The 2009 recession did not negate the talent crisis in the Canadian energy sector. Arguably, the fundamentals of the industry have not changed. The average price of oil per barrel in 2009 ($62) led one Calgary Herald writer to describe 2009 as a “Cinderella Year” for the industry. With a more balanced perspective in mind, Mercer assessed the impact of the global recession on the talent market in this sector.
Dual HR Strategies
Despite an aging workforce, the energy industry has made strong progress in introducing a new generation of employees to key roles. A profile of the industry’s workforce shows success in attracting young workers relative to the success of other industries with similar demographic challenges.
For most energy sector employers, demographics have important implications for their human capital strategies. The challenge is to achieve two distinct policy and program objectives simultaneously:
• retain baby boomers as long as possible to transfer their knowledge and expertise to the next generations; and
• attract, train and retain talented younger workers.
With the anticipated rise in labour demand globally in this sector, Canadian employers that fail to align their human capital strategies for these two groups run the risk of becoming a training ground for other employers to recruit from.
Buy Over Build
Mercer’s analysis shows that Canadian oil and gas employers reward industry experience over company experience. They favour a “buy” (hire from outside) over a “build” (develop and promote from within) philosophy and are willing to pay a premium for outside talent. This approach strengthens the view that people are a commodity, signalling to employees that there is more money to be made by changing employers.
At the current rate of entrants and exits, the industry employment base is contracting at 2% per year. If demand requires even modest employment growth, workforce shortages will quickly appear. By 2014, there could be a shortage of 24,000 employees across the industry, assuming the economy demands only a 4% growth in employment annually.
What’s HR to Do?
If the recent economic downturn was truly a pause, a return to boom times will mean HR will be tested, so knowing how to prepare is prudent. HR will need to follow three Rs: reduce, realign and require.
Reduce the reliance on “buying” talent. The “buy over build” approach can be seen as managing workers as a commodity, which may not resonate well with the next generations. Sources of human capital value should be measured and understood to determine the importance an organization places on firm-specific versus industry experience. Breaking the cycle of loyalty to industry experience rather than firm-specific experience may go a long way toward retaining critical workforce segments.
Realign rewards practices to support desired workforce outcomes. Retention mechanisms need to be robust. Total rewards programs are a key element of retention; however, they must be offered in combination with other career and developmental incentives. The best reward strategies consider all of the ways in which organizations deliver value to employees and reinforce the productive things employees do for the organization.
Require a more systematic approach to workforce planning, with a stronger link to future business goals. Workforce planning should be embedded as a continuous process rather than as an intermittent activity. Workforce planning processes should provide access to data about a company’s workforce to inform effective decision-making. Understanding the internal workforce dynamics and new and emerging labour markets is the most effective way to avoid or mitigate workforce gaps.
The energy company that has a unique human capital strategy tied tightly to its business strategy will be in the optimal position for success in overcoming the inevitable workforce shortages. BC
Stephen Diotte is a partner in Mercer’s human capital business.
stephen.diotte@mercer.com