Leadership & Management

BP’s John Browne: Corporate Vision Key to Creating Shareholder Value

In any business, “it’s absolutely critical not to lose the plot,” says Browne.

May 01, 2005

| by Lisa Vollmer

No matter how quickly — or how dramatically — a company’s competitive environment might change over time, it must hold two things constant: its sense of purpose and its commitment to creating “mutual advantage” for stakeholders. According to John Browne, group CEO of global energy giant BP, an unwavering focus on these objectives enables organizations to adapt to their competitive landscape — and in turn sustain shareholder value.

“In any business, it’s absolutely critical not to lose the plot,” Browne, who received his masters degree from the school’s Sloan Program in 1981, told students attending the final View from the Top presentation of the year on May 16. “You have to remember what your purpose is, and you have to be disciplined about sticking to it in order to create shareholder value. It doesn’t work the other way around — you can’t start with shareholder value and work your way backwards to establish your organization’s values.”

For Browne, “sticking to the plot” has meant keeping BP’s fundamental objective — providing light, heat, and mobility better than anyone else — at the forefront, despite the dramatic changes that the global energy industry has witnessed in recent years. “Since the 1990s, a lot has changed in the world,” he said. “In 1990, 80 percent of oil came from OECD countries. Now, less than 50 percent of it does.” And Browne expects that the world’s reliance on countries outside of the OECD will only intensify as global demand for energy continues to increase. He predicts that by 2015, 80 percent of the world’s exported oil will come from West Africa, Russia, and the Middle East, while 80 percent of it will be consumed in the United States, the European Union, and China.

Over the past decade, the relationships among countries working to address the world’s energy needs have also evolved. “Gone are the days when a foreign country would come in and — with a bit of might and brawn — impose its will on a host government,” Browne said. “This type of relationship is no longer possible — and even if it were, it would be considered entirely unacceptable.” Instead, companies like BP must work with all of their key stakeholders — not just employees and customers, but also the local governments and communities in the countries where they operate — to protect their unique interest. Browne considers BP’s ability to create this “mutual advantage” an intrinsic part of its business objectives.

When it comes to assessing whether or not BP is achieving its dual priorities, Browne says that meeting earnings estimates and profit forecasts is only part of the story. “So many people think of business as a series of tasks and duties to be completed,” he said, explaining that focusing only on objective performance metrics is inherently risky. “You have to give people a sense of purpose,” Browne said. “And that means convincing them that the best is always yet to come.”

Leaders who inspire this type of mindset nurture employees who continually aspire to reach higher and higher levels of performance. And, says Browne, organizations that reward this type of achievement spur high performance even further. “It’s an extraordinary thing to assure people that the way in which they move in a company or in a society will depend strictly upon merit,” he said.

Not only do successful leaders strive to create a pure meritocracy in their respective organizations, but they also recognize that their most important assets — their employees — have incredibly diverse, complex needs. “Everybody is complicated,” Browne said when asked to cite the most important leadership lessons he’s learned over the course of his career. “Everybody has a very complicated life. People have many objectives that they’re trying to fulfill simultaneously. And your leadership style has to reflect that.”

For Browne, the same two priorities that drive BP’s corporate strategy — a distinct sense of purpose and a commitment to mutual advantage — have shaped the way his personal leadership philosophy has evolved. “In my career, the times when I’ve made mistakes have been times when I’ve crossed the line between feeling self confident and feeling self-important,” Browne said. “That line — though it’s extremely important — is almost invisible. The only antidote is surrounding yourself with incredibly good people. Remembering that they are there because they want to be there — and reminding yourself that they’ll leave if there’s a reason to do so — will keep you on the straight and narrow.”

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