Given the recent plunge in the price of oil, Mercer’s study of 154 oil and gas industry organizations in the US, Canada and Mexico found that nearly half (44 per cent) will cut back on capital expenditures, a third (32 per cent) plan to decrease acquiring new outside talent and 16 per cent may reduce staff. The survey, entitled “Mercer Changing Energy Industry Dynamics Survey” was conducted between December 11, 2014 and January 16, 2015 and revealed the short-term business and human capital tactics under consideration by respondents.
Business strategy impact - while 25 per cent said that it was “too early to tell”:
- 44 per cent will cut back on Capital Expenditures as a result of the decline in oil prices
- 38 per cent will reduce selling, general and administrative (SG&A) operating expenses
- 23 per cent will reduce core (non-SG&A) operating expenses
- 7 per cent will explore potential divestitures of assets, business units, products or geographies
Human capital strategy impact - while 32 per cent said it was “too early to tell”:
- 32 per cent plan to decrease “buying” talent from outside their organization
- 18 per cent plan to freeze or cut compensation
- 18 per cent will consider how to enhance cost effectiveness of HR delivery
- 16 per cent may reduce staff (restructuring)
These results are clear indicators of how quickly market conditions can disrupt employer strategies. For example, in a previous Mercer Oil and Gas survey released in early 2014, 66 per cent of respondents identified “buying” talent as their top talent management strategy.
Given these findings and current market realities, Mercer believes the forward-thinking HR leader will put forth a balanced strategy – taking necessary short-term actions while building capability and enhancing organizational performance for the long haul. In Mercer’s view this approach is essential because as history has proven, the price of oil is fundamentally based on supply and demand – as production cuts take their toll, demand will eventually outpace supply and organizations will be in growth mode again.
Mercer has identified the following ten priority actions to deliver financial performance improvement that HR leaders in the oil and gas industry should take immediately:
- Financial re-engineering
- Program suspension
- Increase employee accountability/empowerment
- Rewards reconfiguration
- Plan governance
- Optimize HR service delivery
- Workforce planning and analytics
- Alternative workforce configurations
- Global plan leverage
- Employee productivity acceleration
More information on these actions can be found at: http://www.mercer.com/services/solutions/energy/managing-human-capital-assets-during-market-disruption.html
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and careers of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With annual revenue of $13 billion and 60,000 colleagues worldwide, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.ca. Follow Mercer on Twitter @MercerCanada.