Oil industry's talent shortages require new staffing strategies

Simon Coton, NES Global Talent, Manchester, UK

Attracting and retaining talent has been a longstanding issue for the oil and gas industry, an issue projected to reach critical dimensions given the continued exponential demand growth for these fuels. Discussions about talent are taking place in boardrooms, human resource offices, and on rigs around the world.

But wherever they take place, common experience indicates two key points are consistently missing from the ongoing debate: 1) the relative inexperience of employees coming into the oil and gas workplace compared to those going out; and 2) the changing global energy context in which tomorrow's workforce will function.

By analyzing these two key points and devising a new strategy, NES Global Talent has made strides in working toward the resolution of many recruitmentand retention-related issues.

People issues

The people issues revolve around several multi-dimensional points other than raw numbers: For the sake of simplicity, they can be prioritized this way:

1. The peak age of the workforce is going up fast – much faster than a one-for-one comparison to the calendar would indicate.
2. Companies that have always relied on experienced workers find they are increasingly dependent on inexperienced ones – and that the ratio of inexperience to the whole workforce expertise is also increasing significantly.
3. Problems of retaining talent are building with globalization and the spread of the industry to new areas and the new competition from national oil companies.
4. Finally, the mindset of many younger engineers – those now choosing their careers – is affected more by media issues such as global warming and the challenge of renewables than would have been the case previously.

To embellish these points briefly:

Peak age: Published studies echo NES' experience in the global workforce. To take one example, Pete Stark, vice president of industry relations for IHS, in a Schlumberger business consulting study, described the trajectory of the peak age of oil company technical personnel. In the year 2000, the peak was 43. Six calendar years later, in 2006, the peak age had advanced seven years, to 50. It is now moving faster still. In the six calendar years from 2006 to 2012, it will have advanced by 10 years – to 60 years of age.

However you do the arithmetic, however happy today's employees are on their jobs, the attrition rate is aging – and changing – the demographics of today's workforce.

Ratio of inexperience: The degree of inexperience of the remaining workforce is growing steadily too. The same Schlumberger study notes that by 2014, there will be about 17,000 new professional-technical hires compared to 22,000 departing professional-technical employees – or a net replacement shortfall of 5,000 personnel. There is no qualitative measure of the net shortfall impact in the ratio of on-the-job inexperience to on-the-job experience.

Growing competition: National oil companies were originally established to control their own country's reserves and exploration potential. Today, many have mature E&P organizations and now compete for global opportunities. At the same time, international oil companies are competing by moving to local workforces at all their current and future operations. Thanks to such changes, hiring opportunities are increasing faster than suitable workforces become available. Projected result: staff raids, salary escalation, and project volatility.

Changing mindsets: In the past, engineers, as a group, seemed more occupied with their immediate challenge than with the political or social issues about their industry. Even though today's oil and gas companies offer unprecedented challenges and rewards, many young engineers avoid traditional energy companies in favor of working on renewables. This changing mindset has cost the international oil and gas industry heavily in terms of technically creative personnel.

Industry context issues

The business, political, and technical contexts in which the oil and gas industry is and will be working are nearly as complicated as the people issues. Understandably, host economies want to promote local employment and use their own natural resources to build a domestic jobs base. And in their desire to do so, they often try to build that base on many fronts simultaneously through local-content regulations, tax laws, social-cost rules, the rationing of work permits and visas, and imposition of fabrication restrictions on any projects in country.

Often such regulations are instituted and enforced pretty much without reference to how they can affect one another – or what kind of trade-offs they can entail for the economics of whole projects. Even well-intentioned variable percentages (e.g., 70% local; 30% imported) can compound problems because of uncertainties in accepted accounting procedures.

Oil and gas company managers can sympathize with the goals driving these approaches but often feel trapped by contradictions from many of the rules. In practice, they are often pressed to choose between price versus quality issues, or between timely deliveries versus frequent, even chronic delays, or between experienced expats managing expensive project phases versus inexperienced recent hires. These are no-win decisions for companies – and really for everybody.

Morale can become an issue as time and money diligently saved in one phase of a project are lost as other phases under-perform. That under-performance is often the predictable result of trying to comply with other rules: e.g., safety standards that can't be met on time or delays in visa permits that hold vital personnel off the job.

The problems of conflicting rules and regulations cluster around today's operating conditions, but they will be felt well into the future. Worse yet, in many cases, today's regulations prevent important strategic decisions by both the host country and the national or international oil company. They enable and set precedents for the problems rather than for the solutions.

Forward planning of talent needs stretches beyond the present to a future one to ten years down the road. Factors such as cross-cultural integration need the most creative and productive precedents. The wrong strategies may be felt for a long period of time.

A new strategy

These issues can be daunting to the human resource managers who have to deal with all of these conditions. Fortunately the market is evolving an industry-sized solution of combined recruiting and staffing specialties that can deal with these complexities.

There are three sets of players who can benefit from such a combined specialist discipline: 1) The countries that are trying to create not just cash flow, but fully functioning economies from their natural resource base; 2) the oil companies that are trying to use their capital and knowledge base profitably, and 3) the men and women who are going to use their problem solving base to deal with the new lessons that each field teaches.

Specialist recruitment and staffing companies like NES have already positioned themselves in countries where the action is strongest. They have a good sense of what talent, skills, and training are available locally. They have developed databases of employable people and can match them with opportunities. They can deal with host countries via the strength of these data bases and their commitment. When local talent is needed, they will find it fast.

The same observation applies to local content vendors and contractors. Such recruiting and staffing companies are invested in country. They are active in bringing the hiring and purchasing processes to the local population. Their project-wide talent canvassing assures host governments that their local content and local logistics people will be respected.

Recruitment and staffing companies also know what outside expertise oil and gas companies need to bring to their projects – and at what point that expertise must be in place. They deal with host governments to secure visas and work permits and negotiate staffing agreements as part of their local content duties.

Staffing companies can also assemble compatible people into highly functional teams to represent the client company's own standards. Again, this ability is based on their connections with clients, their involvement in their planning, and their special emphasis on oil and gas industries.

Because this industry is so deeply committed to supplying workforce needs, companies in it also bridge to oil and gas companies with other services. They can administer all expenses associated with employees they recruit. These extra-salary expenses include a complex mix of social costs, retirement, taxes, medical insurance, emergency care, personal security, and so on.

With respect to professional talent, it has already been noted that younger engineers seem to focus more on careers with renewables and less on traditional oil and gas opportunities. That may be the response to the hostile and remote places that careers in tomorrow's oil and gas might take them. But strong recruitment and staffing companies can largely offset that bias with their emphasis on convenience and what is known as the "duty of care."

Convenience is a big factor if you are going to or from, or staying on a job site for 28 days working 12-hour shifts. But recruitment and staffing companies try to smooth out many of those rough spots. They can book transportation, arrange for security, see to it that their paychecks are deposited on time, and all of the other things that let employees focus on job-related challenges for 12 hours a day.

The duty of care doesn't replace the role of the oil and gas employer. It does permit all involved to have extra check points with each employee. It consists of routine and emergency care, evacuations if needed, security checks, and communications from remote locations. Most of these are new, employee-focused services – and they pay dividends in retention and succession planning.

Hiring the best people

Everybody knows that in the immediately foreseeable future, there is not enough of the experienced talent that the oil and gas industry needs. It is also known that the market is evolving solutions to these problems, solutions that meet the combined needs of host countries, of oil and gas companies, and of the employees who will be responsible for delivering the highest, best standards of the industry.

If your company hasn't yet made contact with these specialty recruitment and staffing companies, please feel free to discuss the services described here and others that can be arranged. The dynamic recruitment and staffing industry is now being shaped by and to your needs and those of your hosts and contractors.

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