How To Align Talent With The Oil Price Crash
The 166th Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) was held in Vienna, Austria, on Thursday, 27th. The Conference decided to maintain the production level of 30.0 mb/d, as was agreed in December 2011. This decision sent shock waves across the oil producing states that are now overproducing by 600,000 barrels a day. The supply glut is leading to a fall in oil prices.
The fast falling oil price has implication for emerging economies that are overly dependent on oil. Venezuela is a clear risk, with its big debt problem. Nigeria’s economy is reported to be tanking. Russia even has a possibility of collapse, although probably not in the near future. A fall in oil prices may force the oil producers to reduce their production levels and consequently cause debt defaults that have wide ranging consequences particularly for the banking and Oil & Gas industries.
For Human Resources leaders, part of the strategy for weathering an economic downturn may include budget cuts. Budget cuts can present a valuable opportunity for reform and, if planned and implemented properly, can lead to stronger, more efficient organization. Studies and experience have proven that better outcomes are achieved when organizations make cuts strategically, rather than slicing a little from everywhere.
This can be an opportunity to identify how to realize savings, based on strategic plans, performance measures, and a clear understanding of responsibilities and priorities. In the past, workforce-related cost-saving strategies have been synonymous with broad cuts to headcount, often at the expense of the organization, but there is an alternative: cost efficiencies may be gained through the reconciliation and realignment of an organization’s workforce rather than a reduction in personnel.
Headcount-related budget cuts can have a huge impact on the morale and culture of an organization. Specifically, the potential negative effects of substantial across-the-board cuts can be particularly severe on the composition of an organization’s workforce. Therefore, it becomes critical for organization leaders to select appropriate cost saving strategies to prevent inefficiencies, retention problems, pipeline issues, and a future inability to recruit and retain the right people. The ability to demonstrate strong logic regarding the actions taken is critical to emerging as a stronger organization post-reduction.
Human Resources should put on Organizational Development (OD) hat and partner with the leadership to take on the overwhelming task of managing organization change to turn the effect of the oil price crash into a competitive advantage. Following a structured process will enable HR to make a pragmatic and data-driven workforce changes and will:
Create a Leaner Workforce: By altering the mix of employees across series and grades, and redistributing and cross deploying the workforce, organizations will have leaner, mission-focused workforces with clear goals and a logical supporting organizational structure.
Develop, Influence and Execute Strategies: Participate as a contributing partner in the organization strategic planning process by providing and leading workforce planning discussion with management. Develop, influence, and forecast human resources to support organization change.
Manage Priorities: By taking a deep look into the changing business needs of the organization and determining the mission critical programs, HR will be able to balance the skill and experience mix to meet the business needs.
Measure Effectiveness and Contribution: Take approach that include a systematic consideration of an organization’s environment and mission, and should be supported by robust data to better understand program strengths and weaknesses and guide decision-making.