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Energy workforce opportunities in the new economic climate

By Peter Weigand and Michael Abraham

It’s a mixed message out there. On the one hand the media is claiming the energy sector is the place to be; on the other hand, energy companies are not immune to the current economic woes. With commodity prices down, industrial demand destruction a reality and the inevitable increase in slow or no paying customers, energy companies are definitely experiencing the effects of our current economy.

Just as consumers have become wallet vigilant, so too are energy companies. While the promise of government sponsored energy programs will undoubtedly create revenue and job opportunities for many, the reality is, that check has not yet been written. And yes, renewable, smart grid and clean tech investments will be required of utilities and others, especially given state mandates. Yet, at the same time, there is a renewed focus on making sure the core business remains profitable.

Given that energy companies cannot control demand destruction, commodity costs, or when and if people pay, that leaves projects and labor costs as the target rich environment for cost control. We are already seeing hiring freezes, projects being killed and a number of related signals that indicate many energy companies are following the rest of the economy into a standstill.

Opportunity Knocks
Who hasn’t heard or read about the workforce crisis facing the energy industry? A couple of telling figures; such as 50 percent or more of utility employees are eligible for retirement within 10 years, or, that Gen-Xers fall 4 to 6 million people short of filling the vacated positions across all industries within the next 3 years, are sobering indeed.

Meanwhile, the energy industry is experiencing a popularity boost like nothing seen before. A recent college senior survey indicated energy as one of the top 5 fields of interest. Until two years ago, energy didn’t even make the top 20 list. Even within our own contract resource and recruiting practices we have received thousands of resumes of professionals who want to get into the energy industry. This is only counting the applicants with college degrees and work experience in other industries.

It’s an employers market today. There may not be a better time to capitalize on this opportunity and when the economy starts to recover, this window of opportunity will close.

Answering the Door
It would be easy to suggest a simple strategy, such as, go out and hire people from outside the industry in droves, but the odds of that working and the cost of the inevitable large number of “mistakes” is pretty high.

There are essentially two key issues with hiring from outside the energy industry: 1) lack of training, and, 2) retention risk.

Training can be an expensive investment in people, especially given post-training retention risks.

This doesn’t have to be the case.

At Skipping Stone, we get a lot of resumes every day from people outside the energy industry who are trying to get in. We surveyed some of these non-energy industry people regarding training.

Interestingly, over 35 percent were willing to pay for some amount of industry training out of their own pocket. The number increased to over 50 percent, if they knew a job was waiting for them upon successful completion of training. The number jumped to 85% if the company hiring them was willing to reimburse their training costs over a period of time.

Given the survey results, the current unemployment situation and willingness of non-energy professionals to be retrained, this screams for a low cost strategy that results in a new trained and retained talent pool. For example, offering jobs upon successful training completion with a three-year payback program tied to retention starts to look attractive. If you couple that with a third party student loan program backed by your company and a personal guarantee from the applicant, it gets even better.

If you don’t want to wait for people to get outside training to get them started, a simple and cost effective retention risk mitigation strategy is a contract to permanent program.

Contract to permanent has a myriad of benefits beyond the obvious “try before you buy”. Advantages such as flexibility, no benefits costs, no HR issues, and little or no insurance impact come with a “contract-to-permanent” approach.

Contract-to-permanent is a viable solution whether your strategy is progressive on workforce development or if you are simply in cost control mode. Using contractors for staff augmentation and project work enables the ability to shed costs quickly and easily as financial conditions warrant.

Implementation
Most human resource departments aren’t equipped to implement these strategies single handedly. Outsourcing in a partnership mode with internal HR is the quickest way to capture what may be a short term opportunity. This eliminates the ramp rate of hiring internal recruiters, contract coordinators, training coordinators and other gaps to timely implementation.

To streamline the effort and minimize the number of outsource partners needed, one way to effectively hit the market hard and fast is the use of a firm that can provide a combination of recruiting services, contractors, including payroll and benefits, training coordination and assist in developing strategies and tracking performance and budget.

Financial Impact
Consider the investment in the aforementioned workforce strategies in terms of a two to three year window. The cost to implement it in 2009 will be much lower than in future years as eventually the labor market will strengthen and in the current environment the competition for talent is at a low point.

Assuming there is a need to either address a retiring work force, renewable mandates or potentially a government backed windfall of activities, any way you look at it, there is a need to invest in a workforce strategy. Even if the talent need isn’t immediate, now is the time to invest in building a pipeline of future talent so when you are ready to turn on the tap, there isn’t the 3 to 6 month wait for ramp time.

For public companies, one could argue that Wall Street has already factored into stock prices lower earnings expectations. Investing in 2009 in a workforce strategy shouldn’t impact earnings to a significant degree and could position the company for a significant return on that investment in future years. If positioned right, analysts might even reward such a strategy.

The competition for talent may never be this low again.