Boycotting BP gas stations would miss the mark, experts say

26-June-2010Published in: St. Louis Post Dispatch Author: Matthew Hathaway

Consumers can change the world simply by not buying — but boycotts don't always work that way.

Twenty years ago, South Africa was in the throes of cultural and economic isolation largely because consumers vowed to punish any companies doing business with the apartheid state. That international boycott is credited with helping bring down the country's racist system, and today a transformed South Africa is the focus of international sports as host of the World Cup.

If South Africa is the best example of just how mighty a consumer boycott can be, the campaign to punish BP might be its opposite - an ineffective response to the Gulf of Mexico oil spill that will most harshly affect small-business owners who had nothing to do with the disaster.

Yet this week, the Facebook page Boycott BP gained its 700,000th supporter.

And, in the real world, plenty of St. Louis consumers have stopped buying from BP stations, said Tracey Hughes, a spokeswoman for Wallis Cos. of Cuba, Mo., a distributor of gasoline to about 60 area BP stations.

"Everybody is feeling the impact, although there are pockets where the consumer backlash is stronger," said Hughes, who said some stations have reported double-digit declines in sales recently.

On Thursday, in a commentary published in USA Today, Public Citizen President Robert Weissman renewed that group's call for consumers to avoid BP stations for at least three months.

Innocents will suffer from a boycott, Weissman acknowledged, but "that can't be reason for consumers to forfeit their collective power to influence or punish bad-actor companies."

For a consumer boycott to work, business must feel its sting, either from lost sales or tarnished reputations, and they need to have a clear path to winning customers back. The apartheid-era boycott worked because it met both these criteria; the BP boycott does not, said Benjamin Ola Akande, the dean of Webster University's George Herbert Walker School of Business and Technology and an expert in energy economics.

Boycotting gas stations flagged with the BP brand is, at most, a symbolic act that will have an insignificant impact on the company's bottom line, Akande said.

That's because BP owns fewer than 200 of about 11,000 stations bearing its logo. Those stations are owned by independent operators, and the gas they sell may or may not have been drilled by BP.

The oil giant does make money from these stations, but the company won't say how much. Industry experts have said that they believe it's insignificant and that the flagged stations' real value to BP are as platforms for corporate marketing.

Under a boycott, the flagged stations could become liabilities. They are the battlegrounds where boycotters can chip away at BP's cultivated public image, or at least that's the position of Public Citizen. In the long run, BP will suffer.

In the short term, the collateral damage of a boycott is overwhelmingly borne by independent operators who had no say in BP's drilling operations or gulf cleanup effort.

"If you're boycotting, you're missing your intended target," said Ronald Leone, executive director of the Missouri Petroleum Marketers and Convenience Store Association. "You're hurting local businessmen, their employees, the people they buy products from ... even the Little League teams they sponsor."

To make any BP boycott even more difficult, the company makes plenty of money from stations not bearing the BP logo.

For instance, angry consumers could end up skipping BP-flagged stations that, in fact, are selling fuel that was drilled by other firms and taking their business to another chain — or a non-branded service station — only to fill up their tanks with petroleum that was drilled, transported and sold by BP.

Patrick Welch, an economics professor at St. Louis University, compares the BP boycott with car buyers shying away from Toyota after that company's recall of more than 8 million vehicles because of unintended acceleration problems.

Toyota must respond to consumers' concerns because it has no other choice. The automaker can't simply sell its inventory to a competitor. But because BP has that option, "it can, to a large degree if not completely, dodge the bullet of a boycott," Welch said.

Leone agrees.

"Let's assume a boycott works, it ultimately isn't going to hurt BP corporate because they'll just sell their crude on the open market," he said. "It's not like the product isn't going to be sold."

BP, What Went Wrong?

6-August-2010Published in: CBS News Authors: Benjamin Ola. Akande and Chuck Feltz

We don't know all the details, but when we listened to Tony Hayward as he was grilled in Congress about BP's safety record, he kept saying he was changing things and that since he took over, there was a new focus on safety - more emphasis, more money spent on it, a new director of safety reporting directly to him. All great business schools teach these kinds of responses, but they are not the best in terms of human behavior-changing techniques.

We believe there were five reasons why BP failed in the Gulf of Mexico.

Tony's strategic message was diluted.

He believed safety was paramount, but that message never got to the guys operating the drill bits. Instead, they obviously thought that such things as time-to-production and costs were more important or they would have stopped drilling. Was their bonus plan in sync with the CEO's vision? Hayward's message never got conveyed in the manner it was conceived, yet he certainly felt he had covered it. It appears Hayward was not aware of where his message lost continuity.

Vendors such as Transocean were not true partners that shared the strategic vision.

Rather, it seems like they were adversaries at worst - and, at best - had goals that were poorly aligned with BP's. Did Hayward anticipate the right way to go about making certain his message addressed and was actionable for all key stakeholders? A strong message poorly executed and acted upon is of no value.

BP failed to realize that safety is a competitive advantage and not a cost.

It would seem that safety would be a keystone value or cultural attribute that, at the least, would represent a table stake, if not a direct competitive advantage. How could something so critical to the culture misfire so poorly? Did they really intentionally design their culture and plan to leverage it as an advantage?

First, safety reduces reputation risk; BP’s reputation is likely tarnished permanently with consumers, vendors and employees. Second, better safety reduces real costs in terms of property insurance, health care expense, payroll, regulatory compliance, fines and productivity. Employees who feel safe are better employees.

Obviously, the lack of safety here cost BP $20 billion and threw their years-long growth strategy out the window. BP is an entirely different company now; and worse, they are not calling their own shots.

Hayward thought safety was just about keeping people safe, but deep down, we bet he'd sacrifice a little safety or take some risk for profits. We’re not saying he would lightly see 11 people die, but if safety is viewed as an expense, then a good manager tries to artfully avoid it. If it is part and parcel of your strategic vision, you embrace it and exploit it.

Improperly valuing risk.

We've become so good as managers at mitigating risk that we have begun to put little value on it – much the same way that Wall Street misvalued risk and almost drove the world into depression. When managers are unaccustomed to seeing bad things happen often, they assume that they never will. Planes don't crash very often, but that doesn’t allow airlines to stop giving the safety speech before each flight. The odds of a car crash are small, but most of us still wear our seat belts. Technology has lulled us into a sense of false security about risk. We are so smart that our machines and our models protect us from having to worry about risk – until they fail to do so. They fail us, too, because they are designed by humans. So, you sink 10,000 wells and the worst-case scenario never happens; why should you think it might happen now? Unless your corporate culture is "better safe than sorry," you'll cut a corner if risk is deemed to be low. How many of us have driven to the store without wearing our seat belt? "It's just a few blocks," we say.

Diluting the strategic message.

No organization is more powerful than the one whose people are laser-focused on driving vision to reality. Unfortunately, leaders assume traditional communication channels are effective in disseminating this critical strategic information. However, our research has found that every organization has a "strategic dilution point" where there is degradation in the content and continuity of this message - typically three levels down from the CEO. The result? More than 80 percent of employees attempt to carry out strategy with reduced clarity and focus.

About the authors:

Benjamin Ola. Akande, Ph.D. (akandeb@webster.edu, twitter @Benjamin_Akande), Professor of Economics and Dean, George Herbert Walker School of Business & Technology, Webster University, St. Louis, Mo.

Chuck Feltz (chuck@chuckfeltz.com, @ChuckFeltz) has been the CEO or president of five companies and is a founding partner of Engage Consulting Group. A 1989 graduate of Webster University, he is the co-author of the new book, Never by Chance: Aligning People and Strategy Through Intentional Leadership (Wiley and Sons, February 2010).