۱- Introduction

۲- Key concepts – Decentralized versus centralized decision-making

۳- How decentralization impacts operational safety – evidence from a case study

۴- Conclusions

References

Abstract

This paper (Part 1) is about the influence of organizational structures on the way major accident risks are managed. It discusses how decentralization, meaning the dispersion of decision-making autonomy within the company, undermines operational safety. A case study is presented, and three real situations experienced by an oil and gas company are described, revealing how the decentralized structure contributed to the negative outcomes observed in each case. The examples demonstrate the need for an operational safety structure with a higher degree of centralization and a greater independence from business pressures. Then, in a separate paper (Part 2) following on from this discussion, the authors propose a design strategy to strengthen the operational safety function. In the suggested structure, a more centralized and independent control of risks is achieved, without losing the ability to quickly identify and effectively address the safety issues at the asset level.

Introduction

Man-made disasters in different high hazard industries have proven the influence of organizational factors in the development of such accidents. Failures in the acquisition, analysis and flow of relevant information have contributed to an inadequate understanding of the operational risks, leading to a poor decision-making marked by a riskblind or even a risk-denying that is only perceived in a retrospective view of these catastrophes. Information flows and decision processes cut across a company’s structure and are largely dependent on the organizational design. The structures in place directly affect the ability an organization has to identify, make sense of, and escalate whatever bad news there may be about safety to top-level managers who have the power and authority to effectively respond and act on them. This paper is mainly concerned with improving the understanding on how structures affect catastrophic risks management. A better comprehension on this organizational factor can enable major hazard companies to identify their design weaknesses and act on them before these vulnerabilities contribute to accidents. In the oil and gas industry, the influence of organizational structure was recognized as a contributing factor to the British Petroleum (BP) Texas City refinery accident, in 2005. The BP US Refineries Independent Safety Review Panel concluded that: “BP’s decentralized management system and entrepreneurial culture have delegated substantial discretion to U.S. refinery managers without clearly defining process safety expectations, responsibilities, or accountabilities” (BP, 2007, p.94). The BP’s decentralized system to manage process safety deserves further explanations. Hopkins (2008) clarifies that: “A decentralized structure means that decisions about how a particular site will operate are made, as far as possible, at the site or local business level rather than at head office” (Hopkins, 2008, p.91). Hence, establishing safety as a decentralized function means that the decisions that could impact the management of major hazards at BP facilities were made at business unit level, with little or even no influence or oversight by the corporate safety experts. Now, add to this decentralized management system, a lack of understanding about process safety and its differences from personal safety, and it is possible to visualize the state of organizational confusion established within the company where it was not always clear who was responsible for process safety related issues. Another major accident where the BP organizational structure acted as a contributing factor was the Gulf of Mexico blowout, in 2010, frequently referred as the Macondo disaster.