workforce sustainability - building a thriving workforce in a rebalance era

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


MERCER’S INSIGHTS INFORMED BY REAL-WORLD EXPERIENCES


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


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OIL & GAS NOVATIONS


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


TWO CONDITIONS / THEMES FOR SUCCESS


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


Mercer 2015 O&G Market Disruption Survey

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THREE CENTRAL THEMES GUIDE HR’S FORWARD AGENDA


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

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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


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


FUNDAMENTAL WORKFORCE CHALLENGES FACING O&G


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



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



MERCER’S TALENT CONTINUUM


• 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


• 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

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 [email protected]


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?