Strategic Workforce Planning in the Energy Sector: An Evidence-Based Approach

Transcription

1 Strategic Workforce Planning in the Energy Sector: An Evidence-Based Approach Jay Doherty Partner and Co-leader, Workforce Sciences Institute Haig R. Nalbantian Senior Partner and Co-leader, Workforce Sciences Institute NFTC 2012 Annual International Human Resources Management Forum Houston, Texas 2012 Mercer LLC 1

2 Strategic workforce planning defined: A systematic, disciplined process for identifying and addressing gaps between current and projected future workforce requirements. It provides a rational business basis for prioritizing, developing, and funding the people practices needed to support business objectives. 2

3 Strategic workforce planning defined (cont d) Should help you answer these questions 1. What jobs and skills are critical to our business success? 2. How can we ensure that we have the skills available when we need them? 3. How can we optimize our workforce (and our workforce investments) by understanding the links between workforce management and business results?... and direct you to actions that ensure the right people with the right skills are in the right place at the right cost 3

4 Workforce planning quantifies the gap between talent demand and supply Talent Demand Gap Business requirements Future workforce needs based on business plan (capabilities, numbers by location) Talent Supply Critical capacity Current and projected internal and external supply of talent and skills Feasibility Value Decision Criteria Timing Cost workforce risks Evaluate alternative strategies to mitigate workforce risks, balancing needs and outcomes: Quantity Quality Location Design plan and policies to transform workforce and close critical gaps Monitor changes to ensure progress 4

5 FOCUS ON SUPPLY Delivering the optimal workforce using Internal Labor Market (ILM) Analysis 5

6 A workforce is the outcome of 3 highly interrelated labor flows and associated rewards Every employer has unique internal labor market dynamics Hires Exits Level Lateral moves 123 Career level Promotions

7 An example from an entire industry in one country The shape of Canada s petrotech workforces in April 2011 CAREER LEVEL Experts / Managers (F+) Specialists (E) Engineers, Geologists and Geophysicists (EGGs) 10% of the workforce is 55 or older Senior (D) Experienced (C) Junior (B) Entry (A) 25% of the workforce is less than 30 years old Source: 2011 Canada MTCS, and Mercer analysis. Includes incumbent records with both age and tenure information provided at the employee level. 7

8 ILM Analysis uses interrelated statistical models to measure your internal labor market s dynamics ILM models typically comprise the following modules: Attraction Modeling entry and external labor market coverage Development Modeling career progression Retention Modeling exits Rewards Modeling promotion, pay and ratings Estimation Estimation of of these these models models delivers delivers what what you you need need to to know knowabout your your workforce workforce and and relevant relevant external external labor labor markets markets to to effectively effectively implement implement workforce workforce planning planning 8

9 So, what should you know? Well, for example 9

10 Know who you are selecting... and how they fare 10

11 Know what retains employees and what they actually value Analysis of actual turnover behavior Prior surveys of perceptions suggested that pay and workload were most critical to employee commitment (in this organization). Our analysis of actual behavior showed that career development and management stability most affected retention. 11

12 Know what your organization actually rewards... and whether those rewards align with what your business actually needs High Agency / Newspaper More prior jobs International experience Higher performance rating West Coast Younger Earnings growth Education in Tech field Past promotion Higher pay level Sales department non-sales job Education Occupation Prior industry experience Tight labor market Tenure Position tenure Highly rated manager Tenured manager Older manager Unit size Low Lower Likelihood of promotion Higher 12

13 Know how careers unfold... and whether you can accelerate effective development An example of opportunity pathways in an energy company Coop student (12) 10 months Engineer I 2 years Operator (7) Engineer II 7 cases Transmission access specialist (22) 2.5 years (4) 3 years 13 years (8) Engineer III Asst. shift supervisor 3 years (4) 5 years 14 years Supervisor engineering 1 year Consulting engineer Based on actual job transitions. The times shown are the approximate average time for the job transitions to have occurred. (6) (8) 6 years (7) Shift supervisor (3) Manager engineering 13

14 Know your vulnerability to changing labor market conditions... and whether business or workforce segments respond differently to outside opportunity Increase in likelihood to quit if unemployment rates drop 0% 2% 4% 6% 8% 10% 12% 14% 16% A B 0% 0% Individual C companies D E F Not Not all all companies are are equally affected by by changes in in unemployment rates. rates. Do Do you you know know where where your yourcompany would would be be positioned on on this this chart? chart? 14

15 CASE EXAMPLE: WORKFORCE PLANNING AND DEVELOPMENT AT SAUDI ARAMCO 15

16 The company is a leader in applying evidencebased workforce planning and development Rigorous, state-of-the-art workforce planning methods (CMPM) Forecasts talent needs, anticipates gaps and identifies ways to close those gaps Uses this information to guide finely calibrated recruiting and mobility decisions Based on firm grasp of the dynamics of both its internal labor market and external markets from which it draws talent Substantial targeted investments in education and training More than $10,000 per employee annually, sometimes beginning before employment and extending across an employee s career Long-term collaborative partnership with the government and key academic institutions to prepare the Saudi workforce for future economy Expansive talent mobility programs Gives its employees exposure to the management practices and tools used by other major firms around the world Relies on seasoned professionals from around the world to come to the Kingdom and help in knowledge transfer on the latest technologies and management practices 16

17 Saudi Aramco is the largest oil-and-gas company in the world and the dominant economic power in Saudi Arabia Manages the world s largest proven crude oil reserves of 260 billion barrels and the world s fourth-largest gas reserves, with 279 trillion cubic feet Headquartered in Dhahran, Saudi Arabia, with offices in North America, Europe and the Far East Employs 55,000 people from 70 nations; 15% of the workforce are expatriates Operates one of the world s largest industrial training and human resource development programs 17

18 Using ILM Analysis allowed Saudi Aramco to assess the workforce impact of education and overseas assignments Promotion Voluntary Turnover Normal Retirement Performance Rating Pay Level Pay Growth Masters vs. Bachelors 11% No Influence No Influence 3% 5% No Influence Doctorate vs. Bachelors 55% No Influence -83% No Influence 10% No Influence Ever Did Overseas Assignment? 49% 41% Not Applicable 6% -4%.01% 18

19 BRINGING IT ALL TOGETHER 19

20 ILM information can be used to simulate future workforce scenarios The changing internal labor market dynamics are shown here Results are shown here The user controls these inputs for each simulation period 20

21 With the right facts and alternative scenarios to test, it s possible to spell out a reliable workforce plan Job families and specific jobs Five-year forecasted increase (+) or decline (-) in critical headcount Projected flows and changes Gap Analysis Workforce Flows Workforce Characteristics Sub- Business Major Job Category Job Category 2002 Active Percent Critical Non-Critical Gap Critical Gap % Retirement Eligible 2007 Vol. Turnover Invol. Turnover New Hire Rate Age Percent white Percent Female Sub-unit A Marketing Marketing Mgr % 26.1% 19.8% 16.1% 0.1% 36.2% % 24.9% Management Actg / Finance % 19.4% 14.3% 10.0% 1.1% 56.7% % 56.2% Sales Sales Rep % -32.1% 10.0% 7.5% 10.0% 41.3% % 14.7% Sales Sales Manager % 11.4% -29.0% 1.2% 3.5% 14.7% 20.4% % 37.6% Total % 59.9% -12.2% 16.0% 12.5% 15.8% 49.8% % 23.1% Sub-unit B Admin Support Admin Support % 16.0% 1.0% 13.3% 4.7% 25.3% % 54.0% Technical Drafting / Surveying % 9.0% 32.2% 12.0% 4.0% 10.0% % 50.0% Technical Engineering % 13.0% -39.8% 21.5% 15.8% 5.0% 30.8% % 7.0% Technical Construction % -10.9% -69.4% 28.4% 17.8% 0.0% 33.1% % 59.5% IT IT analyst % -37.3% -18.0% 46.8% 15.5% 10.0% 17.4% % 46.5% Project Management Managers % -27.0% 91.6% 12.1% 23.8% 15.1% % 26.2% Knowing Knowing what what specific specific jobs jobs will will have have critical critical shortfalls shortfalls makes makes development development and and recruiting recruiting more more effective. effective. A complete complete plan plan would would highlight highlight action action steps, steps, responsibilities, responsibilities, and and timing. timing. 21

22 UNDERSTANDING LABOR DYNAMICS ACROSS COMPANIES: THE CASE OF THE CANADIAN ENERGY SECTOR 22

23 Age profile of employees in Canada s oil-and-gas industry (% of employees) 25% 20% 15% Services and Equipment Exploration and Production All incumbents 10% 5% 0% < Observations with missing hire dates and/or birth dates were excluded. Based on 2009 survey 23

24 Experience profile of employees in Canada s oil-and-gas industry (% of employees) 40% 72% of all incumbents 30% 20% Pipeline/Midstream Exploration and Production All incumbents 10% 0% < 1* Observations with missing hire dates and/or birth dates were excluded. * Hired in January April of Based on 2009 survey. 24

25 The engineering workforce in the Canadian energy sector shows considerable mid and late-career hires April 2009 April 2010 CAREER LEVEL ILM MAP HIRES (age) ENGINEERS TURNOVER (age) Experts / Managers (F+) 7% (48) 5% 19% (52) Specialists (E) 9% (47) 15% (50) 7% Senior (D) 10% (39) 11% (41) 15% Experienced (C) 6% (31) 15% (36) 31% Junior (B) 6% (28) 9% (30) 45% PROMOTIONS Entry (A) 40% (24) 12% (28) 25

26 A focus on industry experience over company experience in rewards reflects a preference to buy vs. build talent Rate of Return for Human Capital All Incumbents E&P Years of Service with Company / In Industry Industry Specific (Age) Firm Specific (Service) Return to general and firm-specific experience is the rate at which FTE annual direct compensation pay rate changes with general experience, proxied by age and company service. Each index is calculated by comparing the FTE direct compensation pay rate for different levels of experience (age or company service) to the FTE base pay rate of an employee with little experience (a 21 year old or newly hired). The OLS models, on which these results are based, control for company size, ownership type, region, level, industry, job family, pay type, responsibility, education and union affiliation and include incumbents as of April 1, 2009 with age, company service, and direct compensation data. 26

27 SUMMARY AND CONCLUSIONS 27

28 Key messages: Above all, master your ILM so you can shape how it operates to deliver the workforce you need today and in the future HR s strategic role is to help secure, motivate and manage the workforce required to achieve business goals This role is facilitated by measuring and understanding the dynamic process that produces your organization s workforce Capitalize on what no one else can know about your business Modern electronic information systems combined with new measurement methods permit organizations to continuously review the running record of their own performance to determine what works and what doesn t In the process, you can increase the return on your substantial investments in these systems as well as on your enormous investments in human capital Applying Applying this this new new discipline discipline will will improve improve the the decision decision process process around around human human capital capital and and support support more more reliable reliable workforce workforce planning planning 28

29 About today s presenters haig.nalbantian@mercer.com Haig Nalbantian is a Senior Partner and co-leader of Mercer s Workforce Sciences Institute. A labor economist, he has been instrumental in developing Mercer s unique capabilities to measure the economic impact of human capital practices. Those capabilities have been applied in numerous projects he has directed for leading companies in the U.S. and abroad across a broad range of industries. Earlier, Haig taught economics at New York University. Haig earned his graduate degrees in economics from Columbia University. Widely published, he is co-author of Play to your Strengths, McGraw Hill. jay.doherty@mercer.com Jay Doherty is a partner and co-leader of Mercer s Work-force Sciences Institute. He has over 20 years of management consulting experience helping energy companies in North America, Asia, Middle East, and Europe. Jay s work includes labor market analysis, workforce planning, site selection, and linking people management practices to bottom-line results. Jay received an MBA from Darden at the University of Virginia, and is co-author of Play to Your Strengths, McGraw Hill. 29

30 For further reading and help consider Play to your strengths, Managing your internal labour market for lasting competitive advantage, Nalbantian, Guzzo, Kieffer, and Doherty, McGraw-Hill Flash movie of Internal labour Market Analysis: Flash movie of Mercer Workforce Forecaster: World Economic Forum and Mercer s Talent Mobility research report contains many "good practices" on workforce planning in both the private and public sectors. Mercer s new analysis and fact-based workforce decision-making tool: You may be interested in building your own ILM Map our free tool is at: 30

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