One could compile an extensive bibliography written about the “big crew change” over the past several years. The short story is that although the human resource “emergency” that the oil and gas industry has decried during the past decade has slowed, it has not disappeared but merely been delayed. The industry continues to face a shortage of skilled workers in the 10 to 20 years of experience category, which is affecting the staffing of midlevel management jobs and, subsequently, senior level management positions.
Estimates show a net outflow of 5,500 people at the petrotechnical professional level in the oil and gas industry. The immediate ramifications of this decline in experienced human capital will be heavy recruitment of staff from competitors, which will continue to drive salaries higher. With the cost of a barrel of both West Texas Intermediate and Brent crude still around USD 100/bbl, projects will continue to be economic, thus increasing the need for experienced hires. But the 5,500-person net outflow says that companies may be unable to properly staff these projects, which could result in delays or the possibility of less experienced staff running them, with potentially risky outcomes in safety and downtime. All of these factors increase costs for oil producers.
However, quantity is not the only risk; quality (i.e., real-world experience) is also a factor. Could the overpromotion of less experienced professionals put projects at risk for safety and downtime problems? Many projects are only as good as the individual managing them. Project leaders must focus on the proper balance of the quality of work, timing, supply of equipment and people, safety, and the bottom-line profitability for all parties to be satisfied. These are all strong management and leadership skills that can be found in other industries, which have devised and implemented best practices. If the proper general manager of a project is selected, he will surround himself with technical experts, thus allowing a focus on the core skills and abilities that he brings to the company, rather than strictly the technical knowledge of the project. This opens up the industry to looking at midcareer leaders in the heavy industrial and civil construction industry, mining industry, or even the military.
Effect on Senior Management
So what do these midlevel staffing issues mean in the long term? For starters, the industry will have a smaller pool of talent to choose from when looking at senior management succession planning. There could also be the real possibility that there are no qualified employees from which to choose within a company. This may cause the company to look outside for talent, which could lead to higher wages, higher turnover due to competitors poaching from one another, and increasing one-time costs attributable to new hires.
If we do not fill the gap, we run the risk of perpetuating the problem from which the industry currently suffers. When those at the top retire, the pool of talent to choose from within the industry will be considerably younger. When this younger crop of talent is appointed to top positions, they will naturally remain in those roles for a longer period of time, making those behind them wait longer to rise to executive roles. For some high-potential midlevel management individuals to reach the top, they may consider leaving the industry to see their career aspirations come to fruition.
A Balanced Approach
To solve the skills gap cycle, a four-pronged approach is necessary. The approach incorporates short- and long-term strategies, thinking outside the norm when making hiring decisions, and implementing organizational development strategies that put the onus on both the company and employees.
Be open to hiring managers, both mid and senior levels, from outside the industry. By opening up managerial roles to those from other industries, the oil and gas industry can “import” best practices into the energy industry that it may not have knowledge of or experience with, as well as help fill some of the gap that exists in midcareer employees. Consider an individual who currently works for a company that provides field development and production contracting services to the energy industry, and is particularly technology focused. This individual worked in the medical industry as an engineer leading groups of other engineers and providing installation and operations support services to clients for almost a decade. He then moved on to provide engineering and construction project management services to the construction and infrastructure industries. This large and technically complex project management background has proven invaluable to the individual’s current employer and has given the company an edge over some of its competitors with new approaches to old problems.
An example of an executive’s appointment is exemplified by the following:
Arthur Soucy is president for Europe, Africa, and Russian Caspian at Baker Hughes, and formerly was president of global products and services at the company. Before that, he was the company’s vice president of supply chain, responsible for sales and operations planning, manufacturing, purchasing, transportation and logistics, and quality. Before joining Baker Hughes, he was vice president of global supply chain at Pratt & Whitney, a United Technology company. Soucy held a variety of management positions at Pratt & Whitney. He also spent a decade working at Hamilton Standard, serving in various manufacturing, engineering, and product development management roles. Soucy has an MBA degree from the Massachusetts Institute of Technology with a concentration in global innovation and international business and a bachelor’s degree in international business from Lesley University in Massachusetts. Soucy’s story proves that someone who is not an engineer by academic background and does not have energy industry experience is capable of becoming an executive at one of the top oilfield service companies in the world.
Use organizational and talent development as a strategic and competitive tool. Strategic human resources is the management of human resources aligned to the organization’s future direction, focusing on longer-term human capital issues and macro concerns about structure, quality, culture, values, and matching resources to the future needs of the organization.
The Economist’s Talent Management Summit held in London in 2013 recognized that “talent is no longer an issue confined to the HR department, but is rising to the top of the agenda for senior executives across the board” (www.-economistconferences.co.uk/event/-talent-management-summit-2013/7232). Companies in the energy sector must facilitate the involvement of human resources at strategic decision-making levels to ensure that a culture is created that sends a clear message to current and future employees that leadership talent is highly valued within the organization. This can be supported by leadership development programs tailored to meet both the employee’s specific development needs and the company’s profile for future leaders.
To facilitate the desired effect, human resources professionals must be seen as true strategic partners. Senior executives seeking a competitive advantage by attracting, developing, and retaining more than their fair share of the industry leadership talent must seek and hire the best strategic human resources practitioners regardless of sector background.
For entry-level to mildly experienced hires, consider individuals with complementary skill sets from other industries. There are a number of intelligent first-year college students who do not initially set out to become engineers or scientists. There is a good chance that a person with an undergraduate degree in mathematics or economics knows enough about crunching numbers and analysis that they could be taught how to apply those skills to the energy industry. Every company out there is courting the “fill-in-the-blank” engineers, and not everyone is going to get them. Why not consider looking at strong analytical types and putting them into a rotational development program in your company to find where they best fit? Also, companies should commit to leadership or leadership potential as a desirable skill when recruiting these individuals. Selling upside career opportunity to new graduates may just net the organization individuals who may have chosen another offer otherwise. In addition, using these criteria when recruiting less experienced employees may aid organizations in their quest for succession planning in their ranks.
This is true for slightly more experienced people as well. Most military personnel enter the energy industry without engineering degrees. Others have gone from civil engineering roles designing roads for government projects to subsea design engineering, and have done quite well for themselves and the companies they joined. Many times in an experienced hire, one needs to look more closely at the creativity and leadership capability of the candidates as opposed to checking the boxes of preferred hard skills and experiences.
Consider long-term options to increase the pipeline of talent into the industry. Looking for talent development at the collegiate level is not enough. While it can be helpful to recruiting efforts to provide internships, scholarships, and work-study options to undergraduate students, more needs to be done to entice students to become science, technology, engineering, and math majors. Companies should be looking at increasing awareness of this type of education at the middle and high school levels or potential engineers and scientists may be lost to another major in college.
Conclusion
While these suggestions may be nontraditional and not easy to implement, companies that desire to get ahead in the war for talent could use them to have an edge over their competitors. The strategy will not produce immediate effects today or tomorrow, but will be advantageous in the long term.
Joy Brown Kirst is a managing partner with Park Brown International. After positions with Western Atlas International and Heidrick & Struggles, she became vice president at an executive search firm overseeing energy industry searches in North and South America, Europe, and the Asia Pacific. She holds a degree in Russian and East European Studies and an MBA from Rice University.