Copyright of the Daily Oil Bulletin 2017
Delivering Change: Service And Supply Companies Finding Ways To Thrive In The New Normal
It’s official. Cautious optimism has crept into the oil and gas industry entering 2017 as the price of oil hovers around $50 per bbl and companies are looking to modestly grow spending and increase drilling activity as they align to the new normal of improving, if not exceptional, commodity prices going forward.
At least, that is the feeling of most of the respondents to the Grant Thornton sponsored JWN Service & Supply 2017 Outlook Report: Delivering change: aligning with a new normal. The comprehensive report, which includes the results of a survey of over 350 representatives of the service and supply industry, will be released in April.
One thing is clear, the report found — service and supply companies have to learn how to operate in a new normal in order to not only survive, but to thrive. It was a theme that played out at two industry workshops held in conjunction with the survey.
Workshops were held in Edmonton and Calgary in January. In order to facilitate open communication the workshops were conducted under the Chatham House Rules that allow participants the freedom to voice ideas without their statements being credited to them as individuals or organizations.
Other themes to emerge at the workshops included the necessity to continue to restructure to remain competitive in the new normal; the need to attract new employees who are adaptable to the new environment and who will be the leaders of tomorrow; the need to build continuity and succession planning into the enterprise; and the benefits that can be derived from diversifying into new products, services, industries and geographies.
For many service and supply companies, aligning to the new normal revolves around a new focus on meeting the needs to the customer: building a better product or service, building trust and open lines of communication with the customer, and approaching deals as a win-win proposition for both sides. Keeping and satisfying present customers is a priority versus aggressively chasing new ones.
Workshop participants spoke of taking a customer facing approach, increasing co-operation with competition and/or like businesses and finding ways to “be the best contractor.”
“Collaboration has been a focus for us this year,” said one participant. “You don’t want to give your customer incentive to go find another supplier. You want to come closer to them to build trust for your product.”
“We are more customer-oriented and listen to them to deliver solutions as required,” said another.
With activity expected to experience an uptick if crude oil prices remain firm, there is increased focus on employee training and hiring practices, and on creating the right workforce for the new normal. Many companies are engaged in long-term planning for how to attract and retain new talent, aiming to be less reactive and more stable going forward, and finding ways to build company loyalty.
One participant put it this way: “There’s been a lot of change in how we do business. Some of it is driven internally—doing so much with so few—and coming up with better ways to do things. We are hiring too. We are bringing in different people than we let go, with different skillsets. They are more open-minded, less specific, and not age-dependent. As we reduced staff, people that were let go were those who were too specific and unable to ‘cross’ [roles and skills].”
Said another: “Companies are looking for people who are open, adaptable [and] understand all of it—not just one very specific area. A mix of technical and business/sales/marketing [expertise]. The people who can do both are very rare.”
One company said it was focused on retooling and cross-training its staff, and “rebuilding its bench strength” as it looks forward to 2017. It is also exploring the option of building a technology platform to make it easier to connect contractors, vendors and customers.
Lessons learned from the boom and bust cycle have also played into new hiring practices. “We take company culture seriously. The culture suffered when we were growing. During growth, it was all about finding warm bodies. We didn’t really look at whether they would be a good fit. Now, we’ve been able to concentrate on culture in a positive way. It’s important to hire people that ‘fit’ into company culture.”
The cyclical nature of the business also puts succession planning and mentorship increasingly in the spotlight. The current environment makes it a good time to “have a good look at who you have and develop them for the future.”
“Now it’s about building the culture internally and spending more time mentoring and training … building more junior assets so that when they get busy, they are ready.”
Having the right workforce also entails creating a healthy work environment to attract and keep the best candidates. “[We are] focused on creating an environment where employees thrive and love coming to work,” one said. “People prefer a steady job, stability and good benefits rather than high pay, high volatility. [The priority is in] engaging employees and giving them a voice to be active participants for changes within the organization.”
“If you harness their interest, they’ll give you 200 per cent,” said another. “If your employees are engaged, they will appreciate that [and will be loyal]. Companies that have not engaged their employees, [those employees] are just waiting around for something better and waiting to jump ship.”
Cross training is another big priority; even more critical with the reductions in staffing that has occurred in recent years. “Your job is what we require you to do, not what your title says.”
“Today, personal development/training is not optional, it is mandatory,” another added.
Companies need to be proactive in transferring knowledge from those who will be leaving the workforce to their successors, as increasing numbers of the baby boomers hit retirement age, many participants said. While large companies tend to have processes in place to deal with continuity, many smaller companies do not, putting knowledge retention at risk when staff turnover occurs.
“You need to capture the [company] knowledge and keep it with the company, not the person. Lots of times people walk out the door with their laptops [containing that knowledge]—we see this all the time,” offered one workshop partaker. “Look at all the processes and document them all.”
“Salespeople should document their relationships,” another offered.
Standard procedures can be put in place to ensure that important data is not lost and that knowledge will be passed on in a systematic way. “There’s a lot of unleveraged data,” said one executive. It may “sit in someone’s spreadsheet buried away—data would be there but value diminishes if no one knows what it means. Even if it’s on the company server, it may be impossible to find.”
Technology could also play a role in maintaining valuable data. Field operators can collect data on a smart phone or laptop, collect data on well sites and sync data automatically to the cloud, for example.
Meanwhile, diversification was found to be one route to prosperity for some companies in the downturn. "We added complementary services and with a bit of trial and error it proved to be hugely beneficial. We broadened our scope of operations beyond Alberta and focused on tapping the U.S. market."
Another company said it used the downturn as an opportunity to invest in research and development to create a new product it plans to launch into the Canadian and international markets in 2017.
Others said they were leveraging government agencies and not-for-profit organizations to obtain funds and expertise to assist in going global and accessing new markets, and are now well positioned to take their business to the next level in 2017.
The Service & Supply 2017 Outlook Report will be released the first week of April, with launch events in Calgary April 4 and in Edmonton April 6. Key findings and insights from the report, including recommendations essential for companies aligning to the new normal, will be presented. For more information or to register, click for Calgary (http://www.jwnenergy.com/events/service-supply-2017-outlook-report-launch-yyc/) or Edmonton (http://www.jwnenergy.com/events/service-supply-2017-outlook-report-launch-yeg/).