tackling the talent gap
TRANSCRIPT
Running Head: TACKLING THE OIL & GAS TALENT GAP
Tackling the Oil & Gas Talent Gap
Brendan Nealon, Zeerak Abbas, Luke Blaylock
The University of Texas at Austin
1
Running Head: TACKLING THE OIL & GAS TALENT GAP
Abstract
Human capital is the most valuable asset a company or industry can have.
Companies that realize this and invest in their human capital usually show long-
term success. The oil & gas industry is currently facing a human capital talent gap
caused by the downturns in the 1980s and 2000s. With over 50% of energy
employees reaching the age of retirement, it has become more imperative than ever
to address and solve this problem.
There are many factors that can be attributed to the current talent gap that
exists in the industry. While the gap itself was created by the financial downturns
decades ago, companies failed to implement workforce techniques in the times of
success. One of the biggest reasons the talent gap exists is due to the lack of
investment that companies put in their interns, apprentices, and young
professionals. Instead, these companies simply hire talent away from other
companies. One of the reasons for this is the large amount of time is takes for a
recent graduate engineer to attain expertise in a particular skill. Instead of waiting
close to a decade, companies imply buy away already developed talent. For obvious
reasons, this practice is unsustainable and will only lead to a larger talent gap in the
future. Another cause of the talent gap is the lack of soft skills in young
professionals. Due to the lack of development programs offered by companies,
young engineers lack the non-technical skills and competence to attain management
positions. Lastly, there are fewer students pursuing engineering disciplines relevant
to the oil and gas industry.
2
Running Head: TACKLING THE OIL & GAS TALENT GAP
All of these factors considered, along with the looming retirement of Baby
Boomer generation has faced current oil and gas executives with a predicament. The
long term success and growth of established oil companies is going to be put in the
hands of a much younger generation of talented engineers, how effectively can these
executives orchestrate the transition?
3
Running Head: TACKLING THE OIL & GAS TALENT GAP
Table of Contents
Abstract 2
Executive Summary 5
Tackling the Oil & Gas Talent Gap 7
Causes 8
Solution 9
Encourage the Next Generation 11
Youth Programs 11
Education 12
4
Running Head: TACKLING THE OIL & GAS TALENT GAP
Casting a Wider Net 12
Implement Training Programs 14
Retain Skilled Employees 15
Conclusion 15
Executive Summary
Human capital is the most valuable asset a company or industry can have.
Companies that realize this and invest in their human capital usually show long-term
success. The oil & gas industry is currently facing a human capital talent gap caused by
the downturns in the 1980s and 2000s. With over 50% of energy employees reaching the
age of retirement, it has become more imperative than ever to address and solve this
problem.
There are many factors that can be attributed to the current talent gap that exists in
the industry. While the gap itself was created by the financial downturns decades ago,
5
Running Head: TACKLING THE OIL & GAS TALENT GAP
companies failed to implement workforce techniques in the times of success. One of the
biggest reasons the talent gap exists is due to the lack of investment that companies put in
their interns, apprentices, and young professionals. Instead, these companies simply hire
talent away from other companies. One of the reasons for this is the large amount of time
is takes for a recent graduate engineer to attain expertise in a particular skill. Instead of
waiting close to a decade, companies imply buy away already developed talent. For
obvious reasons, this practice is unsustainable and will only lead to a larger talent gap in
the future. Another cause of the talent gap is the lack of soft skills in young professionals.
Due to the lack of development programs offered by companies, young engineers lack the
non-technical skills and competence to attain management positions. Lastly, there are
fewer students pursuing engineering disciplines relevant to the oil and gas industry.
Simply put, the oil and gas industry lacks appeal for recent graduates. There is
little stability, a difficult work-life balance, and the off-chance of traveling to a politically
unstable area. Therefore, it is important to change the image of the industry by recruiting
even before college. Sponsoring STEM programs in high schools will encourage youth to
pursue positions in oil & gas upon graduation. Furthermore, it is imperative for
companies to improve their training programs or to create new programs for apprentices.
This will shorten the time required for a young professional to attain expertise. Another
solution companies can implement is to provide matching offers and greater benefits to
their current employees in order to retain them. This will keep employees within the
industry and force other companies to develop young professionals.
6
Running Head: TACKLING THE OIL & GAS TALENT GAP
Overall, it is incredibly important for companies to develop and retain their young
professionals. With impending retirement from Baby Boomers and the downturn in
prices, it is more important than ever to invest in human capital.
Tackling the Oil & Gas Talent Gap
Arguably the greatest challenge faced by any industry is the shortage in supply of
talent. Without a stream of talented individuals to grow a company, success will slowly
dwindle. Nearly 90% of senior human resource executives have stated that talent
management issues are the single greatest challenge and threat to a companies’ financial
success (ReliablePlant, 2015). Currently talent in the oil and gas industry is top heavy,
with a majority of expertise being concentrated in senior employees, aged 55 and older.
7
Running Head: TACKLING THE OIL & GAS TALENT GAP
The current talent gap was carved from multiple downturns in the 1980s and 2000s,
which caused young graduates to pursue employment in other industries. Low oil prices
are churning a similar cycle, forcing young professionals to look to other sectors. With
the impending retirement of the baby boomers and growing demand of energy
worldwide, the shortage of recently-graduated human capital is becoming a glaring issue
(Halle, 2013). This paper will discuss the causes of the current talent gap, solutions
companies can implement to fix this problem and the cost for implementing these
solutions.
One of the positives with the talent gap problem is that companies and employers
have been aware of the issue for at least a decade. Often times, the industry isn’t aware of
the problem until it directly affects profits. Over 58% of energy employers state that they
are having trouble finding college graduates and other individuals with the right skills for
the job. Furthermore, 74% of the same employers believe that the talent gap problem
must be addressed in the next 5 years (Ram & den Berj, 2015). According to Dan
Heitzelman, CEO of GE Oil & Gas, over 50% of employees in the oil & gas industry are
eligible for retirement (Mainwaring, 2013). Mercer’s survey of 151 energy companies
shows that the largest gap in skill set occurs in technical skills, with over 74% of
companies stating that they lack employees with sufficient technical knowledge (2014b).
Having a younger employee base with expertise will allow a company to be prepared for
robust and pioneering operations, as well as a pipeline towards future leadership while
facing an ever-changing industry.
Causes
8
Running Head: TACKLING THE OIL & GAS TALENT GAP
Similar to other industry-wide problems, the talent gap in the oil and gas business
is the product of a decade of recruiting neglect by companies. For the past ten years,
companies have steadily invested less and less in their new hires, interns, and recruits.
The lack of investment in younger employees has lead to an increased time in attaining
expertise in a skill (Mercer, 2014a). Younger employees also lack important soft skills,
including management and financial competence, creating a larger gap in capable hires
for upper-level management positions. Another cause for the lack of talent in the industry
is the current hiring strategy in the industry. A vast majority of companies try to hire top
talent away from other companies, creating a tug-and-war situation and resulting in a net
loss in talent (Mercer, 2014a). The difficulty in keeping employees away from competing
companies is recognized as the leading recruiting and attrition risk by over 2,000
operation managers (Wesselman, Visser, de Bruin, & van Zessen, 2014). Often times,
the largest talent gap exists in the roles that have the highest rate of retirement.
Furthermore, there are fewer students pursuing engineering and science disciplines
relevant to the oil & gas industry.
While the largest gap in talent exists for petroleum engineers, similarly large
talent gaps exist for blue-collar jobs such as plant operators, technicians, and welders.
The greatest cause for this is the lack of apprentice programs by oil companies. Most
companies fail to setup apprenticeship programs that allow young individuals aged 18 to
24, to pursue vocational skills without attending college. Furthermore, tough work
schedules and difficult working conditions have prompted many vocational workers to
leave the energy industry for other industries requiring similar skills, such as automotive
and construction. Another reason vocational workers and young engineers are leaving the
9
Running Head: TACKLING THE OIL & GAS TALENT GAP
industry is due to security concerns in the Middle East. Countries like Algeria and Iraq
pose significant safety concerns due to domestic terrorism and political instability.
Finding workers to complete jobs in hotspots is becoming increasingly difficult.
Furthermore, it is becoming tougher for companies to provide security for employees in
these areas.
Solution
A solution needs to be comprised to account for the lack of future talent in the
petroleum industry. Most major oil and gas companies see an issue with it and find it a
threat to their future success. According to a study completed by Ernst & Young LLP,
“Nearly 90% of senior human resources (HR) executives at 22 top international oil and
gas companies believe their industry faces a talent shortage and call the problem one of
the top five business issues facing their companies” (ReliablePlant, 2015). As petroleum
engineering students, we may not see the potential lack of talent as an issue, but major
executives do. Despite the fact that the annual starting salary for petroleum engineering
students is roughly $20,000 more than the next engineering discipline, there is still a
notable lack of youth talent. With the compensation for professionals in the petroleum
industry being so high, oil and gas executives are trying to find solutions to solve the
problem. As petroleum engineering students in the supposed talentless category, we have
come up with some way to fix the talent gap. Some of the solutions to combat the lack of
talent are to focus on the next generation, recruit new hires in bulk, and improve and
create new training programs.
With demand for oil and gas steadily mounting, and prices steadily
decreasing, the industry is looking at young geologists and engineers to solve the
10
Running Head: TACKLING THE OIL & GAS TALENT GAP
world’s future energy problems. The Energy Information Administration (EIA)
reported that the international energy outlook for worldwide consumption of fossil
fuels is expected to nearly double from 2005 to 2030, this means that despite the
current downturn of gas and oil prices there is going to continue to be a high
demand for petroleum engineers. The problem is that the industry is bracing itself
for a large portion of current senior-level employees (the Baby Boomer generation)
to retire, and many companies have not installed sufficient training and mentoring
programs to compensate for this looming loss (ReliablePlant, 2015). Some of these
current Baby Boomer executives may have lost sight of the long term health and
growth of their companies and may have difficulties initially meeting increasing
production demands with the future generation of talented but inexperienced
industry employees.
Current industry common practice when attempting to fill a staff or replace
executives is to outbid other companies for in house top talent. Instead of cultivating
new young talent, oil and gas companies attempt to lure away employees from
competitors by offering higher salaries and more benefits. The industry as a whole
needs to look up and learn from other industries such as the ever changing and
cutting edge industry of technology. Technology powerhouses such as Google, Uber,
and Air Bnb are filling their intern pool with the sharpest young minds from
universities such as Stanford, Princeton, MIT and preparing them to excel in
executive positions at a young age. Why should the oil and gas industry not do the
same (Mercer, 2014a)?
Encourage the Next Generation
11
Running Head: TACKLING THE OIL & GAS TALENT GAP
One of the most obvious and most important ways to fill the talent gap is to focus
on the next generations: Generation X and Generation Y. If younger minds are introduced
to the oil and gas industry, there is a good possibility that they will want to pursue a
future in the industry. A few ways to engage said youth are by the introduction of youth
programs, involving youth in organizations, and increasing opportunities for petroleum
education.
Youth Programs. Developing more youth educational programs that give youth
both a fun and intriguing experience can turn their minds onto the oil and gas industry.
On a broader scale just developing more youth STEM programs can help. Marathon
Petroleum has developed a youth education series that is specifically designed to increase
interest in the industry. If more oil and gas companies were to follow suit and create
similar programs to generate the interest of younger students, the industry would start to
see movement in the right direction.
Another way to encourage youth participation is to encourage those who already
have an interest in oil and gas to join STEM organizations and programs. The more kids
exposed to the world of engineering, the more kids wish to pursue a life in oil and gas.
More specifically, joining petroleum groups would help as well. The US Youth
Committee (USYC) to the World Petroleum Council (WPC) is an organization designed
to do just that. Their aim is to “strengthen the impact both young professionals and
university students can have in developing solutions to global energy issues” (API, p.2).
Encouraging youth who already have an interest in oil and gas to join a group like the
USYC can increase their knowledge and interest and hopefully push them towards
12
Running Head: TACKLING THE OIL & GAS TALENT GAP
following a career in oil and gas. Improvements like these will help the industry fill the
talent gap.
Education. One final way to fix the talent gap by focusing on the next generation
is to increase the opportunities for education. As of 2012, only 24 universities in the U.S.
offered undergraduate degrees in petroleum engineering (Cappex, 2012). The small
number of schools can make it tough on students who wish to major in petroleum
engineering, as some personal restrictions may prevent them from doing what they would
like. For example, if a promising student from New York wished to major in petroleum
engineering but did not have the physical or financial means to go to school out of state
for school, that means one less person is able to help fill the talent gap. If a larger number
of schools adopted petroleum engineering programs, high school students and college
applicants may have better opportunities to pursue futures in oil and gas. An increase in
students in the major would lead to an increase in the number of talented graduates that
leave the programs, helping alleviate some of the problem.
Casting a Wider Net. Another important method that can help fill the talent
void is a change in recruitment for oil and gas companies. Expanding and
diversifying recruiting methods can be a possible solution to finding more talent. If
companies were to recruit a wider variety of talent and put these new hires through
training programs that cover multiple areas in the industry, there is a strong chance
that the companies’ talent pools would be improved and diversified. The trend at
large recruiting expos is companies typically interview students who stand out the
most on paper. This could contribute to the stigma that engineers do not have as
developed soft skills as students of other disciplines. Often times engineers that
13
Running Head: TACKLING THE OIL & GAS TALENT GAP
have the most developed soft skills do not have as impressive of grades or resumes
on paper. If tweaks were made in the recruitment process to not let as many of these
types of engineers to fall through the cracks, this could help the long term transition
of the Baby Boomer executives. If more young engineers are brought in to go
through diversified training programs, there is a higher probability that the new
hires are placed in a position in which they can excel. A potential solution to this
recruiting dilemma is to take more advantage of modern social technologies. Along
with traditional recruiting expos, social data technology can help any size of
company more effectively and efficiently narrow down candidates based on soft
skill related characteristics such as temperament, and behavioral characteristics
Alternative options could involve installing diversified apprenticeship programs
(Mercer, 2014a). Even within smaller independent operating companies, if geologist,
landman, reservoir engineer and drilling engineer apprenticeship programs became
more common practice, the youth movement of a smaller successful operating
company could become much more streamlined. Lastly, it would be in the best
interest of companies to somehow compile the unwritten knowledge of this Baby
Boomer generation readying themselves for retirement. Either in some type of
document or in the field or even in a classroom, this great generations “tricks of the
trade” should not go forgotten (Mercer, 2014a).
Implement Training Programs
One more solution that could help fill the void of talent in the industry is to create
and improve new hire training programs. While many companies already have rotation
training programs in place, some may not be beneficial to the newly hired individuals. As
14
Running Head: TACKLING THE OIL & GAS TALENT GAP
stated in the preceding section, some new hires may be placed in positions where they are
unable to excel. In a 2013 study conducted by the Society of Petroleum Engineers and
sponsored by BP, 53% of the participants surveyed who had a for lack of training and
development opportunities at their current company said they would consider moving to a
different company. Often times, after completing their employer’s rotation program,
newly hired employees are placed in roles where they are most needed, not where they
most excel or find the most satisfaction. This can hurt the success, talent, and morale of
the employee as they are forced into a role in which they are unfamiliar. There are also
oil and gas companies that do not have very well developed and implemented training
programs. This contributes to the talent void because many people are brought into the
industry without the proper training and development. In the same study conducted by the
Society of Petroleum Engineers, 25% of those surveyed believe a lack of proper training
has hurt their career. These are people that could be great at their jobs but are not given
the opportunity to do so. Introducing and improving training programs can help
employers find where new hires can excel and in turn help alleviate the lack of talent
(Enzer, 2014).
Retain Skilled Employees
One last solution that can aid in filling the talent gap is to retain the skilled
employees that companies are losing. These can be experienced, older or younger, skilled
employees that might have found a new calling in life that steers them away from the oil
and gas industry. Retaining these professionals is key because it immediately works to
close the talent gap. These employees can be kept on board with such incentives as
15
Running Head: TACKLING THE OIL & GAS TALENT GAP
competitive compensation and benefits structure. However, monetary compensation
should be considered as only one part of the solution. Other possible benefits include
more time off, improved health benefits, better work environment, stock options, and
much more. This solution, paired with the before mentioned solutions, can aid in
diminishing the talent gap, as retaining the older experienced employees for a few years
gives just enough time to train new hires and inspire the minds of the youth (Enzer,
2014).
Conclusion
The oil and gas industry is a very important one for the planet. These companies
are responsible for powering the world. However, it can be tough when many of the
experienced individuals in the industry are growing old and retiring and many of the
younger professionals are not adequately prepared for the more important roles they now
have to fill. For these reasons, it is crucial to help fill the talent gap as efficiently and
effectively as possible. This can be achieved a few different ways. By encouraging the
younger minds of today to pursue a career in oil and gas, the industry is paving the way
for more determined and driven minds to fill the large shoes left for them. There are also
more immediate solutions that are more dependent on the companies themselves, such as
recruiting new employees in bulk and improving or creating training programs to ensure
that new hires are more prepared for the roles they must fill.
16
Running Head: TACKLING THE OIL & GAS TALENT GAP
References
Competing For Talent In The Oil And Gas Industry. (2014a, December 1). Retrieved
November 23, 2015, from
http://www.mercer.com/insights/think/2014/competing-for-talent-in-the-oil-and-
gas-industry.html
17
Running Head: TACKLING THE OIL & GAS TALENT GAP
Enzer, G. (2014, March 17). Oil & gas is facing a severe talent shortage. Retrieved
November 23, 2015, from http://www.arabianoilandgas.com/article-12091-oil-
gas-is-facing-a-severe-talent-shortage/1/
Halle, M. (2013, August 7). Recruiting and Retaining Oil and Gas Talent in a Skills
Shortage. Retrieved November 23, 2015, from
https://www.oilonline.com/industry-news/workforce-trends/recruiting-and-
retaining-oil-and-gas-talent-skills-shortage
Mainwairing, J. (2013, February 15). GE Oil & Gas: Bridging the Talent Gap. Retrieved
November 23, 2015, from
http://www.rigzone.com/news/oil_gas/a/124354/GE_Oil_Gas_Bridging_the_Tale
nt_Gap
Ram, C., & Den Berg, A. (2015, March 2). Closing The E&P Talent Gap. Retrieved
November 20, 2015, from http://www.epmag.com/closing-ep-talent-gap-
784891#p=full
Talent Gaps, Shortages Affect Oil and Gas Industry Success. (2014, December 1).
Retrieved November 23, 2015, from
http://www.mercer.com/insights/think/2014/talent-gaps-shortages-affect-oil-and-
gas-industry-success.html
Talent void major concern for oil and gas companies. (n.d.). Retrieved November 23,
2015, from http://www.reliableplant.com/Read/10949/talent-void-major-concern-
for-oil-gas-companies
Youth in the Oil and Natural Gas Industry. (n.d.). Retrieved November 23, 2015, from
http://www.api.org/GlobalItems/GlobalHeaderPages/About-API/Youth-in-Energy
18
Running Head: TACKLING THE OIL & GAS TALENT GAP 19