"(We) will reduce number of layers from ... 11 to about 7"

The new CEO at BP is shaking things up, or perhaps better said, taking things out. CNNMoney.com quotes Tony Hayward in BP Shares sinks as CE0 warns on results:  "'There is massive duplication and lack of clarity of who does what,'" the [Financial Times] quoted Hayward as saying. "'We will reduce the number of organization units. (We) will reduce the number of layers from the workers up to the CEO from 11 to about seven.'"

Is that the right number, Mr. Hayward?  How do you know what the right number is? Using OrgScope, we found 11 levels at one of the energy giant's competitors--and its shares are not sinking.

How do you determine the right number of levels in an organization the size of BP, with in the neighborhood of 100K employees and perhaps 10x that number more in contractors? What number allows the chief executive and senior leaders to "spot weaknesses and areas for improvement," as one energy executive said to us.

The deeper question here is not about a target number of levels but about whether the structure optimizes strategy.

Comments

[Rob]

I know I'm naive. I tend to look for the simple nub. But I want to think this:

1) Look at what's wrong and right with your business strategy. Remember the simple truth of what you do: Say "I make petroleum products."
2) Execute with leadership - believe that you want to make the best petroleum products on earth and don't let anyone forget it. Don't make this an exercise in slogan-redesign.
3) Encourage the organization to change itself to match the strategy, with each level keeping in mind items (1) and (2)

I know this is simplistic, but this is an opportunity to change a large organization in a fundamental way, not rearrange desks. Flattening an organization can often lead to it being thin, dilute, instead.

I also know it's a lot harder than it sounds, but if you can't start with the simple, you sure can't get to the complex.

In my experience.

Which is naive, as I said.

Interesting to watch this same dynamic over and over and over in the last 35 years. When will someone get it right?

I'll bet the ultimate response will be a ponderous merger as some kind of defensive move.

Arg.

[jessica lipnack]

Flattening an organization can often lead to it being thin, dilute, instead.

My point, precisely, Rob. The pounding out of layers, in the name of reducing complexity, can also make things worse. And who says 7 is the right number for a company of 100K? On the merger bit, BP already merged with Amoco; Exxon with Mobil, etc. The only major *not* to go merger-mad has been Shell. But could BP end up as a hyphen to Exxon? Or another of the majors? Anything is possible.