Deirdre O'Donnell, managing director, Working Smart, discusses oil and gas workforce challenges facing companies in relation to recruitment, retention, and training. It incorporates research relating to graduates, skill demographics, recruitment trends, and their impact.
Most forecasts indicate a sustained high oil price which, combined with several other economic and geopolitical factors, suggests a buoyant and stable E&P market for the foreseeable future. Many oil and gas companies and service suppliers are struggling to adequately source and manage the workforce skills required for their current business, never mind their growth opportunities. To resolve this problem, we must address the different challenges across the complete spectrum of experience levels, including graduate recruitment, skills management, staff retention, and the optimal use of knowledge and experience.
These personnel challenges, due predominately to the cyclical nature of our business and demographics, affect all sectors of personnel, from graduates to professionals. With regard to professionals, it is estimated that 50% of the baby boomer generation will become eligible to retire within the next 10 years, and this is probably an underestimate if preferences for early retirement and/or late-career lifestyle changes are considered. With regard to graduates, the decline in earth sciences graduates over recent years, and a high percentage of those that do graduate taking jobs in other industries, leaves a major shortfall in securing the next generation of geoscientists for oil and gas companies.
Companies are faced with resourcing world-class expertise to build organizations that will give them competitive advantage. Their business success is intrinsically linked to the quality of the personnel they can secure - now and in the future. But how can that be achieved with today's global skill shortages?
Graduate recruitment and development
For long-term sustainability, a major challenge is to secure the pipeline of suitably trained and motivated graduates entering the industry. Most, although not all, companies have a policy of recruiting graduates. Reasons given during our research include the enthusiasm, flexibility, and relatively low cost of new young recruits. However, it is widely perceived that there is a shortage of suitable graduates. Our research indicates that the problem has as much to do with the industry as it does with academia.
In February 2006, we researched 12 leading UK universities to understand their challenges and issues regarding graduate intake and retention. We asked what their recent first degree earth science graduates were now doing. On average, only 24% were known to be working in the oil and gas sector and 52% were known to be working in other industries, particularly in environmental and engineering related fields. Several university contacts quoted the ‘Green Agenda' as a key factor deterring their students from our industry.
Other factors quoted included low pay (particularly by service companies), job insecurity due to volatile oil prices, and the likelihood of working in some unappealing locations. Many universities observed a lack of graduate recruitment effort by the industry in recent years, with larger companies often only interested in higher level (MSc and PhD) graduates. Universities reported that many students were keen to start paid employment as soon as possible in order to pay off their debts. In the UK, the level of self-funding for degree courses has recently increased significantly, which is further deterring students from lengthy higher level courses. Shorter, vocationally focused courses are on the increase, many of which are now accredited by industry societies. These courses are proving to be a low cost solution for preparing graduates to enter the industry with applied skills.
Many employers have noted significant geographical variation in the balance between supply and demand for earth scientists. While there is a recognized shortage in Western Europe and North America, there seems to be no such shortage in China, Indonesia, and several other areas. Yet another challenge is how do we utilize this resource effectively? How do we overcome work permit issues, language barriers, and cultural issues? Can we relocate or utilize locally? Do we need to shift business to exploit this supply? The list goes on ...
Another challenge is how do we communicate with graduates? Our research highlighted that the Internet is the primary tool used by graduates in seeking job opportunities. With this in mind, Working Smart in Q1 2006 launched a graduate recruitment initiative leveraging its established e-business technology. To date, over 3000 students, graduates and postgraduates from 85 different countries have registered their skills, competencies, and work preferences, and more are joining daily. This provides the opportunity for a more level playing field for graduates to market their abilities and aspirations globally.
During our research, universities desired improved communication with industry to better understand what skills are needed and identify where gaps occur. They asked for support materials and data to help the teaching of relevant current technologies to develop skills that will make graduates more employable. One claimed to be still using material from a 1980s BP course, for want of any better new material! In particular, universities need modern industry hardware and software applications such as used for imaging, GIS, modelling, and simulation. This enables a realistic workflow where students can develop their own imaginary oilfields. Most would welcome increased interaction with oil companies, service providers, and professional bodies to develop more specialist training.
Unsurprisingly, universities are also looking to industry as a source of funds for purchase of equipment and sponsorship of students and/or courses. Financial support already happens in an ad hoc manner, but it could be increased and made more effective by a concerted industry-wide initiative. Such an initiative would require an industry/university liaison task force to drive and coordinate the required course development, coaching, mentoring, and material support. Such a group would require funding and would ideally be set up with charitable status in order to optimize the tax benefits for funding companies. Coaching and mentoring would benefit from an increase in the number and effectiveness of internships and sending successful previous graduates back to their old universities as industry ‘champions' to present to upcoming students.
Working Smart is already making a contribution. In addition to the online system for graduate recruitment, the company is collaborating regularly with universities, conducting and disseminating industry/academic research, promoting job opportunities in the upstream oil and gas industry to students and supplying and delivering career workshop materials and presentations at career events. Currently, Working Smart is focusing on leading universities that provide geoscience, petroleum engineering, and related courses in the UK. Over time, the net will be cast wider to further target leading education and training institutions within the EU and globally. By improving access to the new, highly computer literate generation of geoscientists and engineers, Working Smart intends to assist E&P and related service companies to compete at a global level for the limited supply of specialist petroleum graduates. Through its online ‘Skills Based Competency Databank', candidates can be searched and screened based on a wide range of attributes, resulting in a transparent and level playing field for selection.
Many observers note that the crisis in science education in Western Europe and elsewhere starts well before students reach university age. Reasons provided by universities included a lack of good science education in secondary school and the perception among young people that ‘science is difficult' and that easier options exist. Regarding the earth sciences in particular, it was noted that geology is seldom taught and there is a lack of oil industry career information in secondary schools. Furthermore, our industry can appear rather old fashioned and has a low popular profile, for example compared with forensic science, which features prominently in several TV series. A concerted industry-wide initiative would also be beneficial to target younger people using several channels, including the media as well as the formal education system. In particular, we must balance the understandable environmental concerns of budding young scientists by better explaining the role of hydrocarbons
in society and their contribution to a mixed and dynamic range of energy sources.
Although, the current situation regarding student intake and graduate retention (i.e. remaining in our industry) is bleak in some geographic areas, there appears to be a realization within the industry that this situation will not change without proactive action. It is unfair to rely on academic or government bodies to address these problems, which in effect have been impacted by our industry over time. We are definitely experiencing an increase in new initiatives and a general energy, enthusiasm, and commitment to address the current challenges. Working in collaboration with academia and other bodies on a world stage, we will hopefully secure the next generation of geoscientists and engineers. They are, after all, our industry lifeline.
Training and development
Skill is the greatest differentiator in the highly technical competitive market in which the oil and gas business operates. Ultimately, no amount of current proven reserves will protect a company if its workforce is not equipped to explore, develop, and produce oilfields more effectively than its competitors. Most large companies have a training scheme in place for new graduates, typically with programmes lasting between one and three years. Many move their new recruits frequently over the training period, through placements in a wide variety of situations at home and overseas, to give them an understanding of the requirements of field operations, project based teams, and support functions. Training and development must continue after completion of the graduate scheme and throughout their careers, otherwise companies run the risk of their people becoming stale and ineffective. This in turn is likely to lead to problems with staff motivation and retention, particularly in a buoyant business economy and related employment market.
Training is quite rightly moving back up the priority list among forward-thinking companies. Effective training should be well planned, structured, and needs-based to meet the company business strategy and individuals' aspirations in the short, medium, and long-term. Training should be aimed at developing the individuals, not their current role or just specific projected future roles. Rather than by instruction from above, staff should be encouraged to manage their own professional development plans, with guidance, supervision, and support through the management structure. New skills learned should, however, be relevant and used, otherwise they will be quickly forgotten. If necessary, people must be given extra freedom to utilize their new skills, along with appropriate support and supervision.
Most companies aspire to a dynamic culture and many are actively pursuing a strategy of developing a more global workforce, all of which adds to the diversity of skill sets that must be managed. For a company to effectively utilize and develop the skills at its disposal, it must first know what it has - and it is a sad fact that many companies have a very poor handle on their corporate skill set. Database driven online systems can provide an invaluable tool for individuals and companies to register, analyze, and develop their skills. Leveraging long experience in skill-competency assessment, Working Smart has developed related skill management technologies, plus e-business tools for sourcing and managing training modules.
Most companies provide training in-house, mixed with a range of commercial training modules. Several universities have expressed an interest in further developing and supplying continuous education as part of a two-way flow of cooperation between academia, companies, and industry organizations.
It is recognized that effective staff development planning boosts retention and loyalty from personnel. To maximize its effectiveness, however, the career progression planning process needs to be transparent and consistent across the company for various staffing types (e.g., international, resident, geo-mobile). It should have clear monitoring and control mechanisms in place and result in regular appraisals with known rewards.
Recruitment
There is no doubt that the job market is buoyant and with this comes high mobility of people. In addition many companies are seeing a high rate of targeted ‘poaching' of their staff. Working Smart has, over the last 12 months, experienced a continuous rise in the number of upstream oil and gas job vacancies that it has been asked to help fill, inviting experienced people to change employer. There is no sign of a slowdown in this demand.
With the increase in jobs, new candidate registrations and dynamics in the market, the number of people applying for new jobs continues to increase, highlighting the volatility of the market. Whilst mobility will be one company's gain, it will be another's loss, and it ultimately does not add to the industry skills pool as a whole, as the pool size remains unchanged. We continue to experience a greater number of applications from our targeted headhunting service rather than our indirect advertising of jobs. The primary reasons for this are a) our target group consists of passive and actively seeking candidates and b) job opportunities are constantly being delivered direct to good candidates and therefore, their need to search for jobs diminishes.
We continue to see a major increase in the number of new candidate registrations. In 2006, there was an increase of 48% of new registrants over 2005, and this trend appears to be continuing in 2007. In many cases, candidates are testing the market, investigating what other opportunities are out there, and therefore passively looking. In other cases they are actively looking and registering so they can be kept informed of potential jobs.
On examining the demographics of our candidate pool, which covers 153 countries, a notable recent trend shows a rapid increase in the number of experienced Indian nationals looking to expand their opportunities. This shift is driven by the fact that some of our clients have, in the last year, established business units in India, including IT and E&P software application support centres and seismic data processing centres to name but a few.
With recruitment at an all time high, companies are competing for staff. Throwing more money at the problem is not the answer any more, plus we all know that if ‘someone joins for money, they will leave for money'. Like any market force, when demand outweighs supply, new measures are called for. Companies are moving away from replacement or ad hoc hiring and are implementing integrated cohesive short and long-term hiring strategies that can a) build a diverse workforce (e.g. gender, culture, nationality, demographics), b) balance internal and external resources, c) liaise with other industries and professions to identify spare capacity and transferable skills, d) promote and encourage staff referrals, and increasingly e) support an open-door policy for valued past employees to return.
Retention
Many companies are focusing on retention strategies to secure their knowledge base. They are proactive in identifying the reasons why staff leave and are adjusting retention strategies accordingly. Some strategies incorporate a) an ability to support individual's preferences - career, location, flexibility, and mobility, b) the ability to support individual's needs to progress, their career - technical, operational, and management, c) a self-managed career development process, and d) transparent career progression and reward systems (bonus schemes, share options offered). We all recognize that the loss of staff can leave a company very exposed and vulnerable. Many companies strive to minimize this risk by attempting to develop a culture that bonds employees, considers life balances, addresses team dynamics, maintains stability, promotes, and develops, and above all rewards goals achieved.
Building knowledge and experience
There is some scope for transferring skills in from elsewhere, such as from the armed forces, auto, and other mechanical engineers, fishing, and other offshore industries. The process requires fast-track training programmes targeted at areas where major shortfalls exist. This raises the question of how such retraining can and should be funded. In some cases, money may be available through government initiatives, many of which have proven highly effective. In others, industry investment will be required.
Another invaluable source of transferable knowledge and skill is the pool of experienced professionals close to retirement or, in many cases, already retired or semi-retired. Several companies have introduced initiatives whereby senior staff are mentoring younger managers in order that they, in turn, will be better able to fast-track new employees into autonomous and profit-making workers, thus helping to redress the demographic imbalance. Another source of knowledge and experience is through consultants.
Working Smart research on ‘Consultancy trends' reported that 94% of oil companies and 77% of service companies said that they used consultants. Service companies reported finding permanent staff a slightly greater issue than oil companies, which is predominately due to the fact that the oil companies can usually offer better salary packages. The question of ‘Why do you hire consultants' provided similar results for both groups.
In sourcing consultants, over half were hired through direct contact with individuals already known by the company in question, typically former employees or professional contacts known by senior employees. About half of the consultants were engaged on an ad hoc basis for specific projects. Most of the remainder, although still engaged on an as-needed basis, had a stronger relationship with the company, either on a partnering/alliance basis or more commonly as approved ‘associates' used regularly for different projects. The question of ‘What do you expect consultants to have before contracting them?' provided similar results across both the oil and service companies.
An associate programme offers several advantages because consultants come pre-qualified with a known, proven skills set and an approved relationship with the company, including terms of work, HSE training, and other requirements. This provides a very flexible potential workforce with minimum start-up delays due to personnel department red tape and technical investigations.
A coherent approach
As an established global petroleum recruitment company, Working Smart is highly successful in attracting graduates, experienced professionals, and semi-retired professionals as consultants. However, when we consider the expected numbers of geoscientists and engineers entering and leaving our industry over the next few years, and compare this with predicted demand, the challenge cannot be solved by individual companies but must be addressed at an industry level.
We must address the different challenges across the complete spectrum of experience levels:
• Students - how do we excite them to undertake a science/engineering degree?
• Graduates - how do we retain their interest and not lose them to other industries? How do we encourage them to further their education in desired topics?
• Postgraduates - how do we further develop their academic achievements and interest?
• Professionals (0-5 years experience) - how do we attract, secure, train, mentor, and nurture?
• Professionals (6-10 years) - how do we involve, stretch, develop and retain?
• Professionals (11-20+) - how do we motivate, develop, and retain?
• Professionals (25+) - how do we secure or entice back as/when needed?
In an environment where companies are competing for a finite resource, those that are prepared with strategies to resource, develop, and best utilize the available skills and competencies, will succeed. Most would agree that oil and service companies are characterized by a high ageing workforce, shortage of young staff, and an all time low number of new graduates. A structured approach to skill management, integrating all available resources, will bring competitive advantage in our highly specialized industry. Dare we say it - we need a holistic approach to this immediate and paramount problem.
Conclusion
In today's global competitive marketplace, the name of the game is change. Only those business organizations that make the evolutionary leap beyond conventional structures and the ‘programme-of-the-month' approach to management will survive. Today's new breed of flexible, high-performance organizations are those in which all their people are active participants in managing these ever accelerating and unrelenting changes that occur both within their organization and in the marketplace. To quote an old adage - the greatest asset an organization holds is its people and as such the recruitment, development, and retention of its people is paramount to its success.
Details of the research referred to in this article can be found under News Room at www.workingsmart.co.uk
Author
Deirdre O'Donnell - Managing Director, Working Smart