Workforce planning strategies for turbulent times in Oil & Gas: Creating more agile and effective organizations

Editor's Notes

• #8: So change management is really about leadership and the art of managing change But change management is only as good as the leader or leaders that drive it
• #9: SAP – Best practice for Oil & Gas - Hot topics research report Introduction: To set a context for this year’s report and the subsequent annual Best Practices for Oil & Gas conference this September – we asked oil and gas leaders from across all segments to identify the top focuses of the C-Suite in 2015. The below represents, in order, the key leadership focuses in 2015: 1. Cost Reduction, Capital Control, Spend Efficiency and Prioritization 2. Maximizing Productivity with Optimized Business Processes 3. Maximizing Value Realization and Value Driven Activity 4. Driving Organizational Alignment and Transparency 5. Effective Risk Mitigation and Regulatory Compliance 6. Workforce Optimization and Talent Acquisition, Management and Retention 7. Data Driven Situational Awareness 8. Maximizing Asset Utilization and Operational Productivity The crux of this report is focused on the day-to-day challenges experienced by professionals, managers and leaders from across all segments and roles in the industry, their day-in and day-out obstacles. We asked oil and gas leadership, management and professionals to identify the most critical challenges they and their teams face on a daily basis in 2015. The challenges and questions that are most critical to them. The conference, this September, will provide evidenced backed best practice solutions to overcome challenges in the below topic areas and leverage opportunities to improve. 1. The Networked Economy 2. Repositioning IT &the Evolving Workforce 3. Making More Informed Decisions –Data, Analytics & Reporting 4. Leveraging the Cloud, Mobility & HANA 5. Enhancing Business Processes 6. Indirect Supply Chain, Logistics & Procurement 7. Asset Integrity, Maintenance &Reliability 8. Finance, Accounting &Capital Management 9. Operations &Production 10. Large Capital Projects 11. Maximizing Technology Efficiency, Delivery &Innovation 12. Risk Mitigation, EH&S &Compliance 13. Hydrocarbon Supply Chain 14. Enhancing the User Interface &User Experience (UI &UX)
• #10: MANAGING THROUGH DISRUPTION –A HUMAN RESOURCE PERSPECTIVE Within days of OPEC’s decision not to cut production in November 2014 and as the slide in oil prices began, Mercer released a spot survey, “2015 Changing Energy Industry Dynamics”, to understand what HR professionals were considering or planning in response to the disruption. The Survey looked for insight into 2015 actions as well as 2016 and beyond. Results over the six-week survey period showed a significant shift from “wait and see” to “definitive” action - not surprising given the swift and dramatic change in market fundamentals. Outlined below are HR’s highest-ranked responses to the changes in business strategy and direction. These new results represent a drastic change from the previously reported challenge of keeping up with growth, as recently as mid-2014. Impact on 2015 business strategy HR’s 2015 response as a result • 44% will cut back Capital Expenditures as a result of the decline in oil prices. • 38% will reduce selling, general, and administrative (SG&A), and 23% will reduce core (non-SG&A) operating expenses. • 7% will explore potential divestures of assets, business units, products ,or geographies. • Top 3 priorities are: – Decrease in “buying” talent. – Freeze or cut compensation. – Consider how to enhance cost effectiveness of HR delivery. • 16% may reduce staff (restructuring). Perhaps most telling of how swiftly a market disruption can alter the strategies and course of action is to consider talent acquisition. In Mercer’s Oil and Gas Talent Outlook and Workforce Practices Survey (released in 2014), employers focused almost exclusively on “buying” (poaching) talent as the core of their talent strategy – with 66% of employers indicating a preference to “buy” talent over “build” talent. As the headlines now reveal on almost a daily basis, “buying” talent has taken a distant back seat to restructuring and layoffs. In the 2015 Changing Energy Industry Dynamics Survey, respondents indicate a dramatic cut in hiring plans. We point out that hiring versus reductions is largely dictated by where the enterprise plays in the value chain and its unique situation (geographic presence, operating model, and debt levels). Looking at strategies and plans for the longer-term (2016 and beyond), respondents were primarily focused on “building” internal strength and capability (45%); coupled with enhancing supervisory, management, and leadership skills (45%); and understanding and optimizing employee engagement (41%). These priorities were followed by seeking to reshape HR service delivery (23%); optimizing the organization at large (22%); and assessing and reshaping their employment value proposition (20%). While we are aware that sudden drastic actions, such as reductions in pay, may be necessary, they may be seriously detrimental to the enterprise over the long-term. We support longer-term thinking to create internal capability to deal with volatility and change in the coming years.
• #11: Skill shortages continue to be the main concern for employers worldwide Skills shortages remain the number one concern for employers for the coming year. However, there has been a significant rise in the concern regarding economic instability in specific regions. In Australasia and the CIS, 40 per cent feel that economic climate will hinder growth. At the end of 2014 the price per barrel had decreased by 41 per cent over the previous six months. This combined with an already fragile global economy may see a dramatic decline in further investment within the industry. John Faraguna, Managing Director, Hays Oil & Gas Confidence levels of survey respondents seem highly optimistic given the economic uncertainties facing the industry.
• #12: Addressing the Global Skills Shortage Inadequate succession planning and insufficient time for knowledge transfer are seen by 28 per cent of employers as the main reason for the global skills shortage. We are seeing more employers taking proactive measures to address this by hiring graduates into the business with enough time to develop and coach into leaders and experts. Training and up-skilling are part of the industry’s response to tackle the skills shortage and aging workforce concern. WOMEN IN OIL AND GAS: TARGETING THE FEMALE MARKET TO TACKLE THE SKILLS SHORTAGE The gender imbalance within the oil and gas industry is a topic of much debate and there has been a push on initiatives from individual companies and policy makers to encourage more women to enter the oil and gas sector. As employers face skills shortages globally, tapping into the female candidate pool could provide the talent needed to help grow the industry. Aside from the obvious rebalancing of the workforce there are key commercial reasons for employers to engage more women into their businesses. The Women Matter [3] series of reports produced by McKinsey & Company, global management consultants, indicate that businesses with a higher number of women in executive positions tend to be more successful financially than those with no women at senior levels. Getting the right balance of skills, experience and leadership at the top really impacts the whole business, something employers must factor in when looking to hire into executive positions. A significant portion of the global oil and gas employment market is within the science, technology, engineering and mathematics (STEM) fields, such as geoscientists and engineers and changes within the STEM candidate markets will impact the oil and gas industry. According to research by Hays, there has been an increase in the number of women taking science programmes at undergraduate level. According to Higher Education Statistics Agency (HESA), in 2013 women made up over half of all science subject undergraduates in the UK. Though this trend will vary in different oil and gas regions, hiring managers should take advantage of this skilled, readily available candidate pool where possible. How to tackle the skills shortage has been a topic for much debate and targeting the female market to fill these positions is on the agenda for most employers. This year’s Guide shows that almost 40 per cent of all female respondents are in their first four years of working in the oil and gas industry. Employers can access this new workforce to alleviate the skills shortage for senior positions. Showcasing mentorship programmes and succession plans throughout the hiring process and incorporating childcare or flexible work options will help attract women into the business. However, the challenge still remains on how best to keep women in the industry. As our age demographics chart shows below, the industry’s workforce is male dominated, particularly at higher levels of seniority. In part this can be explained by fewer women being hired in the past. However, the industry has been a less attractive long-term career option for women than for men. Consequently we’ve seen a disproportionate number of women leave the workforce before retirement. GENERATION Y: THE WORKFORCE TO HELP SOLVE THE SKILLS SHORTAGE Generation Y (Gen Y) – those born between 1983 and 1995 – now represent a significant and increasing percentage of the global labour market. This year, Gen Y made up 39.9 per cent of the global workforce, an 8.7 per cent uplift from the previous year. As the baby boomers and Gen X start to leave the workforce, this generation will take over the reins and be responsible for leading the worldwide economy. Research conducted by Hays sheds some light on Gen Y’s attitudes to issues surrounding their work and careers: what attracts them to a potential employer and what makes them stay such as reward training and work/life balance, what they look for in an ideal boss, what they regard as key indicators of career success, and how they relate to social media and emerging technology. It’s probably not surprising that our research shows that Gen Y across the globe differs from prior generations in terms of their needs and aspirations in the workplace. By and large, they look for a more engaging employee value proposition than prior generations, and value flexibility in when and where they work. However, our research also shows that Gen Y differs considerably from region to region and from country to country. For instance, while all Gen Y’s want to be compensated appropriately, wealth creation is much more important to those in China than Gen Y in the UK or US where work/life balance and job satisfaction are equally important. In contrast, Gen Y in Japan views job security as the most important indicator of career success. Gen Y in the US are more motivated by making a difference to society than any other country surveyed, whereas Gen Y in the UK are the most motivated by interesting work and coming up with solutions, and workers in China value public recognition. In the oil and gas industry, the ageing workforce and the increasing demand for highly skilled professionals has created skills shortages in many disciplines and in many parts of the world. In 2014, 22 per cent of respondents were aged 50 and above, 7 per cent fewer than the previous year. Therefore, efforts to attract more Gen Y workers into the industry seem to be having an impact. However, our survey shows that skills shortages are still the most important issue facing companies today. Gen Y workers will play an increasingly important role in solving the industry’s skill shortages. Therefore it is critical for companies and their HR departments to understand what motivates Gen Y so that they can most effectively attract, motivate and retain them.
• #13: Key Insights: The Middle East continues to rely heavily on expat workforce, while Asia battles to retain and attract home its experienced, indigenous workforce. Ninety-one per cent of employees would consider an international move which highlights the global nature of the oil and gas labour market. While relocation packages are ranked the fifth most valuable benefit (a value of 15 per cent of total compensation package), only 23 per cent receive the benefit. Given that hiring managers continually struggle to find specific niche skills for their projects locally, companies need to better understand candidate drivers when looking to hire overseas talent. To tap into this global mobile talent pool, employers must deliver a competitive offering that includes an attractive relocation component.
• #14: Add slide: Mutiple user of
• #17: This framework is useful for understanding the interdependencies between the HR processes and the supporting cast of technology, analytics and content. Ultimately we’re trying to make sure organizations have the right HR processes to help the business executive on strategic and operational plans. Technology helps us streamline and simplify these processes Analytics help us measure how well our processes are meeting expectations Content is the fuel that ensures we’re focusing our HR processes on the right behavior, objectives, learning etc… From all this we can see what WFPlanning plays is the strategic side of HR and has the potential to play such a key role in the business. It’s the one HR process that spans Corporate, Finance, Operations and HR
• #18: Taking a deeper look at WFP we find three different types. The often follow a maturity curve from left to right (but not always) WFA is essentially seeing HR in the rear view mirror. There is where most organizations seem to be, but that struggle with data integrity issues which stem from position mgmt., hire-to-retire process issues. Very helpful for understanding current gaps, risks, no change future state based on current turnover rates, retirement rates, other trends Demand Planning – otherwise known as OWP and Headcount and Budget planning – is the near term planning (1 year) –This is why I was particularly drawn to Nakisa. This is the annual process that can bring HR, Ops and Finance together to review strategy, cost center impact changes needed, plans for approval. Having worked for an integrated energy company this was the most frustrating HR process on the planet and yet the least well supported by technology. We maintained the most expensive macro I’ve seen, that always broke, where filters were messed up, permissions mixed up (exposing the wrong people to highly sensitive data – peoples salaries), -- things that were never intended for a spreadsheet. WFP – otherwise known as SWP – is the longer term planning (2-5 years, some times to 10 years) – where we find scenario modeling, skill forecasting. This where we test strategy against capability (talent) to execute. This is HR’s best opportunity for bringing the most strategic value to the business. For example – when implementing a WFP solution with an energy regulator it was amazing to see how engaged Operations leaders were during the WFP workshops and active they were in understanding the dynamics behind the workforce issues they were experiencing in the Fort Mac. Area. WFP is also where we see the most variability of use cases, applications and tools. For example – working as Director OD for another energy company with diversified portfolio of businesses I had several ‘customers’ (HR VPs) come to me with very different WFP needs: Setting up a new facility in a new geography – how to plan for that? Addressing an aging workforce with a second BU Strategy planning and determining critical roles and candidates There are many other use cases…and all need data, tools and planning.
• #19: Here is a sample WFP framework from HCI to help illustrate the process…
• #20: Doug
• #23: Organization design is about the distribution of work, not just structure, though that is the manifest tangible outcome. Change in structure, cuts or mergers, or whatever, starts with a clear view of the distribution of work to execute on your plans, and deliver your intended goals. Redistribution of the work so it can be effectively handled by your target workforce level requires rigorously tested principles of how complex, human adaptive systems work.
• #24: design a merged organization resulting from an acquisition to support achievement of corporate business plan strategies and goals in a rapidly changing and demanding production environment ensure that the producing element of the system, i.e. Operations, was effectively structured to deliver expected volumes of bitumen and synthetic crude, safely, to the required level of quality, with operational reliability, and in environmentally sound ways in a matrix system, incorporate the effective structuring of other key areas such as Maintenance, Engineering (process and reliability), Reclamation, Environment, Human Resources, etc.
• #25: This is simplified version – just to see a bit better – with a focus on the maintenance function line Oil Sands Operator – energy and utilities division Initial surface chart…all looks good, right? To do the quick count: 106 positions, 14 reporting to the unit leader, 54 at the next layer, and 37 at the fourth layer
• #26: Now we have added some design principles that drive alignment of work by layers and levels. The red lines. Our diagnosis involved reading what people the role was supposed to be accountable for, talking to people about what they were actually accountable for, and double checking that with the managers accountable for their work. This is the reality check. The light blue shows roles that are compressed or jammed up, and the green shows roles that are gapped, on the basis of the work they were actually doing, in terms of level of complexity. With this lens applied, we found that, of the 106 roles, 52 were in jam-ups, and 14 in gaps, with 1 in an inversion (operating at a higher complexity that their accountable manager). And many roles were in an overlap situation where they may be in a gap above and a jam with roles below. These are the misalignment conditions that are at cause for many of the operational and management pain points and symptoms: - Strategic misfires; innovation gaps; reduced engagement; increased expenses; sluggish responsiveness; bureaucratic practices  things like Inefficient meetings, poor execution, delays, recurring operational issues, inability to become proactive, low engagement, and low trust on teams, poor team coordination and communication, lower or ineffective collaboration, and more importantly unclear accountability and slow or ineffective decision-making. In general we find about 38% of roles are jammed and 18% of roles are gapped = 56% of roles not well aligned with the principles of the levels of complexity of work. This means only a fifty percent chance of success as planned or intended. Or about an inefficiency cost of t least $2500 per role per year (all roles, not just the misaligned one.) In a group of 1000 people, that is an initial rough estimate for better alignment of bout $2.5 million per year.
• #27: Here we see the proposed and preferred changes that were agreed upon to implement. There were actually three options proposed, and this one was the decided upon, preferred, option. A VP Role was actually added/created at the top most level, with 4 direct reports. The large extended box here represents an assumption of roles at this level with direct reporting relationships in the functional matrix. That is there are managers of roles that have functional line accountability, and their direct reports are dedicated to this group – these are the functional managers in Projects, E&H, Finance, HR, Supply Chain, Document Control. There are altogether about 84 directly accountable roles here, and another 6 functional accountability positions. So number of positions actually went down by about 15. (Do not have accurate actual headcount number changes due to the matrix structure – estimated to be at least 20%, and happened mostly in the lower levels) Notice the lack of colour here. We have proposed to filled the gaps, and eliminate jam-ups as much as possible. You may also notice some jamming up at the very bottom. These represent operator or technician positions that report to a Supervisor, who operates at generally the same level of complexity and has day to day supervision or lead hand accountability.
• #28: Simple and disciplined Define design principles and design criteria: What are the fundamentals that guide the design itself? How will you know which design option is best fit for purpose? Diagnose the organization: Assess and analyze the current structure: What is the work? By position or role, not individual What are the issues and opportunities? Develop design options: What are the possibilities for better alignment and their pros and cons? Decide: Based on design and decision criteria, what is your preferred option? Deliver: How will you implement the intended design?
• #32: Enable workforce agility by effectively modeling and planning changes to your org structure with powerful organizational modeling functionalities Prepare for change and execute change management with minimal disruption to business operations - Model and plan for organizational transformation Foster collaboration and innovation among a widely dispersed, mobile workforce - Search and collaborate with other employees through various directory listing options Improve decision-making to keep pace with rapid organizational change Get the most out of your existing ERP HCM investment by ensuring sound data integrity
• #43: Unfortunately, that’s all the time we have for today. We will be responding to all the unanswered questions in the coming days. If you have any more questions, please feel free to contact Raagi, Chuck and/or Nakisa@Nakisa.com. We invite you to visit the various resources we have available to you: The Org Management webpage for information on the solution suite as all of its modules, our resources page for thought leadership, tools and tips for organizational success and the solutions available at Nakisa that will help support your performance management strategy Our social media channels to keep up to date with the latest news and events, And our youtube channel for short demo videos on our Organizational and talent management solutions
• #44: - Does process change drive the structure changes needed? - How does this help provide the business case or show benefits of a certain design over other design decisions? - What principle drives the horizontal grouping?