CCO, Retirement Solutions
Strategic Growth Director
The global financial crisis (GFC) of 2008 mobilised a rapid response across the energy industry. Investment into science, technology, engineering, and mathematics (STEM) studies fell away as capital was redeployed to focus on retaining the knowledge, skills and experience of the mature workforce. Although these efforts enabled some firms to survive, and flourish as competition fell away, the rapid decline in oil prices within the last 2 years has forced firms to take drastic action.
A substantial portion of redundancies were settled with employees nearing retirement. Although these measures were taken to secure immediate financial savings, they have come at a cost; firms have lost critical knowledge and experience from their workforce. As an aging workforce continues to reach retirement and changing operating models – fuelled by regulatory pressures – demand new skills, securing this expertise is critical to the continued development and success of energy firms; but global commercial and sociocultural pressures are a challenging barrier to overcome when attracting and retaining talent across the industry.
Attracting and retaining talent is an immediate challenge for energy firms. As global commercial and sociocultural pressures change in the next 5, 10 and 20+ years, the challenges and opportunities for energy firms will shift significantly.
Energy firms will need to focus on addressing the immediate skills shortage and experience gap by attracting new joiners and retaining the existing workforce.
“A survey of participants across North America, Europe, Asia, and the Middle East reported that 44% of STEM Millennials and Gen Zs are interested in pursuing a career in oil and gas, compared to 77% in the technology sector, 58% in life sciences and pharmaceuticals, and 57% in healthcare.”
As future generations prepare to enter the workplace, the attraction of the energy industry is being diluted by:
- A global focus on climate change and social responsibility are core drivers for career decision-making and experts have identified a growing trend. Oil and gas companies are struggling to attract talent, particularly if oil features prominently in the branding. Inspired by Greta Thunburg, schoolchildren and young adults used their collective power to stand united against climate change. Meanwhile, public protests and the proliferation of groups such as Extinction Rebellion have bolstered this message. This global sociocultural movement has had an immediate and direct impact on energy firms; potential joiners feel that they have a responsibility to pursue careers in alternative industries with perceived social commitments.
- Regulators are increasingly focusing on ESG issues and energy firms must take immediate action to meet environmental obligations and demonstrate commitment to diversity, equity, inclusion and climate action. In addition to the climate change conversation, ethical working practices, privacy and data management are increasingly scrutinised by both regulators and the workforce. Commitment and integration of ESG factors is now the hallmark of sustainability. Social responsibilities will need to be addressed with a focus on diversity, equity and inclusion to develop a working environment where employees feel valued and safe.
- Shifting social values - new generations are growing in a time of radically shifting sociocultural behaviours. Considerations such as a work/life balance, job satisfaction and job security are all valued increasingly by new joiners and their value is beginning to outweigh salary as core decision-making factors. Although salary remains a core driver for career decision-making, the rise of renewables and decline in hydrocarbon fuel usage is likely to reduce firms’ profit margins. With less available capital, salaries may begin to fade and without a financial incentive, new joiners are more likely to pursue a career in alternative industries with additional benefits.
- Technology is another core driver for STEM Millennial and Gen Z decisionmaking. Recent reports indicate that graduates show the most interest in industries that they believe will be most impacted by new technologies. Globally, just 42% believe that new technologies will have a major impact on the oil and gas industry, compared to 73% in the technology sector . On assessing potential career paths, the energy industry pales against the glittering appeal of technology giants in Silicon Valley. This perception translates into attraction, and STEM graduates are increasingly transferring their knowledge and skills to alternative industries.
“According to the GETI, three in ten respondents are doubtful that they will remain with their organisation over the next three years.”
Considering the unprecedented talent shortage and employee readiness to switch roles or even sectors, retaining talent is an immediate challenge for energy firms.
Traditionally, the promise of a strong salary directly translated into high workforce engagement, but changing sociocultural values are contributing to employee disengagement:
- Alternative industries are increasingly seeking experienced energy employees, as their transferrable skills and experience make for a smoother transition into their industry. Although new joiners are typically more receptive to the promise of benefits packages and access to innovative technologies, the increasingly challenging commercial environment of the energy industry is increasing the appeal of transferring to alternative industries for existing employees. Energy firms are at risk of losing the pivotal skills which have the potential to drive operational change and this departure of top talent could be the difference between success and failure.
- Career progression is highly valued. Since the energy industry is undergoing rapid change, and COVID-19 reduces demand, firms are currently in a state of survival. With capital being redeployed elsewhere in the business, investments in ongoing training and development have slowed. GETI reports that 44% of employees in the energy sector say that their company does not regularly invest in their training and development and 32% report no access to training with their current employer in the last year. With limited access to training and development opportunities necessary for employees to upskill, top talent could be motivated to pursue opportunities either with competitor firms, or alternative industries altogether.
- Relocating - efforts to attract new joiners are pushing energy firms to operate in new territories. To establish the business and operate effectively in new regions, existing roles are being relocated. Although GETI data suggests that many employees would be willing to relocate, the reality of relocating can be a driver for employees leaving their roles or the industry altogether.
“In the immediate future, energy firms will need to establish future goals and use these objectives to drive the talent strategy, to fill the talent pipeline with the necessary skills, knowledge and experience to navigate new challenges and pursue new opportunities. ESG will impact energy firms’ talent strategy, particularly within the next five years. ESG reporting requirements will have an impact on how energy firms select and develop talent, with a spotlight on diversity, equity and inclusion. While firms will need to consider how to structure compensation and benefits to fulfil regulatory and social responsibilities.”
Suzanne Courtney, Strategic Growth Director EMEA, Aon Assessment Solutions
Driven by divestment in oil and gas, and the insurance market shifting away from traditional coverage, commitments to carbon neutrality are pivotal to securing investment and by extension, long-term survival. The shift towards renewables, and the transition toward digitalisation and automation will gather momentum, placing a renewed emphasis on the need for new skills, and providing new opportunities for energy firms to develop their workforce.
- Efforts to reinvent branding and perception is already underway, particularly in the Scandinavian region where activity has involved reinventing brand names, assets and pursuing research projects. For firms which rapidly invest in renewables and commit to ‘net zero’, their efforts to align with sociocultural values is likely to increase the appeal of the energy industry.
- As the industry shifts towards sustainability, STEM programmes are likely to be revived. The investments made in STEM initiatives will engage new generations by guiding and supporting study and career decision-making.
- Experts predict a net job loss across a 10-year period as new technologies and operations create new opportunities at entry and experienced levels.
- New joiners will be attracted to new technologies and opportunities to fulfil their social responsibilities; their work is contributing to creating a more sustainable world.
- For existing employees, the shift towards renewables will provide new opportunities to develop new skills to boost career wellbeing and safety. Aside from individual career progression, sharing the success and growth of the business will boost employee engagement and loyalty.
Sophisticated and developmental technology is enabling the rapid development of smart cities. Smart cities will provide new opportunities for energy firms to develop their operating models, demanding new skills from their workforce. Energy companies will be competing with alternative industries. Although talent strategies will differ across industries, total rewards will become key as energy companies pivot into other areas.
Hydrocarbon fuel usage is likely to fall away and the market share of oil and gas firms which are unable to develop a sustainable business model focusing on renewables, will be limited to select geographies and reduce substantially.
“The value of carbon commitments is set to increase exponentially, and competition to secure investment will continue to motivate evolution across the industry. As insurance markets join the shift towards renewables, a lack of coverage will force firms to develop their methods and activities to remain operational.”
Well-capitalized firms will have pursued opportunities emerging in renewables, and smaller players may fall away from the competition; a wave of transactional activity will restructure the energy industry.
The talent curve is likely to flatten as the current challenges are addressed by the transition to renewables:
- The new technologies and operations will become integral to business models, and firms will seek to fill new roles. The pace of technological development will continue to grow exponentially, demanding new skills from the workforce, which will continue to evolve over time.
- Closer collaboration between the education system and the energy industry could bring alignment to training and education initiatives. STEM initiatives may receive a substantial uptick in investment and support, as changing operations across the energy industry demand new skills in increasing volumes of employees as businesses grow.
- The industry will be increasingly attractive to new joiners, as technology continues to advance, salaries increase, and the role of the energy industry becomes more established as a gateway to fulfil sociocultural obligations.
- Renewables with increasing - and potentially a majority - market share, will stabilise the industry, providing employees with job security as well as opportunities to develop their skills and progress their career. For firms who fail to invest in progression opportunities for their employees, competitors with comparable technology and opportunities and scope, will be more attractive and there may be some exploratory movement in new roles. Building an ecosystem of collaboration across education providers, partners, and even competitors could create a flexible talent pool that can be leveraged in new ways as industry demands change over time.
“Within 20 years, the development of technology is likely to accelerate the transition to automation. As business models change and roles become increasingly automated, different skills will be needed. In preparing for this transition, energy firms will need to explore whether these new skills are already available within their teams, whether any training will be needed to develop existing skills, or whether new talent will need to be hired. When looking ahead to 20 years’ time, digital readiness will be the difference between success and failure.”
John McLaughlin, Chief Commercial Officer, Human Capital Solutions, Aon
Energy firms’ readiness to reskill, coupled with motivation to learn and belief in the ability to change, will be essential for continued success as the industry navigate rapidly changing sociocultural, economic, political and commercial pressures. Identifying the skills needed to pursue commercial ambitions will enable firms to augment their talent strategy and develop an inclusive, equal and diverse workforce, and leverage the benefits of rising patent values arising from a diversified team.
Within five, 10 and 20+ years, changing operating procedures and processes will have an exponential effect, extending across the supply chain. Leadership will need to be the champions of change. With commitment to innovation, diversity, equity and inclusion at the highest level, energy firms will be well positioned to create human capital structures that align workforce behaviours, skills and values to those which support long-term sustainability.
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