Leadership Matters

Perspectives on the key issues impacting senior leaders and their organizations
April 12, 2017

The New School of Energy Leadership

The energy industry has reached a turning point. The growing shortage of experienced leaders and the expanding role of technology are redefining the landscape. Oil and gas companies will need to rethink their traditional approaches to talent in order to succeed over the long term.

Oil and gas companies face a dearth of senior-level talent: Many long-standing leaders were casualties of the recent industry downturn and the retirement of the generation of Baby Boomers looms in the not-so-distant future. These dynamics are ushering in an era of a younger C-level executive. We’re now witnessing 30-something executives in line for the senior roles that have traditionally been held by more tenured leaders. The question we’re increasingly asked is: How do you determine whether a leader without an extensive track record in the field will succeed?

The less structured approach to finding and vetting candidates that many in the industry have relied upon in the past (e.g., through personal relationships and referrals within established networks) will need to shift to a more structured, rigorous assessment process. When evaluating leadership candidates with less experience, oil and gas companies will need to gauge individuals’ stretch potential. A core tool we use to get at an individual’s potential is our Executive Intelligence (ExI®) assessment, which targets the characteristics that specifically predict executive capability and business impact. C-level executives with high levels of Executive Intelligence were promoted 22% faster over the course of their careers.

A new generation of engineers working in exploration and production companies took a front seat during the rise of unconventional drilling, placing their knowledge at a premium over earlier generations who weren’t exposed to such techniques. The byproducts of this shift in leadership demographics is a shortage of operations expertise. To bridge this gap over the longer term, organizations will need to repurpose high-potential talent across functions and geographies in order to build their skills and knowledge of the broader business.

The optimization of technology in the space is driving investment from private equity firms that want to capitalize on the opportunity, spurring a spate of IPOs. Integrated oil companies are also putting significant resources behind tech initiatives. This means organizations will need leaders who can quickly determine quality of oil and gas assets and who have the financial acumen to determine value.

Technology is dramatically shifting how work gets done in oil and gas. Digital is decentralizing information formerly held exclusively in HQ, enabling workers to make real-time decisions in the field. BHP Billiton is using blockchain to record movements of rock and fluid samples to capture real-time data during delivery. Schlumberger recently opened its new Production Technologies Center of Excellence to develop technology-driven solutions to customer challenges and innovate new products and processes.

The role of big data and analytics will only grow, requiring leaders who can design a tech strategy tied to the business and translate data into actionable insight. In addition, the industry will need senior leaders who can help foster organizational cultures that spur innovation. Oil and gas companies face fierce competition for “unicorns” who bring that magic combination of technology expertise and the ability to manage both change and people. This means that they must look beyond the standard industry profile, and attract more diverse talent. With the infusion of investment in the U.S. oil and gas sector, the country is likely to become a training ground for international talent, giving organizations the opportunity to further build the talent pipeline.

Casting a wider net not only helps alleviate the talent shortage, it’s also good for business. According to McKinsey, companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians. Diverse perspectives are also critical in the boardroom. According to our governance survey of S&P 500 corporate secretaries, general counsel and chief governance officers and other leaders, interest in recruiting directors with technology, digital and marketing expertise is on the rise. In an industry that is undergoing such dramatic shifts, oil and gas companies need directors who can help them navigate issues such as digital and cybersecurity.

By rethinking traditional approaches to leadership, committing to structured assessment processes and injecting fresh thinking into the organization and the board, oil and gas companies will be well positioned to succeed in a rapidly changing landscape.

Chad Covey is a consultant in Spencer Stuart’s Energy Practice, operating out of the Houston office. He is dedicated to helping oil and gas clients tackle executive search challenges in the United States and Mexico. Reach him via email and follow him on LinkedIn.