Unlocking Total Labor Value in the Energy Industry - Accenture
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Unlocking Total Labor Value in the Energy Industry
Costly consequences of labor shortages
Talent shortages have widened during the past few
Collaborative workforce model needed to decades for many reasons. Volatility in oil prices led
alleviate global skills crisis in energy to leaner internal staffing—luring engineering graduates
to other industries. Due to a longstanding deficiency
Innovative technologies for extraction and production of promising young talent, much of the industry’s
have dispelled the notion of “peak oil” in a matter of workforce is nearing retirement age.
years. But if oil and gas resources are more accessible
while developing nations continue to industrialize, In the meantime, exploration for alternative energy
why are share prices not surging at large energy increased demand for talent. Some 2.3 million people
companies? throughout the world work in renewables or indirectly
in supplier industries, and some sources indicate this
The crux of the problem lies not with extraction tally is conservative.2 More than 1 million jobs are in
technologies but with the capacity to execute to the biomass and biofuels sectors, solar thermal employs
business plans—hindered by a deficit of talent. at least 624,000, solar photovoltaics another 170,000,
Chronic shortages of skilled and experienced people and wind power about 300,000.
are largely responsible for delays in capital projects,
cost overruns and underproduction. Newer technologies are causing a shift in the skills
needed by companies. Traditional drilling, to some
Skills shortages in oil and gas have reached the crisis extent, is being supplanted by traditional energy
stage, yet many in the industry have not grasped the production sectors.
full magnitude. Job postings for petroleum engineers
in Houston, for example, were up 20 percent in 2013, The industry spends US$27 billion on subsea exploration
compared to a 6 percent year-on-year increase in all and production, an amount expected to grow to
other jobs.1 The production of university-educated US$130 billion by 2020.3 An Accenture survey found
talent is not meeting demand, and shortages are that 84 percent of energy companies leverage an
evident in nearly all markets. extended workforce to fill their skill gaps.4
Resolving the predicament requires a broad The scale and complexity of new projects, and expansion
perspective: one that calls for closer collaboration into new geographic regions, have made skilled labor
with a full range of business partners. Essentially, a scarce resource in almost every part of the world.
what is needed is a holistic operating model for More than three-quarters (78 percent) of workforce
talent that views all potential suppliers, business suppliers surveyed by Kelly Services, Inc. who deal with
partners and employees. Following this model, reliable large clients indicate their customers face a major
data and analytics can track where talent is today, shortage in skilled talent.5 Another report estimated
and where it should be in the global spectrum of that, in oil and gas, more than three-quarters of the
capital projects and production centers. workforce resides outside the core organization.6
The shortages have played a role in derailing budgets, A survey by Kelly Services indicates that Gen Y, the
resulting in vast cost overruns and schedule delays of core of the future workforce, highly values interesting
concern to shareholders. Survey data from an Accenture and challenging work (80 percent),9 but only 50 percent
study of the oil and gas industry found less than one- of current industry professionals rate their work in these
third of respondents had delivered to within 25 percent terms.10
of approved budgets for all capital projects, and only
15 percent had delivered to approved schedules. Nine
of 10 respondents mentioned access to talent as the
major challenge.
2. Think creatively about an integrated
To determine the overall impact of this crisis, supply chain for talent.
Accenture calculated overspend across capital
Business leaders have tended to start with full-time
budgets in the energy industries (oil, gas and utilities)
hiring, then supplement with external sources. This
at roughly 13 percent. Considering that an estimated
practice is slow and no longer realistic, given the scale
US$38 trillion in projects is anticipated by the
of the shortages.
International Energy Agency over 25 years, the chronic
overruns are projected to add US$5 trillion in cost.7
Companies need to broaden the perspective, in effect,
partnering with other firms to develop integrated supply
Consequently, businesses need to acknowledge the
chains for extended workforces. As an example, a major
talent hurdles before making commitments to analysts
international energy firm signed a multiyear contract
and investors. Based on multiple surveys, research
with a labor-staffing provider to manage end-to-end
and working with energy companies, here are five
recruitment—encompassing thousands of hires each
recommendations to alleviate the industry’s chronic
year for operations in Europe, the Americas and Africa.
shortages. Based on a Kelly Services survey of workforce suppliers
about talent supply chain practices and beliefs, 51
percent say their client base has a formal method
to determine preferred arrangement (i.e., direct
1. Start by accepting reality: employment, working as a temporary employee,
you are no longer in the driver’s seat. project-based, statement of work consultants, etc.).11
Companies need to understand the preferences, and
Even after years of difficulty in hiring, many companies also consider where and when each option might be
regard talent shortages as temporary or solvable by optimal for each business unit and project.
offering higher compensation. Some business managers
and human resources professionals continue to operate Workforce suppliers who deal with large clients
under the assumption that—when it comes to hiring— recognize that securing the right talent at the right
they are in the driver’s seat. time leads to benefits for customers in terms of cost
savings (cited by 52 percent), access to talent/supply
The facts tell us otherwise. While employment at large (40 percent) and risk mitigation (7 percent).12 In other
companies continues to be valued by many longtime words, project owners and contractors share some of
employees, traditional oil and gas careers are not same priorities.
attractive to many young people.
Working at remote locations with few amenities is
not widely appealing, especially to millennials. An
Accenture survey found that only 2 percent of US 3. Monitor quality throughout the
college graduates cite oil and gas as a top choice for ecosystem.
work.8 A significant set of candidates perceives the Many companies do a good job of qualifying suppliers
industry as stagnant and lacking in opportunities. initially, but neglect to follow up with tracking and
auditing. This lack of performance management adds
cost and risk the industry can no longer ignore.Given the heavy reliance on external labor, companies A wealth of digital data sets the stage for analytics
need to spend more time vetting safety and quality. Due that can deliver insights to help managers make better
diligence is critical to determine if a turnkey firm has staffing and deployment decisions.
sufficient supplies of high-demand talent to execute a
capital project with minimal delay and cost overrun. An ideal scenario is to apply the quantitative rigor used
in financial reporting to track workforce performance.
Business units within large organizations need to share Managers need to drill down and determine which
performance records, so that individuals or providers key performance indicators will help track what
who fell short on one job are not hired six weeks really matters in managing an extended workforce.
later by a different unit for a risky job. Shareholders Benchmarks can help each business segment
today have a reduced tolerance for risk, and certain understand which metrics are the most important.
employees, contractors and suppliers carry higher
levels of risk.
Suppliers are becoming more adept at tracking talent
and matching company needs to available skills. Use
5. Aspire to be the “business partner of
of vendor management system (VMS) tools enables choice.”
a more reliable supply; however, be mindful of each
Advantageous staffing for project work does not always
country’s performance-monitoring regulations. boil down to cost. Specialty suppliers are likely to
send their best engineering and IT project talent to
business partners with whom they have good working
relationships.
4. Know where skills reside and where they
can best be deployed. Greater flexibility among business partners is needed
to improve performance, but some energy companies,
Whether the business is upstream, downstream or unfortunately, are becoming more rigid. Hoping to shed
midstream, having reliable information about the supply risk, these companies expect service providers to sign
of resources is vital. Companies typically have some on to more indemnification, quality control, vetting
talent information systems in place, but the reach tends and training provisions. In effect, these companies
to be limited to function, business unit or geography. are increasing the cost of doing business—squeezing
suppliers’ margins and sometimes being in arrears on
Many organizations do a fairly good job of demand payments. Consequently, it is not surprising that a
planning and the scoping of staffing for high-priority sizable number of contractors prefer to work for mid-
projects. But many do not take the next step: assessing sized firms that are less bureaucratic.
the likely supply of talent available and whether it will
come close to meeting demand to deliver on time. Energy firms need to aspire to be more than an
“employer of choice”—a term typically associated with
Data shared throughout the business will help full-time work. The term “business partner of choice”
executives do a better job of supplying talent where and makes more sense as an aspiration because it accounts
when it is needed. In addition, new software tools are for working with a full range of businesses to execute
likely to help companies improve visibility into supply. complex projects.
For example, SAP acquired Fieldglass this year, whose Becoming a partner of choice takes long-term effort,
solutions help businesses oversee contract employees. but companies can take immediate steps. Good
SAP is combining this platform with Ariba for logistics planning at remote sites enables more efficient
procurement and SuccessFactors capabilities for human transportation, housing and meals. In addition, consider
capital management.13 As end-to-end solutions emerge, extending support to project-based workers that
companies will be better able to manage workforces traditionally has been limited to full-time employees.
through well-integrated platforms. Invite them to orientation programs and provide
technology tools to help them collaborate effectively
with full-time employees and other team members.14Making headway through greater collaboration Oil and gas companies will not begin to make significant progress in resolving shortages without first acknowledging the extent of the talent deficit. The cost of labor is already high, but throwing more money at the problem is not the solution. Energy companies need to work smarter to attract and retain qualified, experienced and safety-minded talent. A holistic, collaborative model is needed: one that looks at the entire talent ecosystem, providing consistent data around people. The knowledge of available supply is a vital input for business planning, so production forecasts come closer to hitting the mark. Reliable and integrated information systems, including talent analytics, will provide companies with data on skills, timelines, mobility and safety. Having this knowledge will help oil and gas leaders appoint the right people to the right locations at the right time. Understand that the supply of talent is a top priority, and no single company will solve the problem on its own. Productive and flexible collaboration is the only way to make headway to overcome chronic talent shortages.
References 1 © 2014 Economic Modeling Specialists Intl., a CareerBuilder Company. 2 “Jobs in Renewable Energy Expanding,” Worldwatch Institute, July 2008, www.worldwatch.org. 3 © 2014 OilPrice.com—Used by permission. 4 Traits of Truly Agile Businesses, Accenture Strategy, 2013. 5 Scientific Professionals for the Natural Resources Sector, Kelly Services, Inc., May 2014, www.kellyservices.com. 6 “One Single Source of Security for the Extended Workforce,” Covisint, 2011, www.covisint.com. 7 Accenture research, 2014. 8 Accenture 2014 College Graduate Employment Survey: What Awaits Grads in the Working World? Accenture, May 2014, www.accenture.com. 9 Kelly Global Workforce Index, Kelly Services, Inc., 2013, www.kellyservices.com. 10 Scientific Professionals for the Natural Resources Sector, Kelly Services, Inc., May 2014, www.kellyservices.com. 11 “Talent Supply Chain Management Readiness,” KellyOCG and Inavero, August 2013, www.kellyservices.com. 12 Scientific Professionals for the Natural Resources Sector, Kelly Services, Inc., May 2014, www.kellyservices.com. 13 Ricadela, A, Kirchfeld, A. and Campbell, M., “SAP Agrees to Acquire Fieldglass in Cloud-Computing Push,” Bloomberg News, March 26, 2014, www.bloomberg.com. 14 “Managing the Extended Workforce: A Skills Strategy for Business Agility,” Accenture Outlook Journal, March 2014, www.accenture.com.
About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 305,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is www.accenture.com. About Kelly Services Kelly Services, Inc. (NASDAQ: KELYA, KELYB) is a leader in providing workforce solutions. Kelly offers a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire and direct-hire basis. Serving clients around the globe, Kelly provided employment to approximately 540,000 employees in 2013. Revenue in 2013 was $5.4 billion. Visit kellyservices.com. Authors Lucia Bosworth Senior Manager—Energy Industry Group Accenture lucia.d.bosworth@accenture.com Michelle Steffes Vice President—Global Solutions, Natural Resources Kelly Services, Inc. steffmi@kellyservices.com Copyright © 2014 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative. MOD-155/9-8391
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