Last week we were discussing some articles on Rigzone, a great source for oil news. They had published a series related to how a transition to the ‘Gig Economy’ and app-based workforce solutions are playing out in the oil and gas industry (links at end of article).
In light of the layoffs currently plaguing our industry, it seems that a transition to the gig economy is not a ‘when’ or ‘if’ question, but a true reality of the current environment.
What is the ‘Gig Economy’?
While the term ‘gig economy’ may be new, the concept is not. Contractors have always been an important segment of the oil and gas workforce. However, across all industries, the percentage of people working in a contract or freelance environment is growing rapidly. Technology advancements have been a key enabler of this trend.
The oil and gas industry is sure to see an acceleration of this due to the challenging hiring environment. Employers have cut to the bone, to the tune of over 125,000 workers globally.
As oil prices fluctuate and employers adjust to the current environment, oil companies will be looking to take advantage of opportunities while remaining flexible. This means brining on temporary workers as needed or keeping current talent available through some sort of flexible arrangement.
This flexibility does come at some cost to the employers. Hourly rates go up and the risk of workers jumping ship to chase better projects exists. There can also be a lack of continuity within teams and between projects.
Rewiring the Workforce
Whether the drivers are economic or related to quality of life, our workforce is increasingly moving towards a non-traditional employment model. This isn’t exclusive to oil & gas. Now, employers have to start thinking differently about how to effectively “surge” their employee base in line with market demands.
With the recent downturn and the imminent effects of the great crew change, we really are looking at an opportunity for companies to be proactive about retaining their investment in human capital (their “alumni”) so they can leverage that asset when they need it.
Employers that use technology to foster retention and loyalty from their current and former employee base at scale will be the ones who ride this wave most effectively. Continuing education, engagement, and supplemental income opportunities are a few examples of things employers can cost effectively offer to their alumni and maintain the relationships that count.
The financial and operational benefits of protecting the investment in human capital are significant, especially when the alternative is spending time and money to start all over with recruiting, onboarding, and training – when you could have kept your best people at your fingertips.
Protecting Human Capital
Speaking at the KPMG Global Energy Conference in Houston, Jack Welch, former CEO of GE, warned energy companies that this is the time to project your human talent, arguing “this too will pass, you’ve got to make the bet for the long term.”
While temporary and contract employees are a growing reality, there are related costs and risks. Some “gigs” are modularized and do not require extensive interaction with or supervision by in-house staff.
However, when the work being performed is tightly integrated with existing projects or processes, then supervisors and in-house staff will spend more time training and guiding temporary staff. Error rates and turnover are often higher, and team-based processes and decisions can slow down due to a lack of shared history.
Success in a highly competitive, rapidly changing environment depends on employees who are committed to maximizing productivity and finding new and better ways to achieve the organization’s objectives. The challenge for O&G leaders is motivating that same level of commitment from temporary and contract employees.
Read more: Alternatives to Layoffs in Oil and Gas
Part 1 – Coping with the Crude Oil Price Crunch
Part 2 – Finding Alternatives to Layoffs
Part 3 – Mobilizing Teams Around Productivity Improvement
The ‘Gig Economy’ – An App-Based Spin on an Old Idea
The ‘Gig Economy’ – A Good Idea for Oil and Gas?
You’re a Knight, Not a Bishop (Moving from Job to Job)
Battered US Oil Firms Scramble to Delay Looming Retirement Wave
Related Article: Upstream vs. Downstream
Read more about the difference between Upstream and Downstream segments of the oil and gas industry.