Hay Group: Succession planning key for oil industry

The Oil and Gas industry faces the risk of a dry-up of leadership talent due to a lack of succession planning and a too big a focus on short term business goals. This is concluded by consulting firm Hay Group in its ‘Enhancing your leadership reserves’, a research report on leadership investment in the Oil and Gas industry. In its report, Hay Group lists four key areas of focus to encounter the risk of a leadership dry-up. 

For almost a decade, since 2005, global management consulting firm Hay Group identifies the organisations with the best leadership practices in its annual ‘Best Companies for Leadership survey database’. For this survey, professionals from every level are asked to rate the leadership development practices within their own organization. In the 2014 survey, 18,000 professionals took part from 2,200 organizations around the globe. 

Oil and Gas

Based on this survey, Hay Group recently released its ‘Enhancing your leadership reserves - Getting a better return on your leadership investment’. For this research, the firm extracted data from 33 Oil and Gas organizations, that was compared with the average of the total cross-industry sample, and interviewed 20 organizational leaders from the sector.

Hay Group’s research shows that companies in the Oil and Gas sector currently fail to implement sufficient succession planning, and hence encounter the risk of a dry-run of leadership reserves. With succession planning of key importance for the continuity in a firm, a dry-run of capable leaders could severely impact future business goals. The risk is caused by a conflict between the relatively short term geopolitical and economic considerations within the Oil and Gas industry and the developing long-term leadership pipelines.

Management of organisations in the Oil and Gas industry prove to be more effective at running businesses profitably and smoothly than organisations in other sectors, as is shown by the Hay Group research. Around 81% of the Oil and Gas leadership strongly focus on this, compared to the cross-industry average of 75%. As a result of this focus on immediate results, more direct management is conducted by 53% of Oil and Gas leaders, compared to the 37% average, an approach that could cause a de-motivating environment for employees. In the Oil and Gas sector, 64% of workers feel less engaged at work, which is 9% higher than the average in all other sectors. The report shows that only around 53% of all respondents feel that their employees were encouraged to develop their expertise beyond their current areas of expertise.

“Although the industry is very long-term in the way it operates, there are a lot of short term responses in terms of human capital,” tells Sherief Hammady, Hay Group Director and co-author of the report, the Executive Grapevine. “For example, Human Resources in this industry tends to focus on the short term, such as attraction of new staff, paying people more to bring them in, being able to poach good, skilled people from other competitors, etc. But there is a lack of focus on long term succession planning due to operational constraints.”

Going forward

In their conclusion, the consultants of Hay Group identify four key areas to focus on in order to encounter the risk of a run-dry of leadership talent:

• Building adequate leadership pipelines, including early career identification,
• Effective people performance management,
• Bottom-up engagement to make change happen,
• Making leadership interventions profound and long lasting through frequent practical interventions.