Continuous volatility in global energy markets has created an uncertain energy sector outlook in the US. For HR professionals in the US energy industry, new challenges are emerging amid the uncertainty. Shifting workforce demographics and ongoing talent shortages are slowly reshaping the industry as a whole, resulting in the need for new jobs, new skills, and new employees with the capabilities to fill them. Meanwhile, the digitization of the industry remains a significant issue that HR professionals will have to take into account if they wish to improve profitability and mitigate risks. Collectively, all these factors are steering the US energy industry toward a "new normal" that is decidedly different from the energy sector outlook of the past. As a strategic workforce planner, you'll have to properly address these various factors if you wish to remain competitive.
To help you make the right decisions surrounding your compensation planning and human capital management, market data can provide valuable insights into the emerging trends relative to compensation and skills as the industry slowly rebounds. Here, you'll find a high-level overview of some of the most important key findings pulled from comprehensive 2017 energy industry research, giving you a helpful starting point (plus some much-needed reassurance) as you find your place in the new normal.
Overview Compensation Trends by Career Streams
Energy industry research throughout the past several years has shown an overall lack of base salary movement throughout the sector as a whole. Most HR professionals agree that competition for talent won't really be able to pick back up again until there is some sort of movement here, or at least enough to make a dent in the ongoing stagnancy. Despite the fact that there's no longer an energy premium over general industry salary budget expectations, corporate jobs within the energy sector are still more highly compensated when compared to similar jobs in the general industry.
It's worth noting that technical-based positions and skills are becoming more and more coveted by companies within the energy sector, and these types of positions typically account for higher year-over-year (YOY) total cash growth across many different career streams. Looking at the top three positions for YOY total cash growth within each segment, we see that:
Junior Technical Professional was in the top three positions for total cash growth YOY for three different segments - Fully Integrated and E&P; (+6%); Drilling (+19%); and Downstream (+1%).
Technical Support/Paraprofessional was also in the top three positions for YOY total cash growth for three segments - Services and Equipment (+8%); Drilling (+18%); and Pipeline/Midstream (+3%).
If you break down compensation practices by career stream and job positions further, you can see a few minor energy industry trends taking place. For example:
The Fully Integrated and E&P; segment maintained a premium broadly across all career streams over other sectors, especially when considering total direct compensation (TDC).
The Services and Equipment segment showed sizable salary changes in field/hourly and the above mentioned technical career streams as well as notable increases for field supervisory and administrative support. The greatest levels of annual total cash movement in the segment happened for Field Supervisors, who had YOY total cash growth at +10%.
Within the Utilities segment, the Field Supervisory and Team Leader categories experienced the greatest annual total cash movement, with Team Leaders highest in the segment at total cash growth of +21%.
The Downstream segment showed the most significant total cash increases at the management and administrative levels. However, cash movement elsewhere remained stagnant or negative.
Other Challenges and Considerations
As you already know, there's much more to human resource management than simply calculating salaries. Countless other challenges can and will affect your various efforts. The latest Mercer energy industry research found no shortage of other energy industry trends for you to take into account in addition to compensation and pay.
For example, among all survey participants, the two most frequently listed "primary focuses" of the HR professionals were managing profitability and reducing costs. However, it was also discovered that the successful realization of these goals is being continuously interrupted by these top-listed human capital challenges:
- Retaining current talent
- Attracting quality talent
- Succession planning
- Staff development
- Improving employee engagement
As a result, many HR professionals are remaining as vigilant as possible in their attempts to proactively address these issues. This can be seen in the top-listed actions organizations are taking to enhance human capital performance:
- Increased focus on training and skill building
- Reorganization/restructuring the organization
- Enhancing supervisory, management, or leadership capabilities
- Fostering career development
Of course, organizations are also relying on compensation-related methods to address these challenges. One particularly popular way is through salary increase budgets. In fact, it was found that average salary increase budgets increased to 2.8% in 2017. As far as 2018, the overall energy industry budget is projected to remain steady at 2.9%. With any luck, this stabilization will continue in the years to come or lead to more increases and eventually a much more balanced energy sector outlook overall.
Preparing for the New Normal
Even with what looks like a return toward potential stabilization, HR professionals still have a long road ahead of them as the characteristics of the "new normal" become more pronounced. One of the most complex ongoing energy industry trends - and a prime contributor to the new normal - is the large amount of turnover occurring within the field. Many of the older and more experienced employees are leaving the energy industry for good, especially in the corporate and/or shared services functions where their jobs are more portable to other industries.
Naturally, this turnover is making it increasingly difficult for HR professionals to fill the widening gap between their entry-level and more experienced job positions, especially when the more experienced job positions often require intricate and highly technical skill sets that simply can't be taught to younger employees overnight. Taking all this into consideration, it would be safe to say that the ongoing talent shortage coupled with the industry's widening generational gap are some of biggest concerns facing the industry.
For these reasons, it's critical that HR professionals aim to thoroughly understand the market as well as what drives employees, both young and old. Cultivating a multi-generational workplace will remain imperative in the years to come, so make sure you're offering your workers the workplace incentives they want whenever possible.
For more in-depth insights into the US energy industry, reference the comprehensive Mercer Total Compensation Survey for the Energy Sector. This survey has served as the premier source for energy industry compensation and benefits data for over 15 years and features base pay, long-term incentive, short-term incentive, and other organizational data on over 800 different energy positions across the country. The current energy sector outlook may be marked by uncertainty, but you can gain valuable peace of mind and make more informed decisions with objective data on numerous energy industry salaries, benefits, and other critical trends.
For a deeper dive into specific energy sectors, please refer to the full suite of energy products available from Mercer.