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. Even with fluctuating prices for a barrel of oil, many projects will continue to be economic, thus increasing the need for experienced hires. But a loss of skilled labor means that companies may be unable to properly staff these projects, resulting in delays or the possibility of less experienced staff running them. Production rates could suffer from potentially risky outcomes in safety and downtime. All of these factors increase costs for oil producers.
Lack of staff is not the only risk; quality (i.e., real-world experience) is also a factor. The over-promotion of less experienced professionals put projects at risk for safety and downtime problems as well. The proper balance of the quality of work, timing, supply of equipment and people, safety, and bottom-line profitability must be observed for all parties to be satisfied.
These management and leadership skills can be found in other industries, many of which have devised and implemented best practices around project management. If the proper general manager of a project is selected, he or she 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 this gap is not filled, the companies 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 help slow or stop this skills gap cycle, we recommend a four-pronged approach that 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 as well as employees.
- Be open to hiring managers, both mid- to senior-level, from outside the industry.
By opening up managerial roles to those from other industries, we can “import” best practices into the energy industry that we may not have knowledge of or experience with, as well as help fill some of the gap that exists in mid-career 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 providing installation and operations support services to clients for almost a decade. They 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 this individual’s current employer and has given the company an edge of some of its competitors with new approaches to old problems.
- Use organizational and talent development as a strategic and competitive tool.
Strategic HR 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 future needs of the organization allow HR managers to help drive profit in the company
Talent is no longer an issue confined to the HR department, but is getting the attention of senior executives and board members. Companies within the energy sector must facilitate the involvement of HR at strategic decision-making levels to ensure 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.
HR professionals must be seen as true strategic partners. As this issue of talent management is not restricted to the energy sector, those senior executives seeking competitive advantage from attracting, developing and retaining more than their fair share of industry leadership talent must seek and hire the best strategic HR practitioners regardless of their sector backgrounds.
- For entry level to mildly experienced hires, consider individuals with complementary skillsets from other industries or educational backgrounds.
There are a number of intelligent first-year college students who do not initially set out to become engineers or scientists. There’s 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. Most energy-related companies are courting engineers, but not everyone is going to get them. Why not consider looking at strong analytical types and putting them in to a rotational development program within your company to find out 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 that may have chosen another offer otherwise. In addition, using this 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. Military personnel enter into the energy industry without having engineering degrees. Others have gone from civil engineering roles designing roads for government projects into 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 merely 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 for recruiting efforts to provide internships, scholarships and work-study options to undergraduate students, more needs to be done to entice students to become STEM majors. Companies should be looking at increasing awareness of STEM education at the middle and high school level or potential engineers and scientists may be lost to another major in college.
Though there is concern over the skills gap within the energy industry, all is not lost. While our suggestions may be non-traditional and not always easy to implement, companies desirous of getting ahead in the war for talent could use them to have an edge on their competitors. The strategy will not see immediate effects today or tomorrow, but will be advantageous for the long term.