the Exxon Valdezout of the shipping lanes to go around

the ice. He then handed over control of the wheelhouse to Third Mate Gregory Cousins with

precise instructions to turn back into the shipping lanes when the tanker reached a certain

point. At that time, Claar was replaced by Helmsman Robert Kagan. For reasons that

remain unclear, Cousins and Kagan failed to make the turn back into the shipping lanes and

the ship ran aground on Bligh Reef at 12:04 a.m., March 24, 1989. Captain Hazelwood was

in his quarters at the time.

Analysis of Issue Problem of international scope Intense scrutiny Exxon culpability re: alcoholism problem of Hazelwood Consequences on Exxon's visibility, reputation, legal future, financial base

Analysis of Organization

Exxon visible multinational corporation; largest oil company CEO Lawrence Rawl uncomfortable with public role Always a low-profile company Corporate suspicion of media Rigid & hierarchical internal structure Public environment included industry criticism on size & safety of super tankers General degradation of safety & oversight practices


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Analysis of Publics

Government & government agencies: Want investigation, regulation, restitution,cleanup, potential punishment

Oil industry: Hope to save face, not jeopardize operations Exxon stockholders: Want continued financial profitability Media: Demand immediate information, full disclosure, culpability Environmental activists: Angry, seek restitution, participate in cleanup

HOW LEADERS DEAL WITH CRISIS SITUATIONS?

IN THE CASE OF EXXON VALDEZ OIL SPILL:

Objectives of Exxon Corporation: Minimize criticism Maximize profits Minimize legal & financial consequences

Action/Response Strategy adopted: Decided to handle response with no outside public relations consultants Ignored criticism Dismissed interest/involvement of environmental activists Refused to acknowledge extent of problem (abiding by legal advice) Refused assistance from local residents & environmental volunteers to help with

cleanup

Fear appeal: predicting increase in gasoline prices because of cleanup cost Shifting blame: Accused Alaska & Coast Guard of causing delay in cleanup

Communication Strategy adopted: No designated spokesperson Refusal to communicate openly

What did the Exxon Corporation do?

The action to contain the spill was slow to get going. The company refused to communicate openly and effectively to the public about the

incident.

o The Exxon Chairman, Lawrence Rawl, was immensely suspicious of themedia, and reacted accordingly.

Poor Crisis Management:

Media coverage escalated while Exxon dodged the mediao The Chairman refused to be interviewed on TV and said that he had no time

for that kindof thing.

A company spokesman misrepresented the extent of the spill and clean-up effortso This was in contrast to the footage of the ecological disaster shown on TV


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IN GENERAL, HOW LEADERS DEAL WITH CRISIS SITUATIONS?

Before Crisis:

1. Building a plan is very important to deal with crisis situations- It can be done by utilizing acomprehensive set of pre-written templates which makes crisis handling quite easy. In

addition, an accompanying guidebook can also help to ensure crisis management.2. Emergency preparedness- Emergency management is a critical element of the overall

continuity objective. Media management, mailroom defence, bio chemical attacks and

managing the emergency.

3. Role of risk analysis- Prior to the creation of a disaster recovery plan, it is essential toconsider the potential impacts of disaster and to understand the underlying risks. Both

business impact analysis and risk analysis are vital components of the contingency

planning process.

4. Disaster recovery policies- Leaders stipulate continuity and recovery requirements withintheir own policies. They develop an approach to ensure that their policies are of therequisite quality and that they are properly deployed and implemented.

5. ISO 17799/BS 7799-It is an international security standard which covers disaster recoveryand crisis management planning in detail. This standard is followed by all the leaders all

over the world.

6. Contingency planning- Since crisis are uncertain, there is a planning definitely required forthis. So, leaders generally do contingency planning so as to handle crisis.

7. Crisis communications consulting- It helps to reduce the likelihood of an internal businessproblem going "public" or minimize the reaction if disclosure of the crisis cannot be

avoided.

8. Risk management consulting- Leaders should have a risk management consultancy facility.9. Crisis research- In order to handle the crisis, leaders try to go into the depths of the causes

of crisis. So they are able to deal it with great instinct.

10.Smouldering crisis worksheet- They are generally used to ensure that effective factgathering, management notification and external communications are incorporated into

existing contingency plan.

11.Coordinating stakeholder communication- At the time of any crisis, facilitatingcommunications with the stakeholders i.e. with the people who will be affected most by the

crisis, is one of the strategies followed by the leaders.

During the crisis:

1. Bring the situation under control: Ensure the safety of those involved in the crisis. Alwaysprotect people first and property second.

2. Analyze the situation and gather all the facts: Once safety and security have been restored,gather the information of the incident and begin thinking of a solution to the problem.

Don't blow the problem out of proportion before gathering all the facts.


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3. Notify the families of those involved: Assign team member to personally and kindly contactthe families of those involved to inform them about the situation. Never publicly release the

names of dead or injured before contacting the family first.

4. Keep internal publics informed: Keeping your staff and volunteers informed will ensurethat the right information is being released. Try to inform your internal publics before or at

the same time that you are releasing information to the media.

5. Communicate with the media: The only way for your affected publics to be informed is bywatching or listening to the media. Therefore, it is your duty to inform the media outlets as

soon as possible about the situation.

6. Effective crisis management calls for open, honest communication between the companyand its publics: It is almost human nature to try and minimize the problem when the reality

is too difficult to deal with, but it is your duty to your publics to keep them well informed.

WHAT IS THE IMPACT OF STYLE OF LEADERSHIP IN MANAGING CRISIS SITUATIONS?

1. Autocratic styleThis leadership style lends itself to crisis situations and crisis management. This

requires quick decision-making by one person to prevent a disastrous outcome.

Examples of typical scenarios where this style is required are:

Work place violence Breakdown of machinery and strikes Disaster relief management (floods, droughts etc)

Product recalls (stopping the production of a certain product).

2. Participative styleThis leadership style is used when the process of decision-making needs to be applied.

Management always has to make certain decisions regarding changes in the business

environment. Such decisions are:

New products and services A marketing strategy Financial decisions Training programmes for employees.

3. Free-reign leadershipThis style will be applied in the process of conducting research. The leader will provide

strict guidelines and instructions but will then leave the rest to the group. The group

then has full authority and takes responsibility for its own actions.


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4. Charismatic leadershipThis style is applicable for a person who acts as a role-model for other people. This style

requires specific characteristics such as vision for the future and excellent

communication skills. People are keen to follow such a leader and therefore the

examples he sets will guide other people.

5. Transformational leadershipThis leadership style takes specific actions to lead and guide people into a certain

direction. This direction is also the leaders vision for the future and he/she always

leads people in a direction from which everyone can benefit.

In Exxon Corporation, the chairperson neglected all the criticism, didnt take quick action &

showed little leadership. It may be said that the style of leadership in this company was of

autocratic style since the CEO of the company did not act to the situation nor did he

appoint anyone to deal with the problem. This resulted in the spill cost around $7 billion,including the cleanup costs & $5 billion of this was made up of the largest punitive fines

ever handed out to a company for corporate irresponsibility.

Also Exxon Corporation lost market share and slipped from being the largest oil company

in the world to the third largest. The "Exxon Valdez" entered the language as a shortcut for

corporate arrogance and damage.


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FRAME ISSUES IN TERMS OF YOUR UNDERSTANDING OF IS AN AUTHENTIC

LEADERSHIP? IS IT PRESENT HERE? SHOULD IT BE?

The components of an effective leadership at the time of crisis are as follows:

An authentic leadership was not present in case of Exxon Valdez Oil Spill because they did

not address any of the three components.

Operational Response: Two-week delay (in calm weather) before clean-upbegins (now in rough weather). While Exxon stalled and attempted to cover up

the problem, the clean-up operation was slow to begin.

Management Response: Absence of an effective plan, apologized but refusal toaccept responsibility.

Communications Response: Ineffective Use of Communication Channels. After6 days of spillage, CEO of Exxon Corporation, Mr. Rawl made statement to media.Eventually went on TV; unfamiliar with latest Exxon cleanup plans; claimed that,as CEO, it was not his responsibility to read such reports; blamed media formaking a big deal of the spill.

OPERATIONALRESPONSE

Implementemergencyresponseprocedures

Protect emloyeesand business

operations Assess thesituations

Brief headquarters

MANAGEMENTRESPONSE

Mobilize crisisteams

Confirm crisisseverity

Advise seniorexecutives

Adjust andimplement crisisresponse plans

Prepare forexternalcommunications

COMMUNICATIONSRESPONSE

Employees at alllocations

Families ofemployees

Supporters &advertisers

Funding sources Government

officials

The news media


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The process starts with defining the organization's vulnerabilities to business disruptions

and developing realistic workarounds and contingency plans. That's the basis of the

business continuity approach that has emerged as companies, non-profit organizations and

government agencies worldwide prepare for any type of business disruption including a

pandemic.

The contingency plans are in two parallel areas--operational and communication response.

While the operational response team is focusing on resolving the problem as quickly as

possible, the communication team is responsible for informing the organization's key

stakeholder groups to ensure their understanding and support can be maintained.

Having a look at this, it is clear that an authentic leadership must be present in order to

handle a crisis situation.

FRAME ISSUES IN CONTEXT OF FIEDLERS THEORY AND SPECIFIC CONTINGENCYMODEL OF LEADERSHIP? DOES THIS LEADERSHIP STYLE FIT THE SITUATION AS

DEFINED BY FIEDLER?

The Fiedlers Contingency theory of leadership is based on situation centric approach.

According to this theory, any leadership style emerges on the basis of situation. The three

major factors involved in leadership style are: leaders and followers, situation and

control over situation. Situations are responsible for giving charge to the leader in the

following three stages:

a)

Leader-member relationship-trust, respect and confidenceb) Task structure-the hierarchy and groupc) Position power-degree of influence on followers

The main issues in context of Fiedlers theory are as follows:

a) If the situations are supposed to control the leadership style, then no prior crisis handlingpreparations can be done and no disaster recovery plans can be made. This is because

any change in situations drifts the style of leadership according to this theory.

b) There is nothing called Disaster management planning or crisis managementplanning if the Fiedlers style of leadership is to be followed.

c) No hierarchy group can be defined unless the situation to be handled is known.The Fiedlers style of leadership does notfit in the case of Exxon Valdez oil spill. Here

the CEO, Mr. Rawl was under a tremendous pressure to react to the situation to contain the

spreading of oil in the sea. He had to take the responsibility for the problem that occurred

or appoint someone to handle the situation. He could have done a better job, but due to his


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unwillingness, it was seen that Exxon was running away from its responsibilities and

blaming others for the oil spill near Alaska.

What Exxon Corporation should have done during the Oil Spill Crisis?

Exxon management needs to develop ethical communication skills to truthfullycommunicate with stakeholders.

They should have taken the responsibility for the incident that happened andapologized for the same.

They should have taken immediate measures for containment of oil spill and CEO ofthe company, Mr. Lawrence Rawl should have personally visited the location to

check the damage done.

The CEO of Exxon Corporation should have called for a press conference and shouldhave given the plan for crisis management and cleanup reports.

It was necessary to appoint outside public relations consultants to address themedia.

They should have appointed a designated spokesperson so as to avoid rumours andmisunderstandings among the people.

They should have accepted the responsibility rather than blaming others. They could have made a transparent system of approach to the crisis management &

should have acted maturely to the situation.

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Chirag 303 OB Assignment EXXON