I recently attended the UK Oil and Gas Employment and Skills Seminar: The 3 R’s – Recognition, Reward and Retention, where my colleague Gemma Bullivant presented a session titled Recognition and Reward: What Makes People Stay.
The purpose of the event was to highlight some of the most topical issues related to recognising, rewarding and retaining staff at a time when the UK’s oil and gas industry is facing its biggest challenge in 50 years due to the low levels of exploration. In 2013 only 15 exploration wells were drilled in comparison with 44 in 2008. The increase in operational costs alongside fallen revenues is becoming unsustainable. And what does this have to do with employee retention? Well, in a nutshell, production is currently low resulting in less revenue, whilst high level skills are in high demand at high rates. Paying high rates when profit is low becomes impossible making HR think of ways to attract and retain a skilled workforce using other means.
The poaching of talent
The industry is facing fierce competition for skilled engineers, both in the UK and abroad. People with the right skills are hard to find and often even harder to retain. Despite offering good salaries and packages, companies still struggle to retain talent, losing out to UK competitors, or Australian companies who offer great packages with the promise of a better work-life balance and great weather.
Filling vacant positions with contractors at high day rates
Due to demand for the right skills comes, what I believe to be, the biggest issue: filling the vacant positions with contractors paid at high day rates. This is a financial issue for the industry as it increases the operational costs (15.5 % rise in 2013 and anticipated to rise further in 2014).
The percentage of engineer contractors in oil and gas companies is over 50%, which incurs other challenges beyond just operational expenditure. Contractors are, by nature, often less committed / loyal to a company, they chop and change positions often and may not be updated in their training and development as well as taking their knowledge with them when they move on.
In an industry where there are more jobs than people to fulfill the roles, what can be done to recruit and retain the best talent?
A panel formed by a group of presenters addressed this question.
Regarding attrition, the panel suggested that companies should consider cross-training engineers from other disciplines (i.e. nuclear), developing skills internally and attracting skilled professionals from emerging markets.
On the subject of retention, there was a general consensus across the panel that besides focusing on a good salary package, other factors (intrinsic motivators) should be considered, including a better work-life balance, autonomy, continuous development and a clear career path.
Whilst I agree these are good suggestions, they don’t entirely solve the problem in the long run.
Long term plans
For those already in the workplace who have experience and developed skills, contracting has become more attractive than permanent employment and not just for high salary / bonus reasons. Whilst a good salary is important, it’s not always the main reason why people choose to contract. They choose it as a way of climbing up the corporate ladder. Changing companies can make it easier for them to progress their career faster. They can take on more responsibilities and have higher roles without having to wait years for a promotion in their permanent place of work. They see those roles being filled by other contractors and want to do the same.
Long term, strategic planning should also factor in the expectations of the millennial generation joining the workplace or early in their careers. They want to work for organisations that do something they believe in and are supportive, empowering and inspiring. They want to be coached, develop new skills faster and want a better home and work life balance. They value training and development three times more than cash bonuses (Source: PWC poll of 4271 new college students). The younger generation (generation 2020) goes even further than this. They already know what they want from life - my 15 year old son knows already what he wants to do for a living and knows exactly where he wants to work. Oil and gas companies should be attractive to both generations even from when they are in school, college and university.
So how can oil and gas companies retain talent now?
During the seminar there were many suggestions on how to retain talent but there was no overall consensus as to what could work across the industry.
I have a view that oil and gas companies should work together to set rules for the contracting market. For Together, they can:
cap contractor salaries to control costs
agree on the level of skills and experience workers in the industry should have in order to move from one level of responsibility to the next
work on career paths for those key roles while they work individually in development strategies within each organisation.
Although it’s easier said than done, HR departments need to go through this journey and work together if they want to help the financial issues the industry is facing. This will help them achieve a common goal in a collaborative way which can make a big impact in reducing operational expenditure in the oil and gas industry.