workforce sustainability - building a thriving workforce in a rebalance era
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M A N A G I N G H U M A N C A P I T A L I N O I L & G A S
T H R I V I N G
I N A
R E B A L A N C E
E R A
M E R C E R E N E R G Y
2 0 1 5 O V E R V I E W A N D F O R W A R D O U T L O O K
THRIVING IN A REBALANCE ERA | 2
IN 2015 A MARKET DISRUPTION
OCCURRED LIKE NO OTHER
O&G HR LEADERS RESPONDED,
BUT AT WHAT LONG-TERM COST
ENTER THE ERA OF
REBALANCING BUSINESS
PORTFOLIOS, HUMAN CAPITAL
STRATEGIES, AND HUMAN
RESOURCE DELIVERY MODELS
INTRODUCTION
Throughout 2015, Mercer conducted a detailed examination of the human capital strategies, tactics, and actions utilized by O&G companies to address the market disruption. The analysis looked to understand five core questions.
How did HR leaders respond to the disruption?
Were those responses effective?
What are the human capital challenges in the future?
What responses did HR leaders offer to address future challenges?
What strategies should HR leaders utilize to meet those future challenges?
• Experiences from our global,
650-plus community of energy
consultants
• Global labor market analysis for
the entire value chain
• Three-part, detailed survey with
HR leaders from more than 250
O&G companies around the
world
THRIVING IN A REBALANCE ERA | 3
MERCER’S INSIGHTS INFORMED BY REAL-WORLD EXPERIENCES
THRIVING IN A REBALANCE ERA | 4
2015 O&G PROJECTS OVERVIEW
• 550 clients across 40 countries
• 2,055 unique projects
• averaging ~4 projects per client
• Project types
− 20 M&A
− 367 health & benefits
− 83 investments
− 621 retirement
− 964 talent
BUSINESS CONTEXT – A MARKET IN DISRUPTION
THRIVING IN A REBALANCE ERA | 5
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UPSTREAM
S&P Oil and Gas E&P Select Index
Pe
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$200
$250
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MIDSTREAM
Alerian MLP Index
Clo
se
Price
DOWNSTREAM
Refining annual margins
18.00
16.00
14.00
12.00
10.00
8.00
2011 2012 2013 2014 2015E 2016E 2017E
18.00
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14.00
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$/bbl gross margin $/bbl Brent-WTI spread
Services
Oil field services revenue by quarter
OIL & GAS NOVATIONS
THRIVING IN A REBALANCE ERA | 6
Throughout 2015 we witnessed complete novations (the substitution of a
new obligation for an old one) in terms of business direction, portfolio,
investment patterns, priorities, core competencies, and the resulting
requirements for HR, individual employees, and the organization at large.
HYPER GROWTH COST CUTTING BUILD DOWN
TRANSFORMATION / OPTIMIZATION
BUILD UP RETURN TO GROWTH
RESPONSE TO MARKET DISRUPTION
2015
THRIVING IN A REBALANCE ERA | 7 Mercer 2015 O&G Market Disruption Survey
IMPACT OF HEADCOUNT REDUCTIONS IN 2015
THRIVING IN A REBALANCE ERA | 8
TWO CONDITIONS / THEMES FOR SUCCESS
THRIVING IN A REBALANCE ERA | 9
1. HR and business leadership collaborated
on the best set of actions and those actions
were staged across three or more ‘rounds’
of cost-management efforts.
2. Actions were most effective when they were
taken with deep understanding of the
current environment, and considering the
future business growth and potential
portfolio rebalance scenarios.
HOW WILL O&G HR LEADERS ADDRESS FUTURE CHALLENGES
THRIVING IN A REBALANCE ERA | 10
Mercer 2015 O&G Market Disruption Survey
1
3
2
4
5
1
THREE CENTRAL THEMES GUIDE HR’S FORWARD AGENDA
THRIVING IN A REBALANCE ERA | 11
The first includes priorities of developing strategic workforce plans
leveraging analytics; developing a renewed total rewards program; and
assessing and reshaping the employee value proposition.
The second theme falls squarely within the space of HR governance, where
respondents prioritize reshaping HR service delivery and measuring the
effectiveness of HR investments.
Respondents also placed a great deal of importance on optimizing
employee engagement and enhancing leadership capability.
Interestingly, respondents placed essentially equal weight on these two
priorities, supporting Mercer’s research that leadership effectiveness is a core
driver of a highly engaged workforce.
1
2
3
Respondents overwhelmingly intend to focus on building internal capability and
further optimizing their organizations to operate in a sustained low-price
environment. These actions coincide with the current industry call for “lean” while
driving for step-change improvements in operational productivity.
THE VALUE OF WORKFORCE PLANNING
THRIVING IN A REBALANCE ERA | 12
The workforce plan is the one of the cornerstones of effective human capital
management, helping to ensure that HR strategies deliver on business goals and
requirements. For companies hoping to survive and remain competitive in the current
market, building workforce planning capability is now more important than ever.
ENTER THE REBALANCE ERA
THRIVING IN A REBALANCE ERA | 13
FUNDAMENTAL WORKFORCE CHALLENGES FACING O&G
THRIVING IN A REBALANCE ERA | 14
1 | DEMOGRAPHIC IMBALANCES
2 | SHORTAGE OF SKILLED WORKERS
3 | TIME TO PROFICIENCY
DEMOGRAPHIC IMBALANCES
REGIONAL PROFILES 2014• Both present and forward
challenges
• These challenges will be
compounded for companies that
acquire talent only within a single
region
• Projecting retirements to 2020,
Europe will lose 18% of its
overall workforce and 20% of
geoscientists and engineers
while USA and Canada will lose
46% of workers ages 50+ equal
to 570,965 person-years of
experience leaving the sector by
2020
• Leveraging the available talent of
one region to balance the needs
of another region will challenge
companies as they seek to
embrace mobility and manage a
more diverse workforceTHRIVING IN A REBALANCE ERA | 15
Mercer 2015 O&G Talent Outlook
TALENT SHORTAGE FOR CRITICAL ROLES
SUPPLY AND DEMAND
• As the sector aggressively shed
headcount in 2015, and
continues down that path in early
2016, it is understandably difficult
to accept that there is a global
talent shortage of critical roles
across the O&G sector
• Mercer’s Oil and Gas Talent
Outlook 2015–2025 of 10 critical
roles in O&G projected to 2025
reveals a substantial shortage of
six critical positions, short-to-
balanced in three and a potential
surplus in only one critical role
• Those countries with surplus
simply do not have the supply to
fulfill the demand requirements of
the world’s operations
THRIVING IN A REBALANCE ERA | 16
Mercer 2015 O&G Talent Outlook
TIME TO PROFICIENCY
DEVELOPING EXPERTISE IN KEY
FUNCTIONS• This gap risk compounds when
the time to proficiency and
expertise for key functions is
taken into account
• Value-driving roles such as
engineer and geoscientist take a
decade to develop to a
proficiency level and decades to
develop to an expert level
• As HR leaders consider and plan
their workforce of the future,
building capability becomes a
core driver of future success
• Accelerating the velocity of
development – without
compromising quality – becomes
a mandate for all organizations
THRIVING IN A REBALANCE ERA | 17
Mercer 2015 O&G Talent Outlook
MERCER’S TALENT CONTINUUM
THRIVING IN A REBALANCE ERA | 18
• The holistic nature of the
continuum ensures that leaders
think past singular programs in
isolation, and move towards a
systems thinking perspective.
• The Continuum provides a
pathway for current-state
analysis and diagnosis, and a
framework for developing the
unique approach for human-
capital management required to
enhance individual,
organizational, and thus
enterprise-wide vibrancy and
performance.
ADVANCES IN WORKFORCE PLANNING
AND MODELING
LEVERAGE AN ELASTIC WORKFORCE
THRIVING IN A REBALANCE ERA | 19
• Elasticity enables dynamic
responsiveness to the market
peaks and valleys
• In order to create an elastic
workforce, organizations must
first identify the core set of critical
skills and employee staff
requirements necessary to
deliver the base business model
• The workforce supplement to the
core is considered the elastic
workforce. This is the staffing
level optimal for the conditional
market environment ahead
• An elastic workforce allows the
core base business the ability to
efficiently and effectively flex the
staffing levels for growth and
contraction as necessary
BUSINESS PRIORITIES TO THRIVE IN A ‘LOWER FOR LONGER’
O&G ENVIRONMENT …
… AND THESE ARE THE SAME PRIORITIES HR MANAGEMENT NEEDS
TO GUIDE THEIR CHANGE STRATEGY AND CONTRIBUTION TO THE
ENTERPRISE
“LEAN” OPERATING
MODEL
Increase scalable delivery
Improve asset performance
Reduce risk volatility
Reduce operating costs
Contain future costs
Increase free cash flow
Reduce balance sheet liabilities
Redesign the portfolio
THRIVING IN A REBALANCE ERA | 20
THRIVING IN A REBALANCE ERA | 21
THRIVING
IN A
REBALANCE
ERA
Thank you!John Koob, PartnerGlobal Oil & Gas Industry Segment LeaderMercer Energy500 Dallas Street, Suite 1400, Houston, TX 77002, USA+1 713 276 2137 | Mobile +1 713 376 7139john.koob@mercer.com
THRIVING IN A REBALANCE ERA | 22
HOW DID HR LEADERS RESPOND TO THE
DISRUPTION?
WERE THOSE RESPONSES EFFECTIVE?
WHAT ARE THE HUMAN CAPITAL CHALLENGES
IN THE FUTURE?
WHAT STRATEGIES SHOULD HR LEADERS
UTILIZE TO MEET THOSE FUTURE
CHALLENGES?
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