Priming the Pipeline: Upstream Sector Grooms Next Leaders

The future is now. The talent shortage facing the energy industry is no longer a thing of the future, it has arrived. Dubbed The Great Crew Change and The Perfect Storm, the oil and gas industry’s scramble to find qualified and interested candidates to replace outgoing baby boomers is in full swing. Some upstream companies have taken on the challenge of grooming the next generation of company leaders, while others have pipelines so desolate Texas tumbleweeds could roll right through.

With the first of the 76 million baby boomers reaching age 62 this year, working Americans ages 40 and up are expected to make up more than 50 percent of the workforce by 2010. Couple that with the fact that 50 percent of energy industry workers are eligible for retirement within the next five years and college engineering graduates have decreased 79 percent, and you have a recipe for crisis.pipeline

These alarming statistics greatly affect “oil patch” cities like Houston and Oklahoma City, where the local economy is symbiotically connected to the energy industry. Many upstream companies, from exploration and production to oil-field services, have been blessed with devoted and life-long employees, who have weathered many economic cycles. They are replete with institutional knowledge and experience that can’t be transferred in a short period of time.

In recent years, National Oilwell Varco (NOV) realized its entire executive team was made up of baby boomers and began taking steps to proactively prepare for the impending talent crisis. Pete Miller, CEO, initiated the NextGen program, an innovative recruitment and training initiative to groom high-potential graduates for future leadership positions. NextGen recruits college graduates from top schools to interview with NOV. Hiring managers seek engineering, liberal arts or business graduates with international experience, language skills and strong extracurricular profiles.

The hired candidates enter a one-year rotation, which allows them to work within four different business units throughout the year. This diversity provides them well-rounded training in NOV operations and gives them an opportunity to find their best-fit position. Rotation includes stringent performance plans and quarterly evaluations. After the year, NextGen-ers compete for a spot in their desired business unit.

The program is costly and challenging, but seeing as though the entire organization was at risk, it is a smart decision. After laying off many in the 1980s and hiring very few employees in the 1990s, NOV maintained a stable, committed workforce. However, this workforce that carried NOV through the past two decades became the reason it may not survive the next ones.

What Miller discovered has not yet been addressed by many oil and gas companies, which is more than 50 percent of the industry’s executives are age 55 and up, and something needs to be done to prepare for their retirement. Without a plan in place, how are these companies going to replace those highly technical positions to grow and prosper? Finding innovative methods to recruit and retain top technology talent is the only answer.

Oilfield services giant, Schlumberger, said, “The answer to the great crew change would be partly answered by technology but also by creative corporate practices that attract and retain talented new workers and optimize the potential of the workers already part of the company.”

Common Solutions Include:

  • Escalating salaries of highly technical, high-demand positions – Watch out. Salary spikes can spiral and eventually make all projects economically unfeasible.
  • Relocating expatriates and/or U.S. talent – This solution is viable, but poses challenges also. These professionals can lack company loyalty and are fair game to be recruited by other oil and gas companies seeking similar skills. They most-assuredly flock to the highest bidder.
  • Partnering with a recruiting firm that specializes in highly technical professionals – Outsourcing recruiting to a expert with industry specialization allows HR more time and energy to focus on managing those “creative corporate practices” to train and retain young employees.

One thing is certain. Energy companies must find a solution to repopulating their companies to preserve the United States’ position as a world leader in energy and technology. What plans do you have in place to prepare for this crisis? What ideas are working for you?

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