Complex Human Resource Challenges Call for New Approaches

John A. Ryder
Vice President of Human Resources
Champion Technologies

Recurring warnings that the advancing age of the oil and gas industry’s workforce would lead to an employee shortage as Baby Boomers began retiring have become increasingly urgent in the past quarter century. But the issue really did not receive serious attention until global energy demand nearly overtook available supplies earlier this decade, driving oil prices to historical highs and sparking a worldwide surge of exploration, drilling, and development.

When producers, oilfield-service companies, and other petroleum-related businesses began staffing up to expand operations, the pool of experienced upstream employees was depleted in short order. Even more troubling is that the industry’s human resource challenges are global in scope and infinitely more complex than most companies anticipated. The shortage of experienced petroleum-industry employees, combined with the dearth of qualified candidates for entry-level jobs, has emerged as one of the most pressing issues in a severely resource-constrained era.

If producers and service companies are to find and recruit the workers required to meet accelerating energy demand, they must reverse some rather ominous demographic and employment trends. To do so, they will have to develop and implement a variety of sustained, systemic solutions at company and industry levels.

Demographic Constraints

Rather than abating, the issue of the maturity of petroleum-industry employees has intensified. Many studies have illustrated the problem. In one, the Interstate Oil & Gas Compact Commission calculated that the average age of production and service company employees is 46 to 49 years and that the average retirement age in the oil and gas industry is 55 years. The U.S. Bureau of Labor Statistics reports that oil and gas industry employment has been declining for two decades, from a peak of 860,000 in 1982 to approximately 260,000 in 2004.

With too few people entering the industry workforce during the past 25 years, a shortage has arisen of employees with 10 to 15 years of experience capable of performing the jobs required by the current economic upswing. There are simply too few opportunities to hire people with 10 years or more of experience, whether they are geologists, petroleum engineers, chemical engineers, or technical sales or service people. The lack of experienced workers is expected to intensify. Panelists at a recent topical discussion at the Offshore Technology Conference concluded that upstream oil and gas companies in North America are likely to lose more than 60% of their employees by 2010, along with their experience and knowledge.

Unfortunately, as the shortage of experienced oil and gas workers has worsened, the pool of possible replacement workers has been shrinking. Driving the decline are a drop in undergraduate enrollments in geologic and engineering professions essential to the industry, a decline in educational emphasis on math and science, and the understandable perception that the oil and gas industry is not a good place to pursue a career. The notion persists in the general public that the oil and gas industry is old, cyclical, and technologically obsolete, and its contributions to society are undermined by heavy environmental baggage.

Global Talent Marketplace

Because of the global oil and gas economic expansion, competition for new workers has morphed into a worldwide marketplace, with human resource hot spots in familiar oil and gas basins, as well as in technological and geographic oil and gas frontiers all around the world. Each local labor market is uniquely shaped by the needs of local employers and the capabilities of local labor pools. In some places, demand for employees is completely oil-driven, while in other places, the petroleum industry is competing with other industries for workers.

In Alberta, for example, rapid expansion of oil-sands-recovery projects has created an employment boom of staggering proportions. By some estimates, the province is short approximately 100,000 workers. As one might expect, high-paying oil-sands jobs are siphoning thousands of employees from traditional nonpetroleum businesses. Similarly, growing exploration and development activity in frontiers such as Sakhalin Island not only is introducing new high-paying oil and gas jobs into regional labor markets, it also is introducing new workers to the industry.

It has been observed that one definition of insanity is to do the same thing over and over and expect different results. However, that notion could well describe today’s highly competitive global oil and gas labor market. As employers, we cannot continue prospecting for and recruiting employees in the same ways and expect to fill all the openings because the employees we need simply are not available.

Whatever forces are driving labor markets in a given region, limitations of local talent pools increasingly are forcing oil and gas companies to hire employees with nontraditional backgrounds, including many candidates lacking any industry experience. Successfully integrating new employees who lack experience is perhaps the key human resource challenge facing upstream companies around the world.

"There is no silver bullet that can magically solve all our industry's human resource challenges."

Nontraditional Candidates

Employment trends at Champion Technologies reflect the trends sweeping the upstream sector. Over the past 5 years, our global workforce has grown at a rate of 10 to 12% per year, and the rate of growth is increasing. In 2006, our workforce increased between 15 and 20%, and, by the end of the year, we had approximately 1,900 employees worldwide.

Because Champion is much bigger today than it was 5 years ago, our need for employees is greater. Our growth and the evolution of the labor environment have dictated that we change our approach to recruiting and, in particular, how we approach integrating new people into our organization.

Jobs at an oilfield specialty-chemical company such as ours are not identical to jobs at production companies or other oilfield-service companies. But we frequently are competing for the same talent with other upstream compa-nies and even with companies outside the oil and gas industry.

Whenever possible, we hire people from other types of oilfield-service jobs because they have a lot of the core skills that we need. We also have broadened the number of schools where we recruit to develop a more global ap-proach and have expanded the range of educational majors that we consider. We look first for chemistry and chemical engineering majors, but given the nature of our business, we are not tied to hiring engineers. We find that people with other life-science backgrounds fit well into our organization if they have the right personality traits and the desire to do the work we do. We are looking for people who do not necessarily want to spend their entire careers in Houston or Calgary, because at any point in time they are likely to find themselves in Fort McMurray, Alberta; or in Kilgore, Texas; or in Baku, Azerbaijan.

New Training Methods

No quick fix can magically solve all of the industry’s human resource challenges. Indeed, it is unreasonable to expect colleges and universities and professional training organizations to provide all of the qualified workers needed by producers, service companies, and petroleum-related businesses. Ultimately, it is the responsibility of each employer to find and hire the most qualified people available and then ensure that they possess the knowledge and skill required to accomplish the tasks and objectives set before them. Basing a recruitment strategy on simply recruiting experienced employees from the competition is not a recipe for success in today’s market.

Because of the increased diversity in the training and education of the global pool of employment candidates, assessing the skills and knowledge of new hires is becoming more important than ever. More often than not, assessments uncover significant gaps in preparation and experience. Those gaps must be addressed, and the only way is to train people and do it quickly.

Demand for well-trained, skilled employees is bringing training closer than ever to the workplace. Training courses are being modularized and standardized, and training is being reorganized and delivered in smaller, more-focused units. And while many have heralded online training as a panacea, we continue to find that personal delivery of training material, whether in the classroom or in the field, remains the most effective training option.

Global Training Strategy

Because experienced people simply are not available, our company has begun hiring more entry-level workers. To be sure that all entry-level hires develop the knowledge and skills necessary to deliver our specialty-chemical products and services in the first 6 months of employment, we have adopted a much more structured approach to their training, combining classroom and on-the-job experiences.

Champion also has instituted a global training program for newly hired college graduates, no matter where in the world they graduated from college. The training program ensures that new employees are brought into the organization in a consistent manner everywhere in the world, accelerates new employees’ development more consistently, and enables them to become functional at the customer level faster than previous regional training methods.

To implement the global training program, we significantly increased the size of our in-house training staff. In particular, we devoted considerable senior manpower to the task, particularly for the technical course work. The most effective way to teach new employees about the oilfield problems they will encounter and how to apply our products to solve those problems is to assign experienced workers to deliver that training. Someone who has “been there and done that” can be more effective in a classroom or a hands-on training environment

In some ways, assigning senior people to lead a training program was painful because many of them were our main customer-support resources in some geographic regions. But we are convinced that we are more effectively supporting our entire customer base when we use our top human resources to train our new employees and get them up to speed faster. Champion has made a commitment to address its global human resource needs on a sustained, systemic basis with long-term strategies that we believe will have a positive impact on our worldwide organization for years to come.

JOHN A. RYDER has more than 20 years of human resources experience in generalist and specialist roles for companies in the energy, financial services, and engineering and construction industries. His current position is Vice President of Human Resources for Champion Technologies, a global oilfield production chemicals firm. Immediately prior to joining Champion, he was Division Vice President of Human Resources for Dynegy Inc. Ryder is a member of the Technology and HR Management Special Expertise Panel of the Society for Human Resource Management (SHRM) and is a past chair of SHRM’s Human Resource Technology Management Committee. He is also a past President of HR Houston, one of the largest SHRM-affiliated local chapters in the U.S. He is a graduate of Suffolk U. in Boston.