The skills shortage in the engineering field has been well documented as a threat to organizations across industries; however, the Oil & Gas industry (O&G) has seemingly been hit the hardest and has already begun to feel the impact of an ever-shrinking talent pool coupled with an aging workforce. To be fair, this is not a new revelation. However, it is an issue that is becoming more mainstream. Recently, I came across a Yahoo.com headlining story referencing the following Hartford Business article:
When did talent shortages become a front-page news story? Sure, the story was spun as career advice for those looking to earn top dollar salaries straight out of college, but the content behind the article highlighted the burning platform imperatives that typically preclude a Strategic Workforce Planning process.
The premise of the article is that the booming Shale Gas industry in the U.S. is taking off, resulting in an increased demand for engineers that is yielding sky-high salaries. Coupled with poaching from competitors and a lack of college graduates earning degrees in engineering, the war for engineering talent is in full swing. Recruiters report that it takes twice as long to hire an engineer than other roles, with experienced engineers (with 5-15 years tenure) being the most difficult to find. Additionally, the talent shortage is having difficult-to-ignore effects on O&G companies’ top line, as more and more projects are being delayed due to inadequate staffing levels.
Compounding the inability to grow the skilled talent pool is the age profile of the O&G industry. A 2007 study by the National Petroleum Council, which is an advisory committee to the U.S. Secretary of Energy, indicates that the majority of U.S. energy employees will be eligible to retire by 2017. In addition, The Interstate Oil and Gas Compact Commission calculated that the average age of production and service company employees is 46 to 49 years, and that the average retirement age in the O&G industry is 55 years. Clearly, the combination of a decreasing talent pool with a growing demand for engineers is going to continue presenting an industry-wide challenge.
As an organization in the O&G industry, what can you do today to increase your chances of winning the war for engineering talent? The answer is Strategic Workforce Planning (SWFP). Essentially, SWFP entails creating a process that works for your organization to make sure that you have the right people in the right place with the right skills at the right time, and all for the right price. In theory, if we are doing all of these things right, we should be able to execute on our business strategy successfully, and proactively mitigate risks along the way. For the O&G industry, this means implementing strategies today to retain internal engineering talent, strategic staffing initiatives to recruit additional talent, and tailoring career-pathing and development programs to build an internal talent pipeline. While this sounds simplistic and straightforward, the SWFP process typically consists of 5 steps (SuccessFactors’ methodology includes: Scenario Planning, Demand/Supply Forecasting, Risk Identification, Strategic Planning, Action & Accountability) that will help O&G organizations identify the biggest workforce risks (e.g., turnover, retirement, recruiting), as well as pinpoint where in the organization these risks are occurring. Once organizations know the specifics around the challenges they are facing over the next 3, 5, or 10 years, it becomes possible to proactively tailor interventions to mitigate such risks.
As an example, let’s say that after conducting a SWFP process for a O&G organization the top two identified risks (defined as the largest gap between supply and demand) are as follows:
These two risks will require very different strategies, and part of the SWFP process is to identify the strategies that will be the most feasible to implement while having the greatest impact on the issue. In the geoscientist example, we may weigh the costs/benefits of implementing a formal mentoring program vs. establishing an alumni network for retirees vs. a phased retirement program. For the petroleum engineer recruitment problem, we may want to compare the impact of a formal internship program vs. above-market salaries vs. developing internal talent to meet demand. By leveraging impact modeling and what-if analysis as part of the SWFP process, organizations can confidently make decisions on which strategic interventions to implement today to ensure they are better able to meet the demand of the future.
In sum, the options available to recruit, develop, reward, and retain the limited supply of engineers in the talent market are not unique to any one organization. However, with a finite amount of resources, having a well-defined SWFP process for determining the biggest threats to our business and how we will strategically plan against them can be a key differentiator in an extremely competitive landscape.