The expression “War for Talent” was first coined in the late 1990s by Steven Hankin of McKinsey & Co. to refer to the increasing competition to recruit and retain talented employees. This concept emphasized the importance of talent to the success of organizations. Significant as it was a decade ago, it is perhaps even more relevant today, particularly for the E&P sector, as it faces an unprecedented shortage of engineering talent. The dramatic shortage of engineers worldwide is unlike any talent shortage the industry has ever seen.

Numerous studies over the past ten years warn that there are simply too few experienced engineers for the demands of the market. A recent report by Schlumberger Business Consulting (SBC), “2010 SBC Oil & Gas HR Benchmark, March 2011,” claims one of the biggest challenges facing the upstream sector is the “Big Crew Change,” the transition from an older workforce to a younger one. “Although global recruitment of engineering graduates continues to increase, experienced petrotechnical professionals (PTPs) will decrease in the next five years,” the report says. According to SBC reports, “The labor market for experienced PTPs will be tight, and these staffing issues will have serious consequences on projects and production capacity.” The survey also states that technology, process improvements, and outsourcing will be key to mitigating these staffing issues.

Waging the war

Organizations with the ability to acquire talent better and faster than their competitors will have a major advantage in the competition for multi-billion dollar projects.

The challenge for the industry is to find a way to bridge the talent gap. Experience takes time to build, and the lack of available personnel represents a tremendous challenge for both major and independent companies. The impact of this environment on the E&P sector is that vacancies translate directly to lost revenue. Companies with unfilled positions lose billable hours every day, and the people shortage could jeopardize project delivery.

In this environment companies must compete like never before to recruit from the shrinking pool of experienced professionals. To win the War for Talent, organizations must develop greater speed and agility in their recruitment processes.

The art of recruiting

The answer is more complex than simply becoming better at recruiting. To survive in the cutthroat E&P recruiting environment, organizations must harness an entire supply chain of the best recruiters and best recruiting agencies. Leveraging multiple recruiting sources is the greatest challenge and one that very few organizations do well.

The competition for engineering talent is extreme, and the competitive landscape across the recruiting industry is unlike anything seen in other job markets. E&P companies looking to create an effective human resource strategy must complement their internal recruiting efforts with help from the best outside agencies and must create an environment that enables those agencies to succeed. Using third-party agencies remains pivotal because they provide extensive global recruitment reach that would be cost-prohibitive for a company to build or develop internally. Due to the extremes of market supply and demand, agency recruiters that identify top candidates have a narrow window of time to place those individuals at a client company. This is why good agencies are reluctant to waste their time working with clients that either are slow to respond or have processes agencies cannot trust. Recruiting agencies know that their top candidates will get hired somewhere – if not by one client, then by the next.

This graph, which shows the percentage of degreed engineers in the US compared by age, shows the talent gap. (Source: Society of Petroleum Engineers - January, 2010)

Supply chain management principles

One way to address the recruiting problem is to use the supply chain management (SCM) system for engineering labor. Covelo is a company that works as a centralized hub that all external recruiting activities flow through. Client hiring managers specify the needs of their departments at one end, while an exclusive group of agencies deliver talented candidates on the other end. Covelo combines a proprietary web platform with an account manager onsite at each client location. The account manager’s technical background provides quality assurance, while the technology streamlines the process and facilitates a continuous loop of communication to all the necessary parties.

This system promotes continuous learning, and since every aspect of the workflow is measured, identifying (and rewarding) the top performers becomes systematic. The web platform is used only as a tool. It is the constant “push” and “pull” of information (and learning) through the processes that adds significant value to the supply chain management model.

Vendor neutrality is integral to Covelo’s SCM system. Conflict of interest becomes obvious when an individual or group that has a role in recruiting is tasked with managing other recruiting sources. This is why programs managed by an agency acting as a “master vendor” or programs managed by an internal recruiting department that has its own recruiting responsibilities has rarely (if ever) succeeded in this space. Programs that are not implicitly “vendor neutral” are simply unable to instill the trust necessary to engage top agencies.

The impact of automation and best practices

This SCM solution can have significant impact on a client company’s recruitment processes. The effect of implementing this program at one of the Top 10 international design engineering firms has led to faster hiring, reduced turnover of new hires, and hard cost reductions in administrative personnel.

One way to address the recruiting problem is to use the supply chain management (SCM) system for engineering labor. (Image courtesy of Covelo Group)

Covelo’s solution has reduced time-to-hire cycles by as much as 50%, enabling the client to meet project demands more quickly and effectively. In addition, newly hired employees (and contractors) have had greater retention rates.

The same client has experienced other significant cost reductions and improved services as well. Offloading agency management activities to Covelo has allowed the streamlined HR team more time to focus on retention and other core HR issues. Similarly, improved efficiencies in invoicing have yielded labor savings through faster processing and elimination of errors. By automating what was once a complex and labor intensive accounts payable process requiring reconciliation of hundreds of timesheets and invoices from multiple vendors, the client now receives one electronic invoice for all agency expenditures.

Efficient billing shortens the time to pay agencies, which delivers value in a world where agencies can choose where to send their best talent. Ensuring that agencies are paid accurately and quickly provides a strong incentive for them to work through a Covelo-driven program.