With workforce reductions trickling to management positions, Rigzone explores how much longer the industry will lay off workers.
The oil and gas industry has experienced what seems to be a steady stream of layoff announcements since crude oil prices began their steep decline in late 2014, and companies have had to adjust – with many opting to substantially slash capital budgets (CAPEX), postpone projects, cut exploration and production (E&P) investments and lay down rigs.
Though cyclical in nature, when the industry is in a downturn, oil and gas workers are on high alert. Oilfield services powerhouses such as Halliburton Company, Schlumberger Ltd. and Baker Hughes have already laid off tens of thousands of workers globally. And smaller independent companies have been forced to adopt the “do more with less” approach when it comes to their workforce, as have larger companies.
According to global oil and gas recruiting firm Swift Worldwide Resources, more than 200,000 job losses have occurred as a result of the industry downturn. The cuts have been widespread and they’ve been deep.
And, unfortunately, they may not be over.
President, Longnecker & Associates
Reductions at Manager Levels
Contractors, part-time and full-time employees have felt the pain of layoffs for several months and now layoffs have made their way to management positions. In September, Halliburton sent an internal memo to its managers across all verticals, revealing the company’s plans to further reduce its staff. Pipeline company TransCanada Corporation also announced Sept. 24 that it would cut 20 percent of its senior management positions.
With many analysts expressing there will be a “lower for longer” oil cost environment, it provides the industry with some expectations of oil prices for the next 12 months or so.
“Companies are trying to staff where they need it and they’re not just looking at the younger workforce, but identifying people that might be redundant. Sometimes, that’s management,” Chris Crawford, president of managing and consulting firm Longnecker & Associates, told Rigzone. “We’re in a cyclical business that has volatility to it and anytime that’s the case – where an industry swings up and down – you can always assume there will be cuts deep in the organization. I don’t think anybody in an organization feels like they’re totally safe. It’s a narrow view to think [layoffs] would exclude management in some way, shape or form.”
Trent Aulbaugh, partner and leader of the Houston office for executive search firm Egon Zehnder, shared a similar sentiment.
Partner and Houston Office Leader, Egon Zehnder
“I think it’s fair to say with $40 oil for an extended period of time, companies are under a lot of SG&A (selling, general and administrative expense) pressure, and that pressure is going to go up and down the organizational chart,” Aulbaugh told Rigzone.
With the new market reality, Aulbaugh said the “natural prudent and fiduciary responsibility of companies” is to take a look up and down the organizational chain.
“If the investment in people doesn’t coordinate with what the market may bear – and that can happen at any level – it would be a surprise if managers weren’t part of whom companies are looking at.”
“Tough Balancing Act”
It’s a challenging position to be placed in – as companies have had to manage this balancing act of people and business operations.
“This is something that gets debated a lot, but in any organization, there may be 10 percent of employees who are not performing fully up to speed,” Crawford said. “So, there’s a layer of cuts in which employers can say they were lower-performing employees to the extent that you begin to cut employees above and beyond the low performers creates concern. But as an energy company, you’ve got to match up with your expense structures.”
Crawford shared the process often executed when determining layoffs.
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