Safeguarding. your. organisation s. future. A strategic workforce planning approach for the oil and gas sector using the five rights.

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1 your Safeguarding organisation s future A strategic workforce planning approach for the oil and gas sector using the five rights.

2 Safeguarding your organisation s future Planning for the future As the oil and gas sector s current and future growth is curtailed by the availability of critical workforce resources, how can companies ensure future talent is in place to meet their needs and strategic objectives? The answer lies in taking a holistic and strategic approach to workforce planning using the five rights. Getting to the core of the problem There is growing shortage of geotechnical and petrochemical engineering skills across the oil and gas sector. This is exacerbated by an aging workforce, a highly competitive recruitment market and mobility of skilled professionals. Through Hay Group s experience, we have seen organisations struggle to plan and construct the right workforce because they are approaching it on a piecemeal basis often as a numbers exercise on a project planning level, without the real depth and insight required to translate the strategic business plan into a strategic, long term people plan that can be implemented and seen through. How to get it right Effective strategic workforce planning is so much more than estimates and calculations. Put simply, it provides the basis for the critical capability required to deliver your organisational strategy. Other benefits and the competitive advantage from getting it right are also evident: value improvement and cost reduction through right sizing the workforce assurance that business strategy can be delivered better productivity through workforce alignment to operating model competitive advantage through a more skilled and innovative workforce greater staff engagement and retention and lower levels of occupational stress. To get it right, organisations need to integrate workforce supply and demand analysis flexibly into their annual strategic planning cycle. This can be achieved by using our five rights approach and diagnostic outlined further in this paper. 0 Hay Group. All rights reserved

3 What are the five rights? Current context in the oil and gas sector Desired strategic workforce planning state Right size Revenue and therefore profit is determined by commodity prices, in a cyclical industry with long term development timeframes in exploration. Since organisations are not market makers, size depends on future margin expectations. Additionally, there is a question as to what expertise companies need and want to develop internally as opposed to sourcing via third party vendors or contractors. This will impact on the size of the permanent workforce. Instead of a knee jerk reaction, it is critical to plan for different boom and bust scenarios so that the organisation has the right number of people at the right time. Additionally, clarity on the strategic capabilities required will drive decisions on what activities should be focused on in-house and what will be delivered via external vendors. Right skills There are a number of key imperatives in the sector, such as the need for technology development, the move to focus on unconventional oil and shale gas exploration and the dominance of access to reserves by national oil companies. Each of these imperatives requires a specific skill set for success. The reliance on short term acquisition of skilled expertise will not be economical. There is a need to plan at least five to 0 years in advance to ensure sufficient internal resources are available to align to strategic capabilities. Organisations must also assess the gaps in the competencies and skills that will be needed to meet future goals which will underpin their approach to attracting and developing the right talent. Right shape The role of the corporate centre and its relationship with delivery units impacts across the sector be they geographical, functional, customer or segment focussed. Delivering safely and effectively is an area that highlights the tension between the centre and the frontline business units. It is a mission-critical issue for the industry, but there are different approaches taken across different organisations. This often leads to duplication, inefficiency and the incorrect balance of roles in the organisational hierarchy. Oil and gas companies need to think carefully about what culture is needed in the future to deliver the organisational strategy and then align their internal assets behind this. Striking the right balance of roles administration to professionals, juniors to seniors, experienced staff to new hires is key in minimising inefficiencies. Having clarity on where decision-making lies, and who is accountable for what, ensures that the business is aligned to deliver through the structure. Right place A number of energy forecasts predict that the US will be energy sufficient in the next 0 years and that Africa and the Arctic circle have tremendous potential for future oil production. Forecasts rely on under the ground potential reserves. BP s 0 energy forecast also includes over the ground conditions (depending on country, service sector, midstream / transportation and so on). In reality, both economics and politics have a role in determining the place. Taking into account the many factors that influence location, organisations should model future resource requirements using different scenarios and plan accordingly to meet current and future workload requirements. This has the potential to open new pools of resource in new geographies alongside the opportunities presented through the impact on working practices of new technologies. Right costs Direct people costs will differ depending on the organisation s position in the industry value chain, however on average these account for 0-0 per cent of operating costs. Nonetheless, there is a need to contain costs. Oil and gas companies need to ensure the other four rights are translating into acceptable costs and prevent hyper inflation in wage bills. This means paying the right amount for key talent, not a one size fits all approach. Through benchmarking pay and reward for the required skills, there is also opportunity to explore how to drive down pay bills by sourcing and using skills where they are more cost effective.

4 Safeguarding your organisation s future Taking a long term and holistic view The oil and gas industry has so far been effective at resource management. This is the bread and butter of project leaders. Some companies have clearly thought through their talent management challenges and tackled issues such as career development and succession planning in a rigorous way. However, there are a select few who truly take a long term and holistic view of their workforce strategy in this sector, having this view is a clear competitive advantage. Resource management Talent management Workforce strategy Focus High utilisation of staff Internal pipeline of capable staff Sourcing of workforce for the long term Support required to meet focus needs Resource allocation systems Flexible resource management Performance management Succession planning Career frameworks Leadership development initiatives Workforce strategy and plans Strategic capability frameworks Workforce modelling Time plan years Short term years Medium term 0 years Long term Top tips for strategic workforce planning Ensure that the five rights are considered when developing the organisational workforce plan. The workforce plan should be aligned to the organisation s strategy, culture, values and desired behaviours. Workforce planning isn t just an HR exercise. It is a cross-organisational effort with clear accountabilities and focus, and therefore all relevant stakeholders including HR, business line leadership and operations need to engage during the annual planning cycle. The planning effort needs to be holistic, examining both the organisation form as well as people requirements and taking into account both current and long term needs. Ensure there is adequate time up-front and capability to effectively assess, model and develop your workforce strategy (such as robust workforce modelling, scenario planning, gap analysis, workforce strategy maps and reward benchmarking). 0 Hay Group. All rights reserved

5 Has your company got it right? Hay Group has been helping organisations to align their workforce and organisation behind their strategy for almost 70 years. We have set out below a diagnostic to help oil and gas leaders evaluate whether their current approach to workforce planning will meet their future strategic needs. Taking into account your organisation s existing business and workforce strategies, rate your company against the following statements using the scale and correspond this to the relevant rating. You can complete this diagnosis individually or as a management team, but it would be more valuable to ask a cross section of managers from all levels to give their views. Right size Does your organisation translate changes made to ways of operating to the workforce size and in turn required skills? When defining the size of the future organisation, does your company plan for different economic scenarios for long term needs? Does your organisation optimise the mix between in-house expertise and contractors? Are the right people spending the right amount of time achieving required outcomes? Right skills Does your organisation understand the gaps in the competencies and skills that will be needed to meet future goals? Does your organisation have succession planning and development frameworks in place for the critical roles that will be required in the future? Does your organisation communicate behavioural expectations from its senior leaders? Have you identified the mission critical roles and skills that you need to focus on for future workforce planning? Right shape To establish the right organisational shape, does your organisation regularly review areas of duplication and inefficiency? Are frontline roles given accountability in defining and organising safe ways of working, now and in the future? Is your organisation able to balance between what is done centrally and what is done on an asset / business unit or geographical basis? Does the organisational culture align with organisational values and support the strategy?

6 6 Safeguarding your organisation s future Right place Does your organisation model and match the required staff to future needs and locations? Does your organisation consider the people requirement ahead of planning new projects? Does your organisation s planning for future location and design factor in the ability to attract and retain local resourcing and skills? Does your organisation rely on local expertise versus expatriate or contractor expertise? Right costs Are key skills and personnel hired in a cost effective manner? Does your organisation reward the right behaviours and ensure that key drivers of performance are effectively rewarded? Is pay and reward benchmarked to pay the right price for required skills? Does your organisation get maximum benefit and output from the cost of employment? Total Results workforce needs are well planned to meet future requirements 6 80 adequately planned for the future however some red flags to address 0 6 workforce planning partially misaligned to deliver the strategy; urgently address red flags and associated risks Less than 0 inadequately planned for the future; urgently address red flags and associated risks 0 Hay Group. All rights reserved

7 Hay Group s approach Whether you need support on one or all of the five rights, Hay Group can help you with your unique requirements. Outlined below are the four key ways in which Hay Group partners with organisations on strategic workforce planning, each supported by a range of proven and robust analytical tools and methodologies. Every organisation is different, and as such, our approach is very much tailored to our clients specific business context and strategic intent and we resist presupposing one set framework. Organisational and job size and shape analytics Organisational review to assess suitability for future strategy Career blueprints for progression Future work architecture Mapping strategy to future workforce capability Workforce scenario planning Workforce strategy maps Definitions of strategic capability to align with new business operating model Delivering tomorrow s workforce Design and tailoring of strategic workforce planning frameworks and methodology Training of HR business partners and organisational development specialists in workforce planning Design strategic workforce planning toolkit support for business Building strategic workforce methodology and internal capability Workforce analytics and market benchmarking Age and demographic analytics Actuarial and external reward benchmarks Prototyping of workforce demand and supply models Development of workforce planning analysis tools to integrate with people data For further information: Sherief Hammady Director for Oil and Gas, Hay Group t e

8 Africa Cape Town Johannesburg Pretoria Asia Bangkok Beijing Ho Chi Minh City Hong Kong Jakarta Kuala Lumpur Mumbai New Delhi Seoul Shanghai Shenzhen Singapore Tokyo Europe Amsterdam Athens Barcelona Berlin Bilbao Birmingham Bratislava Brussels Bucharest Budapest Dublin Enschede Frankfurt Helsinki Istanbul Kiev Lille Lisbon London Madrid Manchester Milan Moscow Oslo Paris Prague Rome Stockholm Strasbourg Vienna Vilnius Warsaw Zeist Zurich Latin America Bogotá Buenos Aires Caracas Lima Mexico City San José Santiago São Paulo Middle East Dubai Riyadh North America Atlanta Boston Calgary Chicago Dallas Edmonton Halifax Kansas City Los Angeles Montreal New York Metro Ottawa Philadelphia Regina San Francisco Toronto Vancouver Washington DC Metro Pacific Auckland Brisbane Melbourne Perth Sydney Wellington Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organise people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organisations realise their potential. We have over 800 employees working in 86 offices in 8 countries. In the Oil and Gas sector, we work with global and local companies across the industry value chain on a range of diverse business challenges. Our global client list includes integrated oil companies, national oil companies, oil field services, upstream and midstream operators; as well as refineries and petrochemical organisations. For more information please contact your local office through

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