It can be tough managing human resources during an industry downturn. And it doesn’t necessarily get easier during the recovery. If concerns aren’t addressed during the downturn, they may in fact, be exacerbated after operations resume.
Steve Werner, professor and department chair for the department of management at the University of Houston’s C.T. Bauer College of Business, teaches the graduate course “Managing Human Resources in the Oil and Gas Industry.” He’s also published a book with the same title.
“I developed the course five years ago,” Werner told Rigzone. “It focuses on the important differences between the oil and gas industry and most other industries and the implications of those differences for human resource management.”
Werner said the course was based on his interactions with hundreds of executives and managers in the oil and gas industry while he taught graduate courses and executive education workshops.
Werner took time to discuss some issues surrounding managing HR following the industry downturn.
In the industry recovery, how should HR handle the compensation of employees? Cost has been a big concern and a driver of companies to adopt new technologies.
Werner: Yes, cost is a big concern and will continue to be until there is a big upswing in the price of oil. Nevertheless, the best companies will try to control labor costs even when times are better. One way to do this is to compete in the labor market on factors other than wages. Although wages are an important factor in attracting and retaining talent, they aren’t the only factor. Creative benefits (particularly low-cost ones such as flex time), development opportunities, international opportunities, a lower reliance on layoffs and sound management practices can all help attract and retain talent without increasing costs dramatically. Another way to address the cost concerns related to oil price fluctuations is to focus more on variable pay. That is paying lower wages, but very lucrative bonuses when the company is profitable. When there is a downturn, the company can better weather the storm because its wages are low. Although this shifts some risk to employees, they would rather not receive bonuses than deal with layoffs. New technologies will always be attractive when they make economic sense.
Speaking of new technologies, robotics and automation is a big part of operations now, particularly in upstream. What effect, if any, does that have on HR and recruiting?
Werner: Because new technologies change the nature of the jobs, they have a substantial impact on recruiting and other HR activities. More sophisticated technologies will require a more highly-skilled and educated workforce. It will also mean having to attract applicants who may not be considering the oil and gas industry.
How can HR attract workers who may not be interested in oil and gas?
Werner: For entry-level workers, it may entail changing up how recruiting has been historically handled. This could include targeting graduates with different majors than those that have been historically targeted, different schools or broader geographic ranges. For experienced workers, it could entail targeting employees from other industries. Some industries that may be a viable source for employees include aerospace, chemical manufacturing, automotive, forestry and defense. Regardless of whether it’s entry-level or experienced workers, attracting them is likely to require some selling. That is, those outside of the industry frequently have preconceived notions about the industry that are outdated. Educating them on the current higher-tech realities of the industry will help attracting workers who had envisioned joining high-tech firms.
What is unique about the oil and gas industry that makes its HR management so different from other industries?
Werner: There are numerous factors that make the oil and gas industry different from other industries. They include the very global nature of the industry, the critical importance of health and safety, the prevalence of project-based organizations, the unconventional workforce of the industry (largely male-dominated, heavy use of contractors and rotators, etc.), the major involvement of governments and the price volatility of the product. Each of these differences has important implications for staffing, training and development, compensation and performance management.
How should HR recruit and train the next wave of industry workers and leaders?
Werner: HR should keep in mind that this new generation has different expectations than previous generations. Issues such as developmental opportunities, international opportunities, corporate social responsibility, work-life balance and the use of technology are more important than ever before. Social media, mobile technologies and gamification in recruiting, training and performance management are likely to be required to maximize the effectiveness of this next wave.
What is HR’s biggest challenge in oil and gas today?
Werner: In the short term, assuming that the upward trend continues, a major challenge will be attracting talent back to the industry. About half of the laid off oil and gas workers who have found jobs in other industries say they would not return to the oil and gas sector. This relates to a long-term challenge which is to continue improving the reputation of the industry. Figuring out how to deal with price volatility without always resorting to layoffs would help.