Energy POINT OF VIEW DEVELOPING THE OIL & GAS WORKFORCE OF THE FUTURE HR DEPARTMENTS NEED A NEW STRATEGY FOR A DIGITALLY-EMPOWERED WORKFORCE AUTHORS Bill Heath, Partner Keric Morris, Partner The global oil and gas industry will undergo a sustained period of transformation over the next decade. The change will not just be a matter of doing things differently. We will literally be doing different things that will demand new ways of thinking and operating. The primary force behind this change will be the gradual adoption of lower-carbon energy. This will create a fundamental disruption that will be further amplified by the adoption of new technologies, evolving societal expectations for business, the changing demographic profile of the world s population and the economic emergence of developing nations. While there s debate over how far and how fast these changes will go, there is consensus that they cannot be entirely avoided. The challenge for oil and gas companies is to figure out how to embrace this new world and use it to create a more agile and profitable business model that is capable of capitalizing on the disruption.
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For the past several years, oil and gas companies have focused on rightsizing their organizations in order to ride out the downturn in the price of oil. This restructuring has reined in costs but it has not prepared the industry for the much more fundamental changes occurring across the energy sector, leaving it ill-prepared for a future in which there is less dependence on fossil fuels. The next set of forces hitting the oil and gas industry will require greater agility and flexibility from senior management teams and the wider workforce. In this new environment strong controls will continue to be necessary to ensure safe and reliable operations but human resources departments will also have to contend with multiple models operating at different speeds and with different parameters within the same organization, making governance, leadership and management significantly more complex than today. This new role is apt to be uncomfortable for HR departments that have historically sought to create a single set of standardized processes and policies across the business. In this paper, we outline an organizational model and outlook that companies and HR departments will need to develop over time to enable them to respond effectively to this new, evolving reality. THE NEED TO INCORPORATE BOTH CONTROL AND AGILITY Our expectation is that oil and gas companies will need to accommodate two different organizational cultures simultaneously in the future. The first is a command-and-control culture that allows them to manage the rigors and standardized processes of a production platform or refinery. This is a familiar environment for most oil and gas companies and HR departments are highly experienced in catering for its competence development, talent management and leadership style requirements. Teams are structured within rigid organizational models, activities are planned in advance and rewards are effectively contracted. The second model one that responds readily to changing conditions and new developments, and allows for more entrepreneurial initiative will feel much less familiar to most in the industry. It more closely mirrors the approach of technology companies where change is not just accommodated, it is encouraged and nurtured. This model draws its inspiration from new businesses such as Spotify, a company that has purposefully eschewed formal organizational structures and instead expects its staff to self-organise around projects they find personally and commercially rewarding. These types of teams are multi-dimensional, bringing together staff with different backgrounds, expertise, and outlooks. They are also potentially short-lived. They will try something and if it fails, they may disband and try something else. The members of such teams may, in many instances, not even be full-time employees. The HR and leadership processes needed to achieve and maintain this flexibility will be very different to those required for the command-andcontrol side of the business. Another way to look at these two models is around purpose. The command-andcontrol organization focuses on improving profitability by constantly refining processes and eliminating inefficiencies and waste. It is about procedure, standards, and limiting risk. The agile organization is all about Oil and gas companies will need to accommodate both command-and-control and agile entrepreneurship. Copyright 2017 Oliver Wyman 2
An agile approach needs the rapid iteration of ideas and potential solutions. uncovering and seizing opportunities. It is predicated on rapid decision-making, experimentation, and taking calculated risks. It moves quickly and can appear messy and precarious to command-andcontrol managers. While some oil and gas companies are starting to recognize that both models are essential for their future success, many of them are struggling with questions about which parts of their organizations should embrace the new model, how to incorporate the necessary changes, how and whether these models should interact with each other, and ultimately how to govern the two-headed entity that emerges. For senior management, it will require a high degree of comfort working in both environments and the ability to reject the idea of prioritizing one over the other. LIVING IN HARMONY The HR department will have to play a critically important role in creating and maintaining both models, and lubricating the interfaces between the two workforces. The management of upstream operations illustrates the challenge facing HR departments. In one context, this task seems to require personnel, operating within a command-and-control model, to guarantee the efficiency and safety of daily functions and setting strategic priorities. But there also needs to be a mechanism through which the company can incorporate the sensibilities and instincts more closely associated with an agile model to modernize and perhaps reinvent the current operating approach. Moreover, the company will need to explore potential opportunities to integrate new technologies such as sensors, advanced analytics, drones, and 3D printing. The experimentation, risk taking, and ability to reimagine operational processes around new technologies will demand a workforce that has a very different skill set and way of working than the one that currently exists in most oil and gas companies. The interface between the two models will be hard to oversee. Managers in the control model may quickly become exasperated by the continuous feed of ideas and questions as well as the disruption created by the agile model. Managers of the agile model are likely to become frustrated by procedural obstacles to implementing technologies and improvements to operations that may be thrown up by control management. Here are four areas HR teams should prioritize: REDEFINING WORK AND WORKFLOWS If an HR department attempts to oversee the agile team with control priorities and goals, it will quickly have a failed workforce on its hands. An agile approach needs the rapid iteration of ideas and potential solutions. This might, for instance, be achieved through the creation of multi-disciplinary teams that examine data and reliability failures at both a micro (individual component) and a macro (across platforms) level. Workflows are based around projects with teams self-organising around areas of interest or potential gain. Tools from the agile methodology toolbox could be used to facilitate and accelerate analysis. Workflows will also need to pass across the interface between the agile and controlled workforce organizations. Clear expectations Copyright 2017 Oliver Wyman 3
need to be set as to how ideas can be quickly tested and validated. The process of integration, however, will need to be carried out at a pace that is relevant to the recipient organization. ORGANIZATIONAL MODEL The organizational model could be more holacracy than hierarchy. The agile and the controlled organizations might be legally separate ventures sitting outside of the main business or fully integrated. Employees would be sourced from within and outside the business and would come from highly diverse disciplines. The new organizational construct should meet the needs of employees on the team, contractors and third parties using tools such as flexible working hours, management of the careers of contractors and sharing of resources with third parties and competitors. Leaders have two roles in this set up. The first is as facilitator to aid self-directing teams to form and function. The second is the grit in the machine dealing with groupthink where it occurs and helping teams to recognize success, failure or diminishing returns quickly and effectively. TALENT MANAGEMENT AND DEPLOYMENT Managing the talent in such a diverse organization requires a significant change to the traditional approach to employee recruitment and retention. Long-term models for talent needs will be more complicated to build as the size of the workforce is likely to grow and shrink according to the projects being conducted. Instead, the company will need to develop a network of talent that it can draw on, based on its current needs. Building and managing such a network of talent is a very different role for HR and will require new skills and tools. With talent availability still being constrained in a number of traditional oil and gas roles and the need to compete with the market at large to attract digital/technical skills significant pressure will be brought to bear to balance elements such as build, buy and borrow. Creating elements including career paths, training and performance management for internal staff, affiliates/contractors and co-managing with third parties with whom resource is being shared, will require changes in both processes and systems. Some companies may argue that this is already the case. Our observation is that this is currently a very one-sided relationship. Those that are outside of the immediate company are often treated as resources and have limited loyalty or affinity with the oil and gas business. INDIVIDUALLY TAILORED AND DYNAMIC WORKFORCE VALUE PROPOSITIONS The Workforce Value Proposition (WVP) will need to expand and change to take into account the new work experience provided by the agile organizational model and accommodate the increasingly diverse workforce that agile requires. This is a workforce that wants a more personalized at-work experience and will require a flexible WVP to include the right mix of attributes to meet a range of priorities over an employee s life-cycle. Managing the talent in such a diverse organization requires a significant change to the traditional approach. Copyright 2017 Oliver Wyman 4
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The development of employee personas will be essential part of the WVP. Employee expectations will vary considerably. Companies will need to be more proactive in building careers leveraging a variety of tools from providing interesting opportunities through to the development of competitive remuneration/benefits. THE ORGANIZATION AND HR MOVING FORWARD Technology changes, such as data analytics and the application of new techniques including drone inspection and crawlers delivering sub-sea work, represent the start of the transition that companies will need to go through. Much of the impact so far has been incremental such as improving decision making or driving efficiencies. Nevertheless, the industry is on the cusp of fundamental changes that will ultimately transform organizational structures. At this stage, we will need to look within and outside of the organization and the oil and gas industry to find the skills and mindsets needed to effectively challenge the perceived right way of doing things. This aspect of the transformation will include everything from new ways of working to using partnerships to change both the industry s practices and culture. For the HR function, the challenge posed by this new bifurcated workforce model is multifaceted. It will require changing the role and positioning of HR by building on traditional strong functional delivery, continuing the development of skills around data-rich talent planning and management, and embracing greater levels of automation and self-service in the way HR provides its services. With the changes in organization, culture, leadership and talent requirements all traditionally HR topics the focus of the HR director should be to shift HR to a far more strategic role, effectively taking the lead in much of the transition over the coming years. Because this transformation will be gradual and nuanced, HR will need to be one of the first agile models to be created to help enable the rest of the organization to follow suit. HR s function must become one of balancing the change and regulating it to allow the overall organization to operate successfully. HR leaders will have to be adept at influencing (or intermediating) senior management. They will need to be central to the strategic decision-making, as they are likely to be the only function with the understanding of how these changes will affect the broader organization. They will also have to take on the responsibility and ultimately the accountability for building the new WVP. They will have to adopt these new roles in addition to the more everyday services that HR currently provides. HR will need to strike a balance between command-and-control operations and agile entrepreneurship. It will need the flexibility to respond to changing demands from its internal customers as well as to lead them to new requirements. HR has a significant role to play in this transition and the companies that succeed will be the ones that take the lead in rethinking what the HR function of the future needs to be. Bill Heath is a London-based partner in Oliver Wyman s Energy and Organizational Effectiveness practices. Keric Morris is a London-based The industry is on the cusp of fundamental changes that will ultimately transform organizational structures. Copyright 2017 Oliver Wyman partner in Oliver Wyman s Energy and 6 Operations practices.
ABOUT OLIVER WYMAN Oliver Wyman is a global leader in management consulting. With offices in 50+ cities across nearly 30 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has about 4,500 professionals around the world who help clients optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman. www.oliverwyman.com Copyright 2017 Oliver Wyman All rights reserved. This report may not be reproduced or redistributed, in whole or in part, without the written permission of Oliver Wyman and Oliver Wyman accepts no liability whatsoever for the actions of third parties in this respect. The information and opinions in this report were prepared by Oliver Wyman. This report is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accountants, tax, legal or financial advisors. Oliver Wyman has made every effort to use reliable, up-to-date and comprehensive information and analysis, but all information is provided without warranty of any kind, express or implied. Oliver Wyman disclaims any responsibility to update the information or conclusions in this report. Oliver Wyman accepts no liability for any loss arising from any action taken or refrained from as a result of information contained in this report or any reports or sources of information referred to herein, or for any consequential, special or similar damages even if advised of the possibility of such damages. The report is not an offer to buy or sell securities or a solicitation of an offer to buy or sell securities. This report may not be sold without the written consent of Oliver Wyman.