Mercer Report: HR Leaders’ Reactions to Big Drop in Oil Prices

Mercer recently fielded a survey of 154 oil and gas industry organizations in the US, Canada, and Mexico about their reactions and HR strategies to the dramatic decline in oil prices.
The survey, entitled “Mercer Changing Energy Industry Dynamics Survey” was conducted between December 11, 2014 and January 16, 2015 and revealed the short-term business and human capital tactics under consideration by respondents.

Business strategy impact- while 25% said that it was “too early to tell”:

  • 44% will cut back on Capital Expenditures as a result of the decline in oil prices
  • 38% will reduce selling, general and administrative (SG&A) operating expenses
  • 23% will reduce core (non-SG&A) operating expenses
  • 7% will explore potential divestitures of assets, business units, products or geographies
Human capital strategy impact – while 32% said it was “too early to tell”:
  • 32% plan to decrease “buying” talent from outside their organization
  • 18% plan to freeze or cut compensation
  • 18% will consider how to enhance cost effectiveness of HR delivery
  • 16% may reduce staff (restructuring)
These results are clear indicators of how quickly market conditions can disrupt employer strategies. For example, in a previous Mercer Oil and Gas survey released in early 2014, 66% of respondents identified “buying” talent as their top talent management strategy.
 
Given these findings and current market realities, Mercer believes the forward-thinking HR leader will put forth a balanced strategy – taking necessary short-term actions while building capability and enhancing organizational performance for the long haul. In Mercer’s view this approach is essential because as history has proven, the price of oil is fundamentally based on supply and demand – as production cuts take their toll, demand will eventually outpace supply and organizations will be in growth mode again.
 
Mercer has also published the attached point of view that highlights the key survey findings but also provides ten priority areas to consider for short term financial performance improvement and seven concrete and fundamental action steps that HR leaders in the oil and gas industry should take immediately. This article can also be downloaded athttp://www.mercer.com/services/solutions/energy/managing-human-capital-assets-during-market-disruption.html
 

About the survey

The Mercer Changing Energy Industry Dynamics Survey was conducted between December 11, 2014 and January 16, 2015. 154 organizations with oil and gas operations in the US, Canada, and Mexico responded. Employee populations ranged from less than 100 to more than 20,000 across nearly every aspect of the service value chain.


Opinions expressed in this article are those of the author and not of The HR Gazette or its team members.
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