Navigating the crude cycleAgility is the key to workforce advantageBy David S. Andrews and Colin Sloman

Plunging crude oil prices have set off a series of rapid cost-cutting

measures across the oil and gas industry. For many companies,

the fastest and easiest response has been to announce large-scale

layoffs and delay of capital projects. While this will help ease cost

pressures in the short term, it is not a sustainable strategy. Energy

industry executives need to create much more agile, digitally-

enabled organizations, ones that remain competitive despite the

vagaries of market cycles.

Current conditions are yet another reminder that the energy business is cyclical and volatile. Given its unpredictable nature, it’s not surprising that in a recent Accenture study, only 29 percent of energy executives reported feeling well prepared to deal with uncertainty.1 Winners will be those that shake off the complacency of years of high prices and get serious about gaining more agile ways of working—particularly when it comes to workforce management.

Yet according to Accenture research, only 22 percent of energy executives say their organizations are able to shift resources very easily to address emerging or critical needs.2 Now is the time for energy companies to invest in a workforce of the future—one that is both nimble and multi-disciplinary, augmented by proven digital technologies. To do that, they need to focus on four areas:

• Establishing intelligent operating models that enable agility

• Managing critical talent with intent in support of future growth

• Getting control of the contingent workforce to drive value for the organization

• Extending digital capabilities to enhance brains and brawn

2 | Navigating the Crude Cycle

Companies using major workforce reduction as a blunt instrument to deal with today’s oil price challenges are better off asking themselves: What are the smartest investments that will continue to make payoffs regardless of market volatility?

Establish intelligent operating models Traditionally, many in the energy industry have been conservative in their approach to innovating workforce practices which likely—and understandably—stems from concerns about safe operations. Advances in readily available and proven technology have put safety con-cerns to rest and in a wildly fluctuating market, rigidity doesn’t cut it.

Nor do inflexible workforce models. Now is the time to establish flexible, self-organized project teams enabled by digital platforms with greater emphasis on agility. The end result: Streamlined decision-making at the edge of the organization, with less emphasis on hierarchy. And a more empowered workforce—one that makes decisions based on sound judgement, supported with analytics, simple and agile processes, and digital platforms.

Manage critical talent with intentPredictably, as soon as crude oil prices dropped, energy companies and the oil field services and engineering sector (OFSE) began layoffs. Companies need to retain the right workers and prevent the loss of critical knowl-edge needed to support future growth. The question becomes, how should the sector manage their critical workforces to ensure they have the best skills for success and are able to meet any market situation?

Managing critical talent with intent comes down to three actions: Firstly, clearly define your critical talent in functional and technical disciplines by using a segmentation framework before considering deep cuts. Secondly, understand how hard it will be to replace or develop critical workers. With that in mind, establish retention programs and world-class talent development to systematically reduce time to autonomy. And to ensure you are equipped to develop talent much faster for critical roles.

Finally, don’t stop hiring new graduates into critical talent segments. A recent Accenture survey found only four percent of recent graduates are interested in the oil and gas industry.3 Coupled with a reputation for being environmentally unfriendly and dangerous, it will be a challenge to attract the best and the brightest. Energy players need to change perceptions about the industry and provide workers with more democratized and customized work experiences, including tailored learning and accelerated development.

Navigating the Crude Cycle | 3

4 | Navigating the Crude Cycle

Get control of the contingent workforce

Extend digital capabilities

Accenture analysis finds that contingent labor can comprise up to 80 percent of the workforce at a typical energy company.4 Other sources place the number even higher. While these flexible talent pools can be a great way to keep costs down, many energy companies have come to rely on contingent labor for critical roles. This can leave them vulnerable to cost spikes, variable skills availability, safety incidents and unmanaged tenure, as well as exposing organizations to contingent labor risk—including legal liabilities such as co-employment obligations.

Yet most energy companies have yet to crack the code on managing contingent labor to drive the greatest value for the organization. For starters, most companies don’t have a clear idea of how big the contingent labor pool really is or even what it’s doing. They can gain that insight by bringing together HR, Finance, IT, Procurement and front-line management to all work collaboratively. The point is to gain transparency in order to lower costs and drive value from the workforce. And then decide which tasks can be brought in-house or provided by cost-effective managed service contracts.

Companies need to take a good look at their extended organizations and consider a more aggressive auto- mation strategy to enhance both brains and brawn of the workforce. For brains, by automating workflow and administrative tasks, energy companies can free up resources to invest in remote field technology to augment capabilities where it matters. Providing front-line field workers with analytics and collaboration tools will support a new breed of multi-skilled connected employees who can acquire just-in-time capabilities to dramatically improve wrench-time productivity. Additional benefits include stronger safety performance, and clearer visibility into asset efficiency through analytics.

For brawn, consider Statoil’s new North Sea Operations in the Valemon field. Although the company’s platform can accommodate up to 40 workers, it will eventually, if all goes to plan, house none. Instead, operations will be run by remote control from the shore. The benefits: lower cost, greater safety for workers and an operating approach that is fit for the future.5

A New Equilibrium

We don’t know whether oil prices will rise or fall, but we can predict a volatile future. Executives need to manage accordingly, through more flexible operating models and by managing all areas of the workforce in a more discerning fashion. Enabling these changes: a range of digital capabilities including automation, robotics, analytics and mobile technologies. For those that succeed, the result will be a much more resilient, agile organization with a dramatically reduced cost base. Supported by a talent strategy capable of thriving despite marketplace conditions.

Navigating the Crude Cycle | 5

Sources

1 “Accenture research on business agility,” Accenture, 2014.

2 “Accenture research on business agility,” Accenture, 2014.

3 “Accenture 2015 College Graduate Employment Survey,” Accenture, 2015.

4 “Choke point: Capital projects”, Accenture Upstream Oil & Gas Industry Value Lab, August 2013.

5 “Valemon on Stream”, www.statoil.com, updated January 5, 2015.

Copyright © 2015 Accenture. All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.

Join the conversation: @AccentureStrat @AccentureEnergy

Contact the AuthorsDavid S. Andrews david.s.andrews@accenture.com

Colin Sloman colin.sloman@accenture.com

Additional Contributor Parvinder Rehal parvinder.s.rehal@accenture.com

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with more than 319,000 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 Accenture Strategy Accenture Strategy operates at the intersection of business and technology. We bring together our capabilities in business, technology, operations and function strategy to help our clients envision and execute industry-specific strategies that support enterprise wide transformation. Our focus on issues related to digital disruption, competitiveness, global operating models, talent and leadership help drive both efficiencies and growth. For more information, follow @AccentureStrat or visit www.accenture.com/strategy.