Velda Addison, Hart Energy

It seems that more often than not nowadays oil and gas companies’ press releases and quarterly earning calls bring more bad news of job cuts.

As global supplies continue to outweigh demand profits are taking hits, forcing companies to rethink drilling operations and rework project timelines as capex falls amid declining oil prices.

This combined with OPEC’s decision not to cut production in November 2014 prompted Mercer to conduct a survey to find out how HR professionals were responding or planning to the disruption. The firm surveyed 154 oil and gas industry organizations in the Canada, Mexico, and the U.S. from Dec. 11, 2014, to Jan. 16, 2015.

Results revealed that:

  • 32% plan to decrease buying talent from outside their organization;
  • 18% plan to freeze or cut compensation;
  • 18% plan to consider how to enhance cost effectiveness of HR delivery; and
  • 16% may reduce staff (restructuring).

In addition to the impact on so-called “human capital,” 44% of the survey respondents planned to reduce capex due to lower oil prices while 38% planned to lower selling, general and administrative (SG&A) operating expenses. The survey also revealed that 23% will reduce core, or non-SG&A, operating expenses, and 7% planned to consider possible divestitures of assets, business units, products or geographies.

“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,” the company said in a news release announcing the survey’s findings.

While decisions on whether to hold back on recruiting efforts or reduce workforces are not taken lightly, oil and gas companies should not lose sight of the long-term picture.

Though these are challenging times for the industry, which is doing its best to survive the latest downturn, some HR issues will still be there when the situation returns to normal, if there is such a thing. There will still be a skills shortage. Baby boomers will still be retiring. There will still be a need for experienced crews to show younger ones the ropes, especially for those fields that take decades to develop.

Mercer pointed out how survey respondents have changed strategies, saying that in a 2014 survey employers were almost exclusively focused on buying talent. But that has taken a “distant back seat to restructuring and layoffs” as the latest survey indicates a cut in hiring plans.

“Consider the organization that needs to produce immediate cost savings—in the end, manpower reductions may be required. However, there are a number of alternatives and actions that may produce at least a portion of the needed savings and not impede that organization’s ability to compete once the market rebounds,” Mercer said in a report about the survey’s findings. “Whatever the decision, having a framework to push thinking outside the proverbial box enables HR leadership to outline and assess alternatives, understand the ramifications of each, prepare risk mitigation plans, and make more informed choices. At the same time, HR can create shared ownership among the leadership team to execute those decisions flawlessly.”

Seeking alternative debt, tax and insurance structures, suspending programs instead of full cessation, increasing employee accountability or empowerment, and establishing a fact-based definition of future talent needs and developing plans to meet those needs were among Mercer’s suggestions.

The firm also listed steps, concerning HR, that companies could take now. These included:

  • Defending your best assets to guard against important employees unexpectedly leaving;
  • Clarifying roles, work and key performance requirements;
  • Building sustainable internal capability and knowledge transfer; and
  • Engaging employees with superior communication and transparency to build loyalty and seek their involvement with new strategies.

These recommendations are well worth heeding in good times and bad. The entire report can be downloaded at Mercer’s website,

Contact the author, Velda Addison, at