Building a 21st Century Workforce in the Energy Sector

People are every bit as important as the bottom line in the energy sector. Corporations, both in the domestic or global arenas, have learned the hard way that seemingly small mistakes, such as traditional cost-cutting measures, layoffs, and reduced hiring can generate big, gloomy events. More often than not, massive global downturns and disastrous environmental spills stem from this failure to think in the long-term.

The industry could have prevented losses from these catastrophic events had it prioritized its workforce over its cost management objectives.

A Look at Employment in the Energy Sector

Over the last decade, the sector has dealt with overwhelming challenges. But the most troubling, other than commodity price swings, is the impending workforce supply gap. Experts claim this to be the main reason the sector’s growth and pace of innovation has slowed down.

Given the global complexity of the market, energy companies are shifting their focus to improving workforce management practices while maintaining cost-efficiency. Skills shortages and an aging workforce are not merely barriers to growth; they are the result of a company’s reluctance to train and invest in workforce development and retention.

To curb these challenges, leaders have been looking beyond traditional management methodologies and putting more emphasis on human performance improvement. Leaders hope that by improving human performance and investing in their talent pipeline, they can achieve lasting change and sustainable growth.

A report released by the U.S. Department of Energy shows that change has come in many ways across the industry. The renewable energy and natural gas sectors, for instance, are attracting more employees while coal product continues to decline. The oil and natural gas industries have seen a large net increase in jobs between 2004 and 2014, while the proliferation of new technologies has led to new employment opportunities.

In spite of these, experts still forecast a major skills shortage in all subsectors, as its aging workforce prepares for retirement, and the succession of key roles lags behind.

Key Challenges in Energy Employment

In the past, layoffs were a common trend among energy companies as a way to remain cost-efficient and competitive. Given the series of busts and booms and ups and downs in the market, businesses then preferred short-term value over permanent efficiency gains. Reduced hiring in the 1980s became widespread as consumers looked for savings everywhere, forcing companies to drop prices.

The delayed result of this trend is an aging workforce and organizational silos, which many companies still face today. And as governments channel more funds to renewable energy and with global competition getting steeper, operational leaders in the gas and oil sectors now face greater demands.

Moreover, given the risky nature of energy jobs, there has been a lack of interest coming from younger workers. Managers now struggle to retain and recruit key talent, which is stunting succession plans for top managers and technical employees.

The coal industry seems to have suffered the greatest losses, as governments favored cleaner sources of energy and consumer demand plummeted. The industry spent government and private sector funds on reclaiming coal mines and assisting coal workers in their retirement or transition to other employment opportunities.

Balancing Cost-efficiency and Human Improvement

Weathering a highly volatile market requires a long-term view of the talent pipeline. A modern workforce for the future of the energy sector should be agile, dynamic, and diverse. Operational managers should not just be engineers, they should also be adept in risk assessment, behavioral science, and digital technologies.

A number of companies are reaching out to new populations, such as millennials, women, and minorities, which have not had adequate representation in the sector’s labor pool. Businesses invest in new technologies, as well as mobility and relocation strategies to attract the right talent. In critical locations, companies present relevant programs for workers, such as mobile clinics, housing, and recreation facilities to provide a more attractive work environment. In more inhospitable locations, the move to automation is speeding up to reduce reliance on line workers.

Many companies, particularly those with overseas locations, have also become reliant on joint ventures. They turn to local leadership in overseas locations to manage operations and gain a deeper understanding of geopolitical risks and respect for local regulatory environments.

The existence of high capital costs along with rising costs and tighter cash flows may make investments in performance management and recruitment risky. But agility is crucial for companies to thrive and become resilient amid increasing complexity in the global and domestic markets.

For instance, considering the impact of sophisticated data analytics, automation, and smart management of complex systems on exploration and production, companies must invest in helping lower-skilled workers adapt to these changes. Heightened automation and reliance on smart technologies can alienate older, lower-skilled employees.

Reducing Uncertainty, Pursuing Real Change

While automation appears to be gradually transforming the energy workforce, people remain indispensable for critical operational leadership, technical and safety roles, as well as complex decision-making.

Businesses need to help all workers integrate into the company’s culture and get them on board to fulfill desired synergies. Internal training programs must also be in place to develop core competencies and facilitate knowledge transfer. Flexible work models have also recently become a popular option for energy companies struggling to retain staff. And more importantly, any change in the process or organizational restructuring requires strong communications plan to ensure that no employee gets left behind.

For instance, companies looking to switch to automated systems must find ways to retrain workers and collaborate with regulators as the transformation unfolds. This is critical in the offshore industry as well, where the management of plants is increasingly relying on highly complex automated systems. Thus, synergies between companies, regulatory bodies, and other stakeholders, such as academic institutions, are necessary to facilitate innovation across the board.

The energy sector has significantly evolved and diversified over the last few years. The sheer complexity and volatility of this sector have made employment a lingering issue. To overcome uncertainties and challenges ahead, fostering an innovative workforce—one that can handle change and drive growth—is crucial. To meet the future demands of the sector, companies must take every possible approach to assist and develop a skilled workforce.