Insulating Against The Loss Of Corporate Knowledge A Challenge In Boom And Bust Oilpatch

Building a spirit of collaboration through the oil and gas supply chain can take years of concerted effort between producers and suppliers to build trust, solidify relationships and land on successful formulas that benefit both sides. And it can all be wiped out in a single bust cycle when those who forged the new relationships are sent packing.

There is little that companies can do about the boom and bust cycle endemic to the oil and gas industry. But there is much they can do to avoid losing the gains made when the inevitable bust arrives and companies scale back operations and staffing levels. And maintaining those hard won gains can pay big dividends going forward, when cost controls and efficiencies matter more than ever.

According to a new JWN Energy and Grant Thornton sponsored report, Inspired Conversation: Uncovering real approaches to industry-wide collaboration, a deficiency of institutional memory that would allow successful collaboration lessons to carry forward represents one of the big challenges in reforming the producer-supplier relationship.

There is so much turnover through the boom and bust cycles that people must often start fresh to develop new connections, making it challenging to establish the kind of deeper long-term relationships that build trust and ongoing co-operative businesses practices, the report found.

Cost cutting in the down cycle often sees experienced and higher cost employees replaced by lower knowledge administrators. The situation is made worse today by the large number of baby boomers reaching retirement age and exiting the industry — the so-called great crew change — and the desire of those entering the workforce to find work perceived to be more stable.

Loss of institutional memory

In many cases, new employees lacking historical knowledge and experience have to rediscover the need to work together, some attendees said. The high level of layoffs among operators in the most recent downturn has led to situations where the bidder has deeper knowledge than the customer.

“The frustrating thing is, we do [collaborate], it’s successful, and then a downturn happens and everybody forgets about it, and then you have to re-educate a different set of management to actually get on to it,” an Inspired Conversation attendee from an exploration and production (E&P) company said.

Turning to solutions, the energy executives said that among other things, companies should prioritize knowledge transfer as part of their succession planning process, starting by determining what knowledge and experience they already have in-house, documenting it and ensuring it informs company policy going forward.

Create a policy around how to undertake collaborative contracting, put it in writing and review regularly, they suggested, so that previous lessons learned are not forgotten. If policy is well documented, new hires will have access to this, and lessons learned in terms of collaboration are more likely to be followed on an ongoing basis.

Industry associations can also play an important role in finding ways to tell industry stories, such as through panel discussions with experienced leaders, those who have become experts in niche areas and people who have made mistakes and learned valuable lessons from them.

For more details, download the report here.