PwC: Human Resources Shifts from Back Office to Key Partner in Business
Eighty-three percent of oil and gas chief execs surveyed say their talent management strategies need to change, but most feel they don’t have the human resource data they need, PwC reported in its 14th Annual CEO Survey.
Oil and gas companies are increasingly shifting their human resources (HR) operations from a back office function to a key partner in corporate strategy, PwC noted in the report. An oil and gas company’s ability to gather comprehensive hard data in a central system has become increasingly critical as companies face a shortage of talent, complex workforce needs and a large number of Baby Boomers exiting the workforce.
The average cost of recruiting and training a new engineer can be between one and one half to twice that engineer’s annual salary, in addition to efforts to initially identify that worker resource.
“If organizations are not able to retain this talent long enough to make the investment worthwhile; in other words, if large numbers of employees voluntarily leave before approximately two years, the financial impact can be significant,” PwC noted.
Analytics that combine internal and external data can help identify whether higher salaries are driving turnover or managers that have a higher-than-average turnover of workers, PwC noted. Technology and analytics can also help a company speed up the time it takes for a new worker to become productive and autonomous by allowing the HR organization to see how different rotations within a company improves results, or experiment with training programs at different career stages or mentoring programs.
HR technology and analytics can also identify the right training for employees and leverage economies of scale such as regular regional training sessions or social media and informal video “how to” segments to reduce travel costs and address training needs on a near real time or just in time basis.
A number of human resource information systems (HRIS) platforms are available on the market that can aid oil and gas companies in HR planning. These systems go beyond payroll and employee information to include talent management, resource planning, succession management, recruiting, performance management, Cydney Aiken, advisory director in PwC’s People and Change practice, told Rigzone.
This technology can help oil and gas companies determine what type of non-traditional employee is having success with their company, what are the common skill sets, and what programs or training is being implemented to enable success. This information allows oil and gas companies to expand their recruiting efforts, improve employee engagement and make more informed decisions.
“There are unique features that can be used which allow you to search based on success trends,” Aiken noted. “But like anything, it needs to be implemented well and used by not only HR, but employees and the business. The technology has to be tied to the business needs, and HR to be viewed as a strategic advantage not simply administrative.”
“A fair amount of these technologies also are incorporating learning and collaboration so that in some ways, you have a ‘one-stop-shop’ from prospect/referral data, to employee management and development to leaving and retirement,” Aiken commented. “There are also unique features being introduced like searches in your own employee database, which allow you to find resources anywhere based on criteria such as level or skill set to see if someone is available and assign or deploy them to another project.”
HR planning is not just a technology issue, Lawrence Ferguson, director of PwC U.S.’ SAPSF talent management practice, told Rigzone.
“Companies need to first have a solid process in place for how to approach workforce planning, and understand which hare the primary data elements needed to enable them to perform predictive workforce modeling. Once the companies’ process for performing integrating workforce planning has been well defined, the technology enablement is virtually “turnkey”.
Energy companies have been using a mix of large enterprise resource planning (ERP) platform solutions along with specific human resource information systems platforms that focus on one or maybe two areas, such as performance management and learning or time and expense, Aiken said. One example is an ERP with a time and expense system bolted on. Expanded HRIS systems that are either fully integrated or unified (one line of code) and enable employee lifecycle management as well as employee collaboration and learning is something that is new over the past few years and growing.
PwC is starting to see more and more oil and gas companies switching over, but in general there is a significant number that have not changed. A number of potential reasons exist for the lag.
“One of these is that a fair amount of these new technologies are cloud-based, and there is still heavy reliance and investment made on the serve-based solutions,” Aiken noted. “The early adopters have begun to switch over, and now the next wave is beginning.”
Another reason observed by PwC is that the oil and gas industry is now starting to understand how best to use these solutions as they mature, and how it matches their business needs and strategy, Aiken commented.
Analytical tools can also be used for succession planning, which will become increasingly important as Baby Boomers retire.
“If a company simply reacts to each retirement, salary costs will mount as the company is forced to recruit more costly and experienced talent instead of developing it on its own,” PwC commented.
The U.S. energy industry is one of several industries being significantly impacted by the retirement of large numbers of Baby Boomers. Every day, 10,000 Baby Boomers reach retirement age in the United States; at the same time, fewer workers of the X and Y generation age are available, causing a gap in resources.
“To handle this gap and allow for the Millennial generation to mature, older workers are still being retained as consultants,” Aiken commented.
Aiken added that PwC has started seeing new trends around retraining non-traditional hires, creating mentorship programs and introducing new collaboration and social tools in order to speed up autonomy and leverage older workers in new ways.
“These new technologies and analytics are in part driven to support these trends and needs.”
Meaningful and accurate HR data is certainly one of the major aspects of the challenge of Big Data, which is facing the oil and gas industry.
“Many of the other major functional areas within oil and gas companies, such as finance, operations and supply chain, utilize HR information to perform vital business functions,” Ferguson commented. “Being able to quickly and efficiently access HR information to enable business leaders to make effective strategic and operational decisions is the end goal of the Big Data challenge.”
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Senior Editor | Rigzone