Introduction
Profit maximization is the ultimate goal of every business. As a result, companies are ready to do what it takes to reduce cost while at the same time increasing profits. However, the desire to maximize profit may lead to some consequences such as sacrificing the safety of workers or endangering the community and the environment. It is estimated that about 40 million workers in the USA are forced to seek emergency healthcare services due to work-related injuries every year. At the same time, some companies have been found to compromise the safety of workers to maximize their profits. These are clear indications that a significant number of companies are sacrificing safety for profits. One such company that has been accused and found to be liable for compromising safety for profit is British Petroleum (BP), which is one of the leading oil companies in the world. The Deepwater Horizon explosion on April 20 exposed the cost-cutting strategy that is used by BP to maximize profit, and the disaster proved that the company is not sensitive to the safety of workers and the environment in which it operates (Chamberlin, 2014). The desire to make the profit is making companies like BP sacrifice the safety, even though the cost-cutting strategies have proved to be expensive in the long-run.
Problem Identification
Many companies, especially in the construction and manufacturing industries find it extremely challenging to balance safety and profitability effectively. Even though the safety of workers should be the number one priority for any business that is geared towards long-term and sustainable success, this is not always the case. On the contrary, profitability and productivity is always the number one priority of many companies across industries (Madsen, 2013). At the same time, regulatory bodies exert a lot of pressure to create a safe working environment for their employees. Recently, due to increased environmental degradation and pollution, companies are also under pressure to adhere to environmental regulations that require minimum emission of greenhouse gases and another pollutant into the environment (Bjornlund, Van Rooyen & Stirzaker, 2017). The situation is made worse for companies by the fact that competition is now stiff in almost all industries and shareholders are also demanding profits. Consequently, many companies are facing safety-profitability conflicts, which have led to many workplace injuries and disasters that have caused massive loss of lives and environmental pollution (Madsen, 2013). Therefore, the main problem that is facing many companies like BP is safety-profitability conflict.
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However, some companies are not facing intense safety-profitability conflict, but they still choose to engage in cost-cutting negligence that compromises the safety of workers. Some companies do not care much about the safety requirements, as their main focus is to maximize profits for investors (Madsen, 2013). Cost-cutting negligence is not only endangering the lives of workers, but it is also costly to the company because it may be forced to pay heavy fines that can lead to long-lost and success of the firm. Even though safety-profitability conflict is a real problem in many industries, cost-cutting negligence can be avoided if a company decides to create and implement relevant workplace policies. The inability of companies like BP to strike an effective balance between safety and profitability is making firms to engage in unethical and unsafe practices that can be deadly.
Analysis of the Situation
Overview of BP
The situation, in this case, is sacrificing safety for the profits. Specifically, the analysis is focusing on BP as one of the companies that have been found to be liable for compromising safety for profits. BP is one of the leading oil and gas companies in the world. Even though the company is based in London, UK, it operates in more than 80 countries across the world. The company's market capitalization is estimated to be $139 billion, and its total value is $166 billion (Chamberlin, 2014). There, BP is rated as the third largest oil and gas companies in the world.
The Deepwater Horizon Explosion and the BP’s Cost-Cutting Negligence
The Deepwater Horizon explosion that occurred on April 20, 2010, was the largest marine oil spill in human history. The explosion occurred on the Gulf of Mexico in the USA, which is roughly 66 km away from the coast of Louisiana the Deep Horizon ring that exploded was owned and operated by BP. According to the report that was given by the US federal government, the explosion led to the discharge of about 4.9 million barrels of oil in the water. At the same time, 17 engineers who were working on the site also died immediately (Chamberlin, 2014).
According to Chamberlin (2014), the aftermath and impact of the explosion were significant and did affect not only a human being but also wild animals and the environment. The Gulf Coast was the most affected area by the explosion. Many industries in which the local depended on were forced to close down due to the effects of the explosion. For instance, the fish industry was heavily affected because the government closed about 30% of waters in the gulf and people were not allowed to engage in fishing activities in the affected areas. Besides, more than 100,000 people were rendered jobless. The environment was also significantly affected by the explosion because the oil split polluted the water, killing many animals and plants in the sea. For example, about 4,768 dead animals were collected four months after the explosion.
Regarding financial cost, the Deepwater Horizon explosion was extremely costly to both the government and the BP. The company was forced to allocate $100 million to compensate people who lost their job due to the disasters (Jarvis, 2010). The Company also spent about 105 billion between April and June in 2010 to address the problems that were associated with the explosion, which made their holding to fall by around 54%. Also, the company was forced to spend about $50 million in the implementation of the PR offensive that was aimed at marinating its public image and reputation in the market and among consumers (Jarvis, 2010). Nevertheless, the company lost its public image and reputation when the explosion occurred, especially due to the high number of lawsuits against it by June 2010. About 130 lawsuits were lodged against the company, and it was directed by judges to pay billions of dollars to affected parties.
The cost-cutting negligence mainly caused the explosion by the BP employees. To reduce the cost of operation in the ring, BP used cost-cutting measures that turned out to be highly destructive (Goldenberg, 2011). BP was found to be liable for the disaster after compromising the safety requirements to reduce the cost and maximize the profit. The explosion illustrates how cost-cutting negligence can be destructive and expensive to both the companies and other stakeholders, including the society at large.
One of the major cost-cutting negligence that was used by the company's engineers was the decision one cement plug to harden the piping before the drilling mud is removed from the good bore. Normally, engineers are expected to use at least two cement plugs for the process to prevent the sudden burst of oil and gas. The decision by engineers not to add the second cement plug a bust of the gas rush up the pipe, killing 11 workers instantly (Goldenberg, 2011). According to the findings of the team that was investigating the explosion, Halliburton that was contracted by BP did a faulty cementing job. Even though BP was quick to blame Halliburton for the explosion, the investigative team revealed that the BP did not effectively monitor and control the activities that were being done by Halliburton. Due to the known losses associated with the well, BP was reluctant to take additional precautions like creating additional barriers during cementing that could have assisted in preventing the blowout.
BP's engineering team was also accused of failing to conduct formal disciplines analysis of the risks that were involved in the process of drilling that could lead to an explosion. Consequently, the team ended up placing heavy drilling mud with lighter seawater before the well was effectively sealed. At the same time, communication failure was another factor that significantly contributed to the explosion. BP failed to adequately inform the parties it contracted such as Halliburton on all the known risks that were being linked to the operations (Goldenberg, 2011). Also, BP encouraged people to continue working on the Deepwater Horizon even after encountering many hazards and warming. The crew in operation waited too long to respond adequately to the warning and the potential risks they were facing at the site.
The case of BP clearly shows how companies are sacrificing safety for profit. The disaster occurred due to the cost-cutting culture that is entrenched in BP and its subsidiary across the globe. The company is known to heavily reward employees who help the company in the significant reduction of the cost of the operations (Goldenberg, 2011). On the contrary, Goldenberg (2011) notes that employees who have helped in identifying potential risks do not receive any award or recognition from the company. This culture explains why employees who were working in the Deepwater Horizon were unwilling to report some of the hazards and risks that they were facing on the site before the deadly explosion. Investigation reports indicated that the possibility of explosion started emerging some days before the fateful event occurred. The heavy rewards that are associated with cutting the cost in the company are motivating and encouraging BP's employees to risk their lives, even in cases where they are working in extreme unsafe situations.
The decision to allow Halliburton to use little cement is another indication that the company was sacrificing safety for profitability. BP was not justified to blame the companies that it contracted for the explosion because it was solely responsible for supervising and monitoring what was going on the site. It was possible that companies like Halliburton were aware of the BP’s culture of cost-cutting and it was using that to improve its relationship with the company (Goldenberg, 2011). It was also possible that the BP did not avail all the materials that were required on the site with the aim of reducing the cost. Therefore, BP was only shifting the blame to Halliburton and other companies that were working on the site when it knew that it was the primary cause of the problem. The culture of cost-cutting at the expense of the safety of employees is making companies like BP endanger lives of their workers.
There are some reasons why companies like BP ends up sacrificing safety for the profit. One of the main reasons is lack of clear strategy that is comprehensive and covers many aspects of the operations (Madsen, 2013). Employees are only able to make the right decision when a company has clear and effective strategies. Employees are not able to understand the mutual relationship between productivity and safety when a company does not have an effective strategy. As a result, as the company strives to maximize profits, productivity-safety conflict is likely to occur in the workplace. For instance, BP did not have clear strategy to motivate workers to increase their productivity in the workplace to enhance its profitability. Encouraging employees to strive to cost of operations and production is likely to motivate workers to assume some of the deadly risks and hazards like the work that occurred in the Deepwater Horizon.
Another major reason for safety profitability conflict is lack of correlation between a company's strategies and safety planning. In large companies like BP, it is always the top management to draft main strategies while safety departments formulate employee safety plan. Consequently, there is a disconnect between safety plans and the strategies that are laid down by the company. This ends up confusing workers because they are not sure on whether to follow the company's strategy or adhere to safety measures in place. In many cases, employees end up concentrating on the strategies and objective that are set by companies, and they ignore possible accidents or injuries that can occur in the workplace (Madsen, 2013).
Also, Madsen (2013) points out that disconnect between strategies and company’s practices are also causing safety-profitability conflict in the many firms. A disconnect between strategies and practices are mainly associated with inadequate resources, lack of knowledge and skills, improper training, and unclear communication. As a result, workers are not likely to practice what is contained and defined in the safety policy. It appeared to lack of clear communication was the main reason that caused the Deepwater Horizon explosion in 2010. BP did not communicate possible risks to the companies that it contracted to assist it in the operations. At the same time, its employees were not aware of some of the deadly risks it was facing. Besides, BP and Halliburton did not adequately train their employees on some of the technical parts of the process. For instance, Halliburton’s engineers only use one cement plug instead of two, and this could have been due to lack of proper knowledge and skills or inadequate training.
Generally, the inability to avail the required resources and train employees on what is required of there is directly linked to desire to maximize profit. Employees training programs are always expensive, and some companies do not include it in their strategies. At the same time, hiring highly talented experts increases labor cost. As a result, a company may end up hiring employees who do not have the required skills to execute a given task. Oil drilling process requires highly trained engineers and designers to avoid deadly risks. Only engineers who are not skilled can make some of the serious mistakes like the ones that were made by Halliburton employees in the cementing process. Therefore, the desire to reduce the cost of operations to maximize profit is the main reason why many companies are compromising the safety requirements. Cost-cutting strategies may have short-term benefits, but they are highly associated with long-term costs (Madsen, 2013).
Alternative Solutions
One of the best alternative solutions to the safety-profitability conflict is the consideration of economic, environmental, and human rights concerns when a company is formulating and implementing its strategies. A company is likely to strike an effective balance in the safety-profitability conflict when it considers the three factors in its strategy (Madsen, 2013). However, importantly, should give safety to workers a priority in its strategy and operations. A company that gives workers’ safety a priority alongside economic and environmental interest is more likely to make a huge and long-term profit compared to companies that only focus on making a profit at the expense of the safety of workers. It is the employees that make companies to make profits. At the same time, a company is likely to attract many customers when it cares about the safety of its workers while at the same time it shows responsibility towards environmental conservation. For instance, BP spent about $50 million on PR activities after the explosion to regain the confidence of customers, which could have been avoiding if it adhered to safety requirements (Jarvis, 2010).
Instilling organizational safety culture is another alternation solution to the safety-profitability conflict that is faced by many companies, BP included. Safety culture majorly refers to the attitudes, values, and perceptions that employees and organization as a whole subscribe to about safety in the workplace. To reduce cost, many companies always focus on labor, raw materials, and supplies while increasing production. Many companies are not aware, or they are not sensitive to the fact that they spend a lot of money in trying to address some of the injuries and general employees' health problem that are associated with workplace environment (DeMaria, 2017). For examples, BP was encouraging employees to indulge in risky behaviors not knowing that it was encouraging risky practices that may be costly. Safety culture will not only reduce the cost operations but also improve the safety of employees in the workplace, as well as environmental conservations. Some accidents that occur in the workplace cost companies a lot of money, even they can be avoided by instilling the safety culture in the organization.
Thirdly, the problem of safety-profitability can be solved through safety training in the workplace. Companies like BP should train their employees on some of the safety measures. Safety training should also be aimed at making employees familiar with the equipment and some of the dangerous equipment that they are using to accomplish the assigned task. Also, employees should be trained on how to respond to safety issues that they are likely to encounter in the workplace. One of the main advantages of safety training is that it significantly improves the quality of life of employees, making them more productive (Bjornlund, Van Rooyen & Stirzaker, 2017). Safety training also boosts the morale of employees, which is directly associated with improved performance. Companies are likely to make more profit when the productivity and performance of their employees are high. Hence, safety training does not only reduce injuries and accidents in the workplace, but it also enhances profitability through improved productivity of workers.
Opinion
Sacrificing safety for profit is not only unethical but also morally wrong because it threatens lives of people play important role in the successful firms that do not care about their lives. Even though some people are likely to argue that profit is the ultimate of any company, businesses do not operate in a vacuum, and they have a responsibility not only to employees, but also the surrounding communities. Businesses have a social responsibility to take care of their take care of their employees. Apart from fair and adequate remuneration, firms are expected to guarantee the safety of workers, especially those who are employed in risky working environments. Social responsibility regarding the safety of workers is no longer based on voluntarism, but it is a legal requirement that all firms must abide by regardless of their sizes and areas of operations. Therefore, sacrificing safety for profit is both morally and legally wrong.
Employees are not commodities to be exposed to unnecessary risks in the name of maximizing the profit. On the contrary, they are the most crucial assets for the success of any given company. Therefore, a company must ensure the safety of workers. The safety of worker should not only be based on the actual working environment but also the surrounding environment. As a result, businesses should also protect the natural environment where employees live. Polluting the natural environment affects the health and safety of employees, which ends affecting their productivity or performance in the workplace.
Also, according to Madsen (2013), past incidents, including that of BP proved that sacrificing safety for profit is unprofitable due to direct and indirect cost that is associated with the practice. First, a company that sacrifices safety for profit is likely to be involved in many lawsuits that are expensive and consumes a lot of time. BP, for instance, after compromising the safety for profit, ended up with about 130 lawsuits, which consumed a lot of its financial resources. There is also a lot of direct costs that are involved in sacrificing safety for profit such as noncompliance fines and compensation for victims. BP was forced to pay $100 million as compensation for employees who lost their lives as a result of the Deep Horizon explosion that occurred on 20th April 2010. Besides, it spent about 50 million for PR activities that were aimed at redeeming its public image and reputation. Compromising safety of employees to maximizing profit also affects the productivity of employees, resulting in an indirect cost. Therefore, companies should find effective ways of balancing safety and profit to avoid safety-profitability conflict that is costly.
Conclusion
Profit maximization, for a long time, has been the main objective of every business across industries. However, profit is no longer treated as the only ultimate goal because social responsibility is rapidly emerging as one of the key objectives of any business that intends to prosper and have long-term success. Therefore, sacrificing safety for profit is increasingly becoming unsustainable. Consequently, businesses that are not able to strike an effective balance between safety and profits will not be able to succeed. Ignoring safety of employees does not increase the profitability of a company but instead reduces it through direct and indirect cost.
References
Bjornlund, H., Van Rooyen, A., & Stirzaker, R. (2017). Profitability and productivity barriers and opportunities in small-scale irrigation schemes. International journal of water resources development , 33 (5), 690-704.
Chamberlin, A. (2014, September 10). A must-know guide to BP and the recent Deepwater Horizon ruling. Market Realist . Retrieved from https://marketrealist.com/2014/09/bps-deepwater-horizon-incident-recent-court-ruling
DeMaria, J. (2017). Organizational Safety Culture . Retrieved from https://ishm.org/organizational-safety-culture/
Goldenberg, S. (2011, January 6). BP cost-cutting blamed for 'avoidable' Deepwater Horizon oil spill. The Guardian. Retrieved from https://www.theguardian.com/environment/2011/jan/06/bp-oil-spill-deepwater-horizon
Jarvis, A. (2010, September 13). BP oil spill: Disaster by numbers. Independent . Retrieved from https://www.independent.co.uk/environment/bp-oil-spill-disaster-by-numbers- 2078396.html
Madsen, P. M. (2013). Perils and profits: a reexamination of the link between profitability and safety in US aviation. Journal of management , 39 (3), 763-791.
