Executive Leadership - More Important Than Ever

Jan. 16, 2006
As in most organizations today, energy industry leaders must have the skills to guide their companies through steady growth and faster progress toward globalization.

As in most organizations today, energy industry leaders must have the skills to guide their companies through steady growth and faster progress toward globalization. Moreover, major public corporate scandals such as Enron and WorldCom mean dramatically increased scrutiny of corporate governance standards and financial disclosure.

This shift in emphasis from the executive floors to the boardroom has resulted in a demand for senior leaders with backgrounds that extend beyond operations and into finance, risk compliance, investor relations and reputation management. For many companies, the challenge is re-training or enhancing the skill sets of existing managers whom they have groomed and promoted over years through internal channels.

The present generation of executive leadership in the energy industry is made up largely of individuals who show prowess during collaborative projects, are team players and are generally considered “good hands.” While these leaders have had great success in overseeing operations, they often lack certain managerial skills and are far from being prepared for, or even want to handle, the increased communications and financial demands of changing shareholder and board expectations.

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Large oil companies have already begun to place individuals with strong financial backgrounds and an aptitude for compliance in upper-level positions. For example, ConocoPhillips CEO James J. Mulva rose from CFO to his current position.

While these companies continue to assemble the best senior management teams, many smaller oil and gas operators and service companies that opt to grow rather than be acquired are also looking for new leadership to handle the complicated challenges of working in today’s environment. Compounding the problem of identifying the right skill sets of today’s energy-industry leader is a shortage of executives prepared to take on these senior-level jobs. When companies acknowledge their need to select candidates who are likely to work well with their corporate cultures, bring a robust set of skills and experience and can articulate a vision for the organization’s success, they increasingly turn to retained executive search firms such as Preng & Associates to recruit new talent.

Preng & Associates is the only global executive search firm working exclusively in the energy industry today. The firm recently marked its milestone 25th anniversary and has operations in the United States, London and Moscow, where it works hand-in-hand with companies from all sectors, including exploration, production, power, transmission and distribution, pipelines, transportation and service and support.

The shortage of talent in the industry is a well-documented problem with roots in a multitude of areas, including education at all levels and social perceptions of the industry. All too often, family members who were financially impacted by industry fallout in the mid-1980s have dissuaded potential engineering and geology students from pursuing energy careers. Moreover, education systems throughout the United States, at both secondary and university levels, do not actively recruit students into fields that would result in job placements in the energy industry.

Collaborations between energy firms and institutions, as well as informational efforts designed to improve public perception of the industry, have paved the way for a larger pool of talent in the future. Still, companies seeking top leadership today have few well-qualified candidates from which to choose.

Most often, today’s leadership at one company comes from talent groomed at another. Within the energy industry, finding the best leaders to meet the overarching demands of globalization and corporate accountability and transparency is most easily achieved through targeted recruiting efforts. This has resulted in a fairly unprecedented shift to recruiting candidates from outside the industry to fill middle and senior management positions.

However, a new trend seems to be emerging: executives who were lured from the “majors” to smaller companies 10 to 15 years ago, attracted by more lucrative compensation and opportunities to assume top slots, are now being recruited to return to larger corporations. The smaller companies have cultivated leaders by initially hiring the best employees and cross-training them in a variety of areas, including asset management, operations, technology, core business practices and strategies, finance and marketing. This willingness on the part of companies to train future executives and, conversely, the hunger on the part of employees for professional education in many different disciplines has accelerated their development as executive leaders and candidates for advancement.

This new talent pool is enabling more strategic succession planning and ensuring that farsighted energy companies have the right leaders in place for a dramatically different 21st century.

As we look to the future, not only do we expect to see a continued influx of leaders migrate from other industries to oil, gas, power and service companies, but this new group will be more diverse as well. Increasingly, managers represent a far broader range of ethnicities, gender and core educational background. Not long ago, any energy-industry job candidate had either a geology or engineering degree. Increasingly, however, energy companies are hiring people with management, accounting and business degrees to fill middle- and senior-level positions. This trend toward diversification bodes well for companies that choose to tackle the challenges of an increasingly complex global economy and the need to deploy staff around the world to exploit energy opportunities of the future.