Staff cutbacks have been all too common recently in the energy business. But industry observers say an industry turnaround will surely come—possibly sooner than expected. A key question for senior executives is, will they have the necessary, experienced staff available when that turn-around occurs?

Yes, there is still job switching going on now, even in the current environment—particularly in the midstream and downstream sectors that continue to perform relatively better than upstream producers and service fi rms. A recent report, “Talent Management in a Down Economy,” released by Swift Worldwide Resources, a major energy industry search and placement firm, even cautioned that a labor shortage could come when that long-sought turnaround arrives. Layoffs and personal moves to other industries will leave the industry without the personnel it will need.

The talent demand

“While we have seen some setbacks in overall production, with projects being postponed and new investments put on hold, the demand for skilled talent still exists and will only continue to grow in the years to come,” the report said. “It may seem like the demand for some skilled workers in this industry is virtually non-existent, but the data suggest that will change dramatically over the next few years.”

A key concern is the comparatively older age, overall, of energy-industry personnel, Swift noted. The industry downturns of the 1990s left a hole in the supply of experienced, mid-career personnel.

“The number of workers exiting the workforce into retirement is significantly larger than the number set to take their place,” the report added. “What’s more, this labor shortage is expected to impact ‘skilled workers,’ such as those in construction and manufacturing, whose skills the industry holds in high demand.”

The report urged senior management to “get ahead of the curve” and consider staffing issues now, before crisis-stage who goes/who stays questions arrive.

Developing talent now

“Any business leader knows that people are their most valuable competitive advantage. This is not in question. What matters is: What are you doing to attract, develop and retain the best talent?” it asked. “Believe it or not, now is the best time to begin developing a long-term talent attraction and retention strategy by taking into account projected future growth and resourcing needs.”

That requires “honest analysis” of the company’s personnel to identify top performers as well as the also-rans.

“Consider elevating the weaker members of your team by investing in training or ‘top grading,’ if necessary, bringing in new talent that better suits your current and future needs,” the Swift report said. And it’s important to not wait “for a job opening to identify the top talent in your market. Instead, always be scouting the market and filling your talent pipeline.” When a top player appears, go ahead and hire then “and create an opportunity that will impact your team. The companies who succeed in the war on talent will have hired the best and the brightest ahead of the curve.”

The report emphasized retaining top employees and executives should always remain a top priority, regardless of the business environment.

Even in these challenging times, searches and employee movement are under way, David Preng, founder and principal of Preng & Associates, told Midstream Business. From a recruiting perspective, companies should do several things in this tough economic environment, Preng said.

What’s happening?

“One is to challenge people, as they want to be treated professionally and fairly. Second, people want to know what’s happening, they don’t want to be surprised. A town hall twice a day is not necessary but you need to communicate to make sure they know where the company stands, its strategy and what they can do to help,” he said.

Also, it’s important to keep employees involved, he added. “Make sure they have a sense of ownership in what they’re doing, and that they are productively engaged. Additionally, the leader not only needs to be leading and communicating, he must also be part of the team.”

A new report by the Hay Group of Korn Ferry International, “Real World Leadership,” emphasized the same points made by Preng and emphasized the need for an effective corporate culture.

“Culture is no longer seen as an afterthought when considering the business focus of an organization,” said Noah Rabinowitz, senior partner and global head of Hay Group’s Leadership Development Practice. “Culture is the X-factor. It’s the invisible glue that holds an organization together and ultimately makes the difference between whether an organization is able to succeed in the market or not.”

Instilling culture

“To instill the desired culture, leaders must connect culture with business strategy by articulating the behaviors and values required of all to execute the strategy,” the Hay report said. A challenging business climate can help spur a strong culture, it added.

“When organizations fare well, leaders are unlikely to call for significant changes in culture. But culture change becomes a priority when companies experience a disappointing performance or a trigger event such as the installation of a new CEO, a merger, a spin-off, a market shift, or a major competitive threat,” it said.

Idle employees, especially those who sense a lack of involvement and direction, will start looking elsewhere, Preng said. So where could they go?

Preng’s executive search firm with offices in Houston and London specializes in the full energy value chain on a global basis. This broad view allows its staff to naturally spot trends in hiring. He noted “midstream is not suffering as much as upstream firms at present as their cash flow continue with product moving through midstream systems, but MLPs, by their nature have got to keep growing and they are affected by the upstream slow down.”

As noted, midstream as well as downstream firms are doing comparatively better and some of them are hiring. Also, certain skills can transfer easily into other industries, for example law, accounting, banking and finance and there may be movement in these disciplines this year.

Where can they go?

A recent Reuters story noted “law firms and banks are adding staff to their restructuring practices from Houston to New York City to scoop up new business as oil prices sink, pressuring energy companies to slash debt or file for bankruptcy.

“At least two investment banks and one law firm have bulked up their energy and restructuring departments with new hires to handle the building workload. Another three law firms have re-jigged staff for the new work, and other restructuring advisors have partnered with banks who already have deep roots in the oil and gas world, centered in Houston, the world’s energy capital.”

So what else can management do—raise salaries? That might be tough to justify when sales are flat or down. Money—within reason—isn’t everything, Preng said, given these tough times. “People want to be challenged and they want to hear some answers to the question, ‘what is my future?’” He emphasized again the need for executives to actively work to keep staff informed of what’s happening.

The Swift report echoed his advice: “Money alone does not keep people happy in their jobs. Studies show that professional development opportunities, flexible schedules and recognition for achievements actually outrank money as the key factors to employee satisfaction. Companies should not be lulled into a sense of complacency when it comes to retaining their best talent. Leaders that are in touch with their employees’ motivators drive superior results and yield a higher rate of retention,” it said.

The Hay Group report outlined important points to create a successful culture. “To help create buy-in and support, organizations must involve their top leadership in assessing the current culture and defining the desired culture. Senior leaders then must articulate the culture change and make employees understand the new culture, the reasons for it, and why it is critical to achieve the organization’s goals,” it said.

“Leaders should embody the new culture in their behaviors and actions, making employees understand how the culture looks and feels in the workplace,” the report added.

“Compensation, rewards and employee recognition programs should be aligned to the new culture and strategy.”

Comments