The oil and gas industry is facing a bigger workforce challenge than ever before. The recent boom has resulted in a widespread labor shortage, the baby boomer generation is near retirement, and studies have found that the oil and gas industry is struggling with effective leadership – with just one in 20 professionals fitting the profile of an effective leader today.
The so-called “Big Shift Change,” when baby boomers will retire in droves and leave 500,000 openings in the oil and gas industry over the next five years, presents a major risk for companies as they lose decades of institutional and industry knowledge.
Compounding the issue further is the reduced number of students applying for and completing STEM university courses, the complex nature of the industry, rapid changes in technology and unique safety concerns, which means that we’re at a critical point in time for companies to have robust talent programs to identify and train “high-potential” (HiPo) employees. HiPos are identified by their leadership characteristics, and they are twice as valuable as their non-HiPo peers because they save their companies millions through efficiency, leadership and longer tenures.
Major U.S. corporations spend an average of $3 million every year on leadership and development programs for HiPo employees, often struggle with keeping them with the company -- more than half of will leave within five years. Our research shows companies can reduce flight risk and improve the success of their HiPo programs more than tenfold if they offer the right kind of training that develops leaders’ ability to motivate others, effectively communicate and support others through change.
Here are five actions consistently taken by successful companies that result in strong HiPo programs, low turnover and increased savings that the oil and gas industry should institute now:
1. Recognize that employees need more than strong performance in their current role to succeed in future roles. The shortage of leaders in oil and gas could be explained by the lack of support and training provided to those managers who worked their way up through the ranks from technical roles. While identifying employees with a record of high performance is an important step in identifying them as HiPos, it isn’t enough by itself. CEB research shows that assuming high performance equals high potential puts the odds at six-to-one that the employee will fail in a development program.
2. Define “potential” clearly. While attributes may vary slightly based on company culture and practices, there are three important aspects all companies should look for when defining potential: employees need to have the aspiration to rise to a more senior role, the ability to manage and lead effectively, and commitment to the organization.
3. Measure potential objectively. Only one-in-three organizations use assessment data to identify employees for HiPo programs, and nearly half lack a methodical process for identifying and developing HiPos, according to CEB research. Rather than relying on subjective assessments, nominations or evaluations, successful organizations ensure fair and valid identification of HiPo talent through scientific assessment.
4. Ask for commitment in return for career opportunities. HiPo employees are highly marketable — they are strong performers and are often confident they can find work elsewhere. Therefore, organizations that see the highest returns on their HiPo investments proactively mitigate flight risk among by asking for future commitment – even “career contracts” -- in return for development opportunities.
5. Create differentiated development experiences. Typical HiPo programs fail to prepare participants for future roles. Giving HiPos stretch assignments goes part of the way -- they not only learn new skills but also apply existing skills to different roles – but even more, new learning technologies enable the most efficient extraction of knowledge from experience. Getting this blend exactly right is even more important as baby boomers retire and oil and gas companies fill positions from the biggest pool for potential hires today – millennials (ages 18-29 years). As many as 23 percent of millennials say they value diverse experiences more than advancement and they place particular emphasis on development opportunities when looking for jobs.
Jean Martin is an executive director and Eugene Burke is the chief scientist and analytics officer at CEB, the leading member-based research and advisory firm.