Thriving in a Rebalance Era: Managing Human Capital in Oil & Gas

2015 was a momentous chapter for an industry that follows a notoriously cyclical boom-and bust pattern. The prevalent and historical human capital management approach has been to focus on frantic growth in the good times and frenzied cuts in tough times. However, 2015 was unique in both the velocity and ferocity of change that caused instability across the market. In this paper, we look back at our clients’ experiences and quantitative survey data from 2015, providing actionable takeaways  to help HR and the business thrive this year.

Thriving in a Rebalance Era

Throughout 2015, Mercer conducted a detailed examination of the human capital strategies, tactics and actions utilized by oil and gas companies, and how those actions and tactics changed as the market disruption worsened. 

Our analysis looked to understand five core questions about the 2015 O&G market disruption:

  • How did HR leaders respond to the disruption?
  • Were those responses effective?
  • What are the human-capital challenges in the future?
  • What responses did HR leaders offer to address future challenges?
  • What strategies should HR leaders utilize to meet those future challenges?

What happened in 2015?

A Market Disruption Like No Other

The ferocity of declining crude prices caused by global supply imbalances created a market disruption that forced O&G companies to quickly change their operating models (novations) to adapt.

O&G HR Leaders Responded—But at What Long-Term Cost?

HR leaders focused on meeting the requirements of the business with short-term strategies of cost cutting and organizational “build down.” Yet longer-term fundamental O&G workforce challenges loom on the horizon no matter the price of oil.

Enter the Era of Rebalancing Business Portfolios, Human Capital Strategies and Human Resource Delivery Models

HR leaders now drive toward lean, agile, productive and engaged workforces. As the demographics of the O&G industry prepare for a tectonic shift, human-capital strategies must be adaptive to a new workforce reality. This requires an analytics-based, long-term workforce plan, a balanced (elastic) talent deployment model and an enterprise-unique “C6 talent continuum equation.” The product of these is organizational vibrancy and performance that propels the enterprise forward — to compete and thrive in a rebalancing era.

How Will Oil & Gas HR Leaders Address Future Challenges?

Our November survey also sought to understand how HR leaders planned to address the challenges facing them in 2016 and beyond. The respondents overwhelmingly intend to focus on building internal capability and further optimizing their organizations to operate in a sustained low-price environment. These actions coincide with the current industry call for “lean” while driving for stepchange improvements in operational productivity. 

Respondents also placed a great deal of importance on optimizing employee engagement and enhancing leadership capability. Interestingly, respondents placed essentially equal weight on these two priorities, supporting Mercer’s research that leadership effectiveness is a core driver of a highly engaged workforce.

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