The Capability Crunch
the battle for resources
23 November 2010 – Robin Pinchbeck
Agenda
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Petrofac
Context for our industry
Generation X & Y
Our approach to recruitment & retention
Petrofac’s employment proposition
Petrofac
• A leading provider of facilities solutions to international oil & gas industry
– 30 years’ experience supporting oil & gas production and processing
– Successful track record of several hundred projects
• We design and build oil & gas infrastructure; operate, maintain, and manage
facilities and train personnel
• Where we can leverage our service capability, we develop and co-invest in
upstream and infrastructure projects
• Our key markets are the Middle East and Africa, CIS and Asia Pacific and UK
Continental Shelf
– these markets account for 70% of the world’s proven oil reserves and 85%
of proven gas reserves
Focused on growth…
Revenue – US$ millions
‘02
• 13,000+ employees
• listed LSE
• market cap. approx. $8bn
391
Finding Petroleum: The Capability Crunch
Indexed share price performance since IPO
800
672%
700
609%
Indexed Price
600
500
400
300
200
38%
27%
7%
100
Petrofac
OSX
Petrofac + EnQuest
Source: FactSet as at 4 November 2010
Finding Petroleum: The Capability Crunch
FTSE 100
FTSE 250
Nov-10
May-10
Oct-09
Apr-09
Oct-08
Apr-08
Oct-07
Apr-07
Oct-06
Apr-06
Oct-05
0
Operating locationsMilan
Moscow
Atyrau
Aberdeen
Abu Dhabi
Sharjah
Sakhalin
Houston
Woking
Bishkek
London
Beijing
Algiers
Mumbai
Tunis
Khartoum
Lagos
Chennai
Doha
Kuala Lumpur
Ahmadi
Khobar
Jakarta
Damascus
Main operational centres
Other operating locations
Corporate services
Finding Petroleum: The Capability Crunch
Petrofac “DNA”
• entrepreneurial culture with leadership close to the detail
• a focussed business in terms of offering and geography
• high employee ownership, yielding high project ownership
• a willingness to take (and manage) commercial risk, beyond the appetite of
peers … AND to do things differently
• high confidence to deliver ‘on the ground’ where we work using:
- local resources and supply chain to deliver to international standards
- our contacts and cultural affinity
• risk identification and management followed by a relentless attention to detail
in execution
Finding Petroleum: The Capability Crunch
Industry and Social Context
Oil Industry
• Over half the world's energy is currently sourced from oil and gas and this
is forecast to rise towards 60% in 2030
• Even if the UK achieves its objective of sourcing 15% of its energy from
renewable sources by 2020, it will still rely on oil and gas for 70% of its
energy, roughly the same proportion as today
• The maturity of Western economies is linked to lower birth rates and fewer
graduates just as companies are striving to expand into new markets in
developing countries
• The whole industry faces some stark demographics:
– Around 50% of professional E&P staff are aged between 40 and 50
– Only 15% are junior recruits aged between early twenties and midthirties
– Up to half the current workforce is likely to retire within the next ten
years
• Pressure to replace skills is most likely to be felt in the technical side of the
business, where shortages are more acute and the demands from the
business more intense
Finding Petroleum: The Capability Crunch
Social Context
• Whilst oil and gas industry people needs will continue to grow over next decade,
too few people have entered during past 25 years resulting in shortfalls of talent
• In particular there is now a critical shortage of middle managers in positions to
succeed those in senior leadership teams, who will be retiring in next 5-10 years
• Universities across Western world are not graduating enough engineers to take
care of their domestic needs, never mind producing a large expat population
• Need to look across world for future intakes as some countries are producing a
surplus e.g. China
• Industry faces critical challenges both in terms of:
– quantity of people in those locations where they are needed
– and quality of new entrants overall
Finding Petroleum: The Capability Crunch
Social Context
• The energy industry is unique in:
– diversity and scarcity of abilities and expertise needed to make things
happen, and
– far-flung locations where cream of those highly specialised skills are
required
• Energy projects commonly involve project management and design in one
location (often in the West), with construction in Asia, and final stages taking
place in Africa, China or Australia
• Consequently, project management and technical personnel must be able to
move freely between continents to execute each project phase
• Therefore companies servicing the oil industry require immigration and
employment policies that allow overseas professionals ease of passage
Finding Petroleum: The Capability Crunch
Demographic Challenges
• Generational differences have real implications on how employers and
employees interact
• Each generation brings a different set of attitudes to the workplace
• Organisations need to respond to these different attitudes if they are to
attract and/or retain talent from each generational group
• Generation X (those experienced professionals currently in middle
management positions looking to progress) are most notably in short
supply
Finding Petroleum: The Capability Crunch
Demographic Challenges
Traditionalists
(Born 1922-1945)
Baby Boomers
(Born 1946-1964)
Generation X
(Born 1965-1980)
Generation Y
(Born 1981-2000)
Work Ethic/Values
Hard work
Respect authority
Adherence to rules
Work efficiently
Desire quality
Question authority
Want structure and
organisation
Sceptical
Multi-tasking
Entrepreneurial
Goal-orientated
Leadership Style
Directive
Command and control
Consensual
Collegial
Everyone is the same
Challenge others
The young leaders’
century
Interactive Style
Individual
Team player
Loves meetings
Entrepreneur
Participative
Communications
Formal
Written
In person
Direct
Immediate
Email
Voicemail
Feedback and
Rewards
Satisfaction in job well
done
Don’t appreciate
feedback
How am I doing?
Freedom = best reward
Whenever I want it at
the push of a button
Meaningful work
Messages that
Motivate
Your experience is
respected
You are valued and
needed
Do it your way
Forget the rules
Working with other
bright, creative people
Finding Petroleum: The Capability Crunch
Generational attitude differences
• Baby Boomers (born worldwide 1946-1964)
– Place more emphasis on work as an anchor in their lives
– Tend to be loyal and stay for long periods with one employer
• Generation X (smaller population born 1965-1980)
– Typically more organisationally cynical than the previous generation
– More likely to change jobs if they see more rewarding roles (compensation
and career progression)
• Generation Y (born 1981-2000)
– Nearly as large a group as the Baby Boomers but driven by different values,
life experiences and high expectations
– Technologically savvy, highly networked with friends and colleagues, and
used to instant communications
– Place more importance on job content, sense of purpose, career path and
training, communications and work/life balance
Finding Petroleum: The Capability Crunch
An example of our developing approach to
knowledge retention
Petrofac Graduate Development Programme website
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Designed to be an online
base for the graduates
They can hook up, share
information, discuss
topics, etc
They can access it
whenever and wherever
they want to
Track their progress and
learning
Finding Petroleum: The Capability Crunch
Learning from Experience
The knowledge of the retiring generation is at
worst lost or at best captured in an
inappropriate or irrelevant way
Around 50% of E&P staff are between 40 and
50 years old and will retire within the next 10
years.
The pressure is on to up-skill younger technical
staff
Finding Petroleum: The Capability Crunch
Learning from Experience
The Petrofac wiki on the Graduate Development Programme website is used as
a knowledge repository and is built, used and updated by the graduates
Finding Petroleum: The Capability Crunch
Learning from Experience
The group meet with ‘experts’/senior staff and learn from their experience and
knowledge
Finding Petroleum: The Capability Crunch
Learning from Experience
Each graduate captures what they have learnt and adds to the wiki to expand
upon what others have added
Finding Petroleum: The Capability Crunch
Learning from Experience
Other groups can access the wiki, learn from others’ experiences, update/add to
the information and help the knowledge repository grow
Finding Petroleum: The Capability Crunch
and share this knowledge on the Wiki
Finding Petroleum: The Capability Crunch
Petrofac’s business is competence provision
• We’re asset-light: our main assets really do leave the buildings every night
• Our growth is built entirely on people:
– recruitment and retention are absolutely critical and strategic
• All levels of management (including executive management) spend significant
amounts of time interviewing, selecting and enrolling talent
• We think our culture differentiates us
– and the only way this can be “sold” is movers and shakers looking
candidates in the eye
Finding Petroleum: The Capability Crunch
Petrofac’s employment proposition
• Petrofac is a pure meritocracy; no one nationality predominates and our
leadership is very diverse; there is no identifiable corporate nationality
• A large proportion of our employees (nearly one third) are shareholders
– we think this is fundamental, and we strive to increase
• We promote from within, but also require a lot of external mature recruitment
– and therefore, have to achieve rapid cultural assimilation
• We reward the creation of wealth & pay for performance
• We articulate clear values and these guide our recruitment and selection
processes, as well as the everyday conduct of business
• We believe individuals really make a difference
Petrofac is still led by founders, which differentiates us from many
competitors in the battle for talent;
Our challenge is to keep the core DNA intact and developing healthily
Finding Petroleum: The Capability Crunch