HR Insights – the energy industry today

Author: Huma Qazi, 9 Apr 2015, London

Last summer, crude oil was $115 and the industry is now faced with operating at half that price. In the UK, it has had a serious impact in the North Sea, with Shell, Chevron, Conoco, Tullow Oil and BP having either already cut jobs or in the midst of announcing further cuts and approving restructuring budgets to brace itself for 2015. Large oil-field service companies have announced and others are projecting thousands of job cuts. And this is not yet due to M&A, rather is being driven by the oil prices. Medium sized companies are also cutting jobs, while others have been quick to announce capital spending cuts, asset disposals and are scaling back oil operations respectively. International E&P organisations are not only cutting jobs, but freezing salaries and cutting contractor salaries during this cost conscious environment. Smaller oil and gas E&P companies are slashing their operating revenue forecasts for 2015 and some for 2016 as well following the lead from a top investment bank.

The challenges from an HR perspective:

  • Responding quickly with cutting CAPEX projects and OPEX costs, such as overheads (including labour costs)
  • Widespread redundancies will create job insecurity and labour supply will exceed demand
  • Job searches will increase and people mobility will increase in the interim as job seekers look for alternative suitable roles
  • Redundancy packages are anticipated not to be generous and will offer the bare legal minimum, as there are bonafide corporate financial reasons driving the job cuts
  • Project personnel may see one of two things (a) their projects being put on hold or shelved (b) a rise in demand for short-term contract professionals on projects to minimise employment commitment, I.e. Shorter term contracts, 3,6 or 12 month contracts with due protection built in not to extend the contract to see organisations through critical projects.
  • Companies will divest and sell off businesses and let go of people within those businesses from the parent organisation.
  • Mergers & Acquisitions will go through optimisation programmes and business transformation programmes will increase seeking budget efficiencies. As a consequence of merged and leaner organisations in 2015, workplace culture becomes of paramount importance to help steer the right engagement and sentiment of key staff.

HR Leaders will want conversations surrounding solutions:

  • Ensuring talent attraction teams focus on attracting the right skill sets, I.e. Finding skilled resources who want to truly join an organisation for the right reasons and who do not leave once the oil price picks up.
  • Engage recruitment firms to run mapping exercises to gather market data and review your Talent Attraction Strategy for 2015 and the next 1-2 years to articulate ways to leverage on ‘leavers’ from competitor organisations.
  • Ensuring retention plans are launched in 2015 to attract and employ resources that will remain engaged with the organisation and value their retention plans and don’t ‘jump ship’ at the next best opportunity.
  • Changing the remuneration structure with an emphasis on retention.
  • Promoting culture and values as a mechanism to attract and to retain, as opposed to the total compensation package.
  • Identify existing top talent, critical resources and hi-potential employees in a more structured manner and tighten up succession plans to properly identify gaps.
  • Graduate, post-graduate and technician apprenticeship programmes in universities and colleges will lose traction and trust. We have seen this buoyancy since the 1980s. History will repeat itself as the Z generation will waver and will want to change their education and career paths, as they will observe the trends of layoffs and lack of recruitment opportunities. Organisations will need to debate whether this remains a priority as there is a dearth of resources already and not enough coming through the pipeline. Low oil prices and lack of job security will only make this area more challenging to justify to the younger generation who are/were interested in the oil and gas sector.