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The oil and gas industry is in the midst of a

period of rapid global expansion. However, will


it have the qualified people it needs to support
that growth? Recent research by Oliver Wyman
(formerly Mercer Management Consulting) in-
dicates that over the next decade, attracting and
retaining skilled workers will be one of the
biggest risks to industry success.
over the next decade, attracting and retaining
skilled workers will be one of the biggest risks to
industry success.
Upstream and midstream business are ex-
pected to be the most affected, as large numbers
of experienced workers retire and competition
for new talent heats up. This is not just an HR
issue: Knowledge, not assets, will be the source
of future value growth in the sector, and a short-
age of well-qualified professionals will constrain
the abilities both to grow in scale and to com-
pete in an ever more crowded field.
Oliver Wymans recent global survey on oil
and gas employment trends indicates that indi-
Workforce Issues
Talent Management Challenge in the Oil
and Gas Industry
Bob Orr and Bridget McVerry
vidual oil gas companies interviewed as part of
that study expect to face significant talent chal-
lenges over the next five to ten years. The survey
revealed a number of key issues that need to be
addressed to improve the future talent outlook.
While the aging workforce is a valid and
growing issue, particularly in the Western
Hemisphere, the more prevalent concern
across the global oil and gas industry is the
ability to find and retain qualified talent (Ex-
hibit 1). Companies are facing an experience
gap, which could significantly impact their
ability to compete in the global market.
As one independent oil company representative
stated, The people are just not there.
The ability to find experienced candidates
with the skills needed to meet anticipated de-
mand emerged as the top challenge facing the
sample group of companies. As one independ-
ent oil company representative stated, The
people are just not there. Approximately 70
percent of participating companies indicated
this challenge as their highest-priority issue
a third of all respondents cite this issue as crit-
ical to solve. Because the business model of
service firms is to offer oil and gas companies
a high-quality workforce with specialized in-
dustry knowledge, a shortage of experienced
workers in the labor market will challenge
their ability to deliver value to customers.
Attrition and retirement are expected to in-
tensify the demand for experienced resources.
Bob Orr (bob.orr@OliverWyman.com) is a di-
rector and head of the Oil and Gas Practice for
Oliver Wyman, in Houston. Bridget McVerry
(bridget.mcverry@OliverWyman.com) is a prin-
cipal in the firms Oil and Gas Practice.
18 2007 Wiley Periodicals, Inc. / DOI 10.1002/gas NATURAL GAS & ELECTRICITY DECEMBER 2007
Two-thirds of survey participants specifically
highlighted attrition among employees with
over ten years of tenure as a high-/critical pri-
ority issue. Once again, the issue is of greatest
concern to service companies, which provided
a substantially higher ranking than independ-
ents in this category.
Company concerns regarding the inadequate
supply of experienced talent, coupled with in-
creasing demand, is likely to intensify the cur-
rent level of competition for workers. As a re-
sult, companies feel increased pressure to retain
their experienced employees. The importance of
retention is reflected in the survey results. How-
ever, the industry is beginning to realize that tra-
ditional approaches to retention are not enough.
While developing a strong corporate culture and
work environment are important, additional
professional opportunities and financial rewards
are expected to be a more successful strategy for
retaining experienced talent.
Competitive compensation is widely recog-
nized as a foundation for retention. In the cur-
rent growth environment, there are a number of
lucrative opportunities available to experienced
workers. As competitive offers are increasing,
according to the representative of one national
oil company (NOC), so are the opportunities
for employees to change their employer. Al-
though most companies do not aspire to be the
highest payer in the market, most recognize the
necessity to offer a competitive package to their
current and potential employees.
Although most companies do not aspire to be
the highest payer in the market, most recognize
the necessity to offer a competitive package.
However, it is becoming clear that compen-
sation alone is not a sustainable solution to re-
tain talent. Instead, the importance of provid-
ing clear and challenging career opportunities
is beginning to emerge as a higher priority.
Over 85 percent of survey respondents cited
providing opportunities for career progres-
sion and personal development as a high-/
critical priority issue to address. Exhibit 2
shows a number of such strategies that compa-
nies are employing to address the issues.
The survey results indicate that too many
companies have yet to realize the scope of the
problem.
For example, when addressing regional tal-
ent gaps, oil and gas companies tend to focus
on internal solutions. However, this approach
will not be sustainable in the long term, and
DECEMBER 2007 NATURAL GAS & ELECTRICITY DOI 10.1002/gas / 2007 Wiley Periodicals, Inc. 19
Exhibit 1. Oil and Gas Industry Talent Management: Highest-Priority Challenge
20 2007 Wiley Periodicals, Inc. / DOI 10.1002/gas NATURAL GAS & ELECTRICITY DECEMBER 2007
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strategies focused on developing local pools of
talent are expected to have the greatest impact.
Rather than current piecemeal approaches,
what will be needed to address this challenge
effectively is an integrated, top-down talent
management strategy that ensures that a com-
pany can maintain and grow its workforce in
line with its long-term business goals.
WHERE HAS ALL THE TALENT GONE?
The pressures to find and hold on to quali-
fied people are expected to intensify as the oil
and gas industry expands over the next decade.
Exhibit 3 shows the percentage losses ex-
pected, by skill area. The looming talent chal-
lenge is the result of a number of different,
colliding factors.
1. An aging workforce. The average oil and gas
industry workers across the value chain are
in their mid-40s, with more than a third
expected to retire by 2012. Companies in
more mature geographies, such as North
America and Europe, will be especially hard
hit by this loss of experienced workers. See
Exhibit 4.
2. Fewer experienced candidates. Competition
is increasing for an insufficient supply of
experienced workers. Integration across the
value chain is driving the need for more
DECEMBER 2007 NATURAL GAS & ELECTRICITY DOI 10.1002/gas / 2007 Wiley Periodicals, Inc. 21
Exhibit 3. Expected Talent Gaps
Exhibit 4. Average Age Distribution
specialized (and, hence, scarcer) skill sets.
Other trends contributing to this shortage
include the slashing of industry workforces
two decades ago, the replacement of
tenured employees with entry-level work-
ers, and training reductions due to operat-
ing margin pressures.
3. Industry globalization. NOCs are expand-
ing operations into new geographies, while
the international oil companies are looking
to build local workforces and rely less on
flown-in talent. In many countries, how-
ever, fewer people have the requisite skills;
thus, those that do are highly sought after.
4. Difficulty attracting entry-level talent. Al-
though there is expected to be an adequate
supply of entry-level workers with basic
skills and knowledge, these workers have
many employment options both inside and
outside the energy space. Harsh, remote ex-
ploration and production (E&P) locations
and oil and gas industry reputation also
have an impact on attracting new talent.
WANTED: TOP-DOWN TALENT
MANAGEMENT
There are some positive trends in terms of
talent availabilityan increase in college gradu-
ates with usable skill sets, a move toward local-
ized workforces, and the use of creative retire-
ment strategies to keep experienced workers in
place. However, most oil and gas companies do
not appear to be well positioned to take advan-
tage of these trends. They are still focused on the
scramble for a small pool of top candidates
(or, in the case of NOCs, on hire and hold for
an employees professional lifetime), and have
yet to develop broader and more innovative ap-
proaches to sourcing workers.
Most oil and gas companies are still focused on
the scramble for a small pool of top candidates.
Most important, most oil and gas compa-
nies lack an integrated talent management
strategy that simultaneously focuses at a high
level on attracting, developing, and retaining
employees with the knowledge and capabili-
ties required for success. Exhibit 5 offers one
such approach.
Source and Recruit
Oil and gas companies must get ahead of the
curve in terms of knowing what their talent
needs will be tomorrow and developing an over-
all approach to sourcing. This starts with an as-
sessment of operational plans, growth targets,
and the existing workforce to identify potential
22 2007 Wiley Periodicals, Inc. / DOI 10.1002/gas NATURAL GAS & ELECTRICITY DECEMBER 2007
Exhibit 5. Key Levers in Talent Management
gaps. Developing new, nontraditional talent
pools to address evolving needs is the next criti-
cal piece of the puzzle, as competition for candi-
dates intensifies. To get prospects in the door,
the company will need to ensure that its brand
image helps differentiate it and will appeal to
candidates values. Finally, a structured recruit-
ing process must be developed that assesses can-
didates from the perspective of capabilities,
knowledge, and cultural fit.
Develop and Manage
Knowledge transfer and investment in staff
training and development will be essential to
long-term business success, particularly if a
company recruits talent with more generalized
skills or from other industries. Structured pro-
grams should be put in place to ensure knowl-
edge transfer from older, more experienced
employees to newer employees. In some cases,
a mentoring or journeyman approach may
be useful for developing very specialized skills.
High-quality employees also value formal ca-
reer management and leadership development
opportunities. Challenging roles and career path
opportunities can help retain the best employ-
ees, while there is certainly a competitive advan-
tage to be had from proactively building a com-
panys next generation of leaders.
Reward and Retain
Competition for talent and the prolifera-
tion of other opportunities increase the im-
portance of a well-defined plan for retention
and employee recognition. Failure to invest in
retention also can lead to a prohibitively ex-
pensive cycle of recruitment and training, not
to mention jeopardizing a companys perform-
ance. Retention plans should be targeted based
on the demographics of the talent pool, with
specific efforts focused on retaining workers
nearing retirement age. Also important are
benefits programs that enhance a companys
reputation for taking care of its own.
OLIVER WYMANS APPROACH TO
TALENT MANAGEMENT
In the face of the coming talent crisis, all
oil and gas companies will likely need to ad-
just their talent management strategies to sup-
port shifting business requirements and coun-
teract increased competition for their most
valuable employees.
Through recent work for energy compa-
nies, Oliver Wyman has developed an ap-
proach to assessing current talent management
efforts, identifying gaps and opportunities,
and developing integrated action plans that is
results-oriented and that can be aligned with
each companys unique structure and long-
term goals. Wymans approach is shown graph-
ically in Exhibit 6.
If you would be interested in discussing Oliver
Wymans perspectives on talent management
challenges in the oil and gas industry, please con-
tact one of the authors of this article.
DECEMBER 2007 NATURAL GAS & ELECTRICITY DOI 10.1002/gas / 2007 Wiley Periodicals, Inc. 23
Exhibit 6. Oliver Wyman Talent Management Strategy Approach