D. Kevin Berchelmann| Triangle Performance, LLC
$30 oil requires solid leadership and crazy efforts at managing talent.
The Oil & Gas industry has cycles; it’s a well-known challenge. Less obvious is that not everyone is experienced in this event. The industry is in the middle of a significant demographic shift, and it’s likely that many have not experienced such a significant change in favor over such a short period of time.
That demographic shift, coupled with our current crazy oil-price-ride creates a plethora of challenges around our people, and it’s likely that many don’t recognize the incredible burdens placed on talent management during these times. These burdens can include:
- Variable layoffs—layoffs driven by idle crews, unneeded shifts, facility shutdowns, though as painful as any other, are both expected and reasonably predictable during times of oil price decline; infrastructure layoffs—those positions not specifically tied to a revenue or activity stream (functional departments, indirect staffs, many “corporate” positions)—are neither widely expected nor nearly as predictable, are much harder to evaluate, and tend to create nervous ripples through an organization.
- Incentive plans routinely make up a significant piece of O&G’s total compensation mix, particularly for senior skilled professionals and high-potential employees. Threshold triggers like stock price, revenue, EBITDA, growth, etc. are likely under water, particularly in upstream businesses, causing compensation pains at a time when we need people stepping up, doing more with a lot less, and treating the business like their own. Reduced pay for more/better performance is hardly sustainable.
- This too shall pass (to some degree, over time), and we’ll need leadership depth and skills that are not being actively developed at this time. “Hunker down” leadership doesn’t require the same competencies and skills as “growth” leadership.
These just scratch the surface. Talent management is stood on its head during times like these, and the pressures are enormous for executives to successfully navigate these challenges. Hand-wringing doesn’t help, and we simply aren’t in a position to throw money at the problem. There are, however, things that some of our best clients in upstream and downstream industries do, such as:
- Communicate like crazy. Don’t wait for rumors to take hold… stay out in front of them. Secrecy will seldom work in executives’ favor, and telling the truth about something post-rumors lends credibility to future gossip. Talk to employees at every pivotal juncture, whether positive or negative. If layoffs are looming, say so. If they aren’t, say so. Include a simple proviso if you must, but speak to the issue regardless.
- Remind top performers that they are, well, top performers. This is no time for your best and brightest to have to guess where they stand. Tell them, in no uncertain terms, that they are highly valued. No, this doesn’t mean a non-cancellable lifetime contract, but it does mean we are eying them for retention. Especially upstream, with little positive news to go around, this can stand out as a glimpse at the future. Consider discretionary, one-time bonuses where underwater thresholds are of particular impact.
A footnote here would also include decisive performance management; make sure any negative staffing initiatives impact lower performers first. Sounds intuitive, but you would be amazed how often this is done poorly.
- Develop future talent even while you may be struggling to tread water. Remember that we coach and manage for now performance, but develop for future Helping folks understand why we need to make some tough decisions today is solid leadership; preparing some of the chosen to lead or better lead in the near and distant future is equally solid, and infinitely necessary.
Leadership and talent management has always been an important part of the Oil & Gas business. What executives today—especially those owning one or more parts of the Talent Management chain—need to understand and embrace is that we are in somewhat uncharted waters. Our changing demographics, a nearly unprecedented shift in economics, and the likelihood that we’re staring down the “new normal” all mean that critical attention to talent is necessary, both to weather the storm and to be prepared for future sunny days.