Oil and Gas - Industry Background
The Oil and Gas industry is most likely facing their most significant challenge in quite a long time. The sharp fall in global oil prices from $ 100 per barrel in 2014 to $ 30 per barrel in 2016 is placing enormous pressure on the top and bottom line growth in the business.
In the fast-changing world, Oil and Gas companies are facing macro threats like energy conservation, climate change, and uncertain energy policy, competition from NOCs and political interference in access to reservations.
On the other hand, they are also facing operational challenges in the kind of Human Capital deficit, financial and cost-related challenges.
Oil and Gas - HR Challenges
If one explores the Human Capital angle from the Oil and Gas Sector the following trends become very clear:
- Retiring Workforce – The key employees in an Oil and Gas setup are the middle-aged employees due to the training and experience that’s required to be successful in this industry.The majority of the workforce in more mature geographical areas like North America and Europe are aged over 40 across the value chain. The majority of this workforce will retire within the next 5-7 years.
- High Demand – High demand for oil is fueling rapid industrial expansion, Hence creating the demand for additional employees in this industry.
- Changing nature of skillset – As the avenue/source (increasing depths offshore, in the Arctic and unconventional sources like tar sands and shale deposits) from where Oil & Gas are extracted is changing, thus the type of skillset required to operate these advanced technologies are also increasing. As the use of sophisticated technology is becoming a frequent location, hence the time to train engineers for the job is increasing.
- Globalization – As a result of acute demand and reduced oil prices, the NOCs are expanding and becoming more global. Due to that, they are also tapping into the precisely same available resources in a geography and making the competition fiercer in that country/geography.
- Difficulty attracting entry-level talent – The number of graduates who select engineering as a subject is diminishing in the developed markets. Many of them, many prefer to take up opportunities in clean technology and/or other high-tech industries. Adding to the complexity is the reputation of Oil & Gas industries are in some of the most inhospitable conditions where remote exploration and production (E & P) happens.
Effective HR Strategies To Address Oil and Gas Challenges
HR can and must understand, innovate and transform their policies and strategies to better align and serve their business. These are the possible options available to the Oil & Gas companies:
Strategic Workforce Planning
These firms need to look at the talent gap and the skewed demand and supply ratio more strategically and globally.
Oil & Gas industries can learn from many other businesses like Information Technology, manufacturing, etc. who are facing an acute skill gap as well and how they are are managing the skill difference with a more matured form of “Advance Manpower planning,” by looking forward and imagining the demand.
Understanding what and where the company is likely to go for the business, what kind of E & P scenario it will face, what skill set is going to be required, where will people come from, how much will come from internal resources vs. external agencies, etc. Advanced Analytics can help in predicting/forecasting these scenarios before it happens.
With those insights, HR can plan for their Talent Management process in a more matured manner.
Once identified the requirement, the companies can look at a More holistic approach towards an integrated Talent management process:
- Capture and transfer of critical knowledge through coaching, mentoring, training and succession planning is a business imperative.
- Have to break down silo’ d approach to handling lifespan talent management process to strategic talent management plan.
- Technology is providing opportunities to alter talent lifecycle empowered through new cloud solutions. Managing multiple workforces within one organization (operations at different stages of growth) is becoming much more attainable.
- Need for a flexible workforce that can expand, retract or redeploy, depending upon business requirements
- Creatively build the talent pipeline focusing on traditional and nontraditional talent pool
- Make the business brand more appealing and make the performance management process transparent and focus on rewarding the talented workers.
- Must discover innovative ways to manage the cost of talent