BP is to implement a pay freeze in 2009, according to Robin Pagnamenta in the Times yesterday, affecting every senior and middle manager across the globe in Britain’s largest company. It is also widely known that recruitment at Shell has dried up at middle management level and, as a result, there are far fewer options available for internal movement. Then there’s the recent Chartered Institute of Personnel and Development Labour Market Outlook survey, done in conjunction with KPMG, rather apocalyptical outlook that UK job prospects are deteriorating ‘at an alarming rate’.
This all paints a pretty bleak picture. But both BP and Shell have recently announced record profits. So what’s all this talk of crisis in the energy sector about? Amid all the economic doom and gloom around, battening down the hatches is certainly one option to limit costs. However, from a talent management perspective, there are a number of essential factors to consider. What are the effects going to be on staff? There are some who would argue that people are lucky just to keep their jobs in the current climate. And of course this is true… to an extent. The ‘lifer’ is a regular feature in organisations such as the supermajors, and short term pain will be equalled out by long term gain. However, my question is if an enormous company like BP can really develop the kind of company loyalty and camaraderie needed to keep their top talent? Just compare BP to a smaller business, where everybody knows everybody else. They’re less likely to leave, because to do so would leave their friends and colleagues in the lurch.
With salary freezes and restricting internal movement, companies might be in danger of pushing their potential high fliers to look elsewhere. Which is obviously not a desirable outcome, particularly at a time when the ‘money printing’ days for the oil superpowers are over and innovation is increasingly important as renewables and green tech climb higher on the world’s agenda.
At FreshMinds Talent we are well placed to see the effect on the job market across numerous industry sectors, but one thing has not changed - there is always a demand for top tier individuals. The best candidates we see are barely on the market for two weeks and in that time they see anywhere between four and five companies.
So what are companies to do? With increasing pressure from shareholders and directors to cut costs and improve performance, are pay freezes a well-measured response to the economic situation or quick fix short-termism? Ironically, BP does seem to have one vacancy open as they continue to search for a new chairman to replace Peter Sutherland.
Read more here
- M&A Surge Looms for Oil & Gas
- Oil and gas stocks fall as crude drops 4%
- Oil and gas future outlook looks strong
About the author
Will Dawson is a Recruitment Consultant in the Executive Hire team at FreshMinds Talent, and is in charge of developing our oil and gas sector offering.
on Feb 24th, 2009 at 4:56 pm
Will,
Your article is thought provoking and should stimulate interesting debate, however let me shed some light upon fundamentals before building onto your fine scene setter
Majors (BP, Shell Exxon, Total etc) are increasingly under pressure to cut overheads and replenish reserves (the principal driver of value/market cap), whilst challenged with diminishing access to ‘Easy Oil,’ strong NOC (National Oil Companies) competitors moving Westward into former heartland markets and the critical issues of Co2 Management and Climate Change knocking at the door of all
Structurally, such Majors are among the largest corporate entities in the world and thus rely on a global framework for talent management which naturally includes remuneration. Securing relatively competitive packages coupled with high job security, business travel and highly challenging roles has kept top talent at the majors overthe last decade, however is this trend set to continue?
Since January, MBA’s (with relevant and extensive O&G experience) have found it hard to move internally within Majors - not because of the salary freeze, but due to a freeze on internal transfers. HR Directors (anxious of what is to come in 2009) are stabilizing the ship and attempting to keep moves down to a minimum. However - how does this and the highly competitive energy environment of tomorrow look to an individual who’s invested tens of thousands in an MBA, or has aspirations, seemingly limited by his/her current Oil Major employer
Competitively, the four largest NOC backed players (MOL, OMV, PKN and Lukoil) in Eastern Europe are moving Westwards rapidly and with this are threatening historical ‘heartlands’ of the Majors. Such NOC’s pay less, expect more and are unlikely to be an option for the current profile of Oil Majors 25-40 year old
So, ‘high-potentials’ have a choice. They can either remain at a Western Major and hope to ride the storm until they reach VP level (normally aged 40-50) and earn what would be considered as a relatively large package, or they could take their transferable skills to a consultancy, start-up/high growth, VC/PE or a New Energy (Bio Fuels, Solar, Wind etc) player and earn double the salary
I have concerns about the Western majors in general and have serious doubts concerning their ability to be strong without radically innovating both from a technological, product and structural perspective. I find it hard to believe that any high-level future executive at a Major would think differently and aside from some anomalies believe there will be an exodus over the next three years from such Majors to other companies.
In an enlightened aged where social entrepreneurship, corporate philanthropy and deep self reflection are on the rapid rise, those who can will choose to use their abilities to make positive changes for the greater good (whilst making on average doube their current salary package). Those not as well intentioned or long-sighted will still be driven to maximize their earning potential as an economically rationale entity would and move out of Majors and into other roles
Historically, majors have been very short-sighted and cut back on R&D, technology, innovation and talent in times or hardship. If this starts to happen again and lessons have not been learnt from the past, the talent flight will happen sooner rather than later. Especially, if the Majors do not learn to develop and nurture their scientists and engineers in a world where they face competition from NOCs and Major Resource Holders (Saudi, Iran, Russia, Iraq, Libya, etc) their very survival is in question
Ultimately; Salaries on Ice - Strategy or Short-Terminism ? My answer is that Majors tend to be reactive and short sighted, yet this is not their fault. Oil majors have grwon into oversized lethargic corporate animals - obese monsters used to feasting on high profits for too many years, who have not had to live with their mistakes from the past and will now face unfrequented challenges. Unfortunately, the monster has grown too big to escape its cave and its form is a structure too rigid and inflexible to allow for non-globally standardized talent management strategies to be implemented effectively. The only ice will be when high potentials realize their market worth having leveraged their transferable skills/experience in the market place and doubled their salaries, halved their working hours and significantly reduced their travel time, whilst finding new challenges within tomorrow’s world