Rigzone just published a very thoughtful article from a trio of professors from Rice and Kent State University who looked at the impact of cutbacks on the energy sector. Their basic points are that:
- In the service sector, people provide the service and,without those people, core business suffers.
- During the downturn in the 1980s, industry did long-term damage to itself by cutting too many and the wrong people.
- Industry needs to be smarter about how it engages and retains its employees than it was in the last downturn.
They base their findings on extensive research on long-term shareholder value. That study showed that “Long-term shareholder value is created only if firms consistently treat both customers and employees well.”
The problem is that many oilfield companies have to balance the need to maintain an effective workforce with the very real financial difficulties they face. One of the main factors that companies need to weigh is how they address risk and, based on the research outlined in the Rigzone article, there is a substantial risk that a company will not have the human capital to compete in the service sector.
Let me suggest four things that a wise investments, even at a time when companies are trying to save every penny:
- Worker Engagement – The research is already very clear that an engaged workforce is one key to increased productivity and profitability for companies. Employees will disengage if they believe their company’s approach to layoffs is arbitrary or ill-planned. On the other hand, a shared sense of purpose and the idea that the company, its leaders and its workers are “in this together” can help hold engagement even during the toughest of times.
- Safety Culture – No matter how tight budgets get, companies cannot afford the perception that they are taking short-cuts on safety. It is often said that all companies have a safety culture; it is just that some companies have good safety cultures and others have bad safety cultures. Nothing creates a bad safety culture faster than the belief by workers that their safety is at risk because the company is in cutback mode. On the other hand, a culture that is consistent from the C-Suite to the deck plate and shares the belief that the company can get the job done and make sure no one gets hurt has a strong advantage.
- Training – True, training is an expense during times of budget cuts, but it is also a cost-effective investment:
- Training can improve productivity and can reduce incidents, which in turn saves money.
- It is cheaper to train people for additional responsibilities than to hire new people.
- Finally, when companies are hiring a lot of people, training entry-level employees can be inefficient because of turnover. During downturns, more training dollars go into existing experienced workers, making it a more efficient use of the time and money.
- Skills and Knowledge Competency – This is the time to develop a system to evaluate workers on their skills and knowledge for a couple of very good reasons:
- Right now, companies need their best workers and, if layoffs are necessary, they need to identify the least productive workers. A good system for evaluating workers helps determine who is qualified to perform their job functions and that is very important right now.
- While we don’t know when the downturn will end, we know it will. Until then, every new hire is critical. Once the business cycle returns, we know from history that injuries are likely to increase and productivity is likely to suffer as new hires are brought in. A solid worker evaluation system helps make sure the right people are hired for the right jobs.
Lifeline Strategies focuses on helping companies keep workers engaged through a positive safety culture and in developing the mix of training, skills and knowledge it takes to meet the demands of the oil and gas industry. Let us know if we can help your company in any way.