When considering the roles, value propositions, and general public perceptions of various industries, perhaps none are subject to such wide variability and subjectivity as energy companies. As highly visible enterprises, they are simultaneously lauded and derided for the sheer scale of their reported revenues, price swings, climate impacts, service availability (and outages), and accidents and mishaps. Given the industry’s high visibility for its impact on the cost and quality of daily living worldwide, companies in this sector are viewed with a mix of awe and distrust that is not typically observed in other industries. When combined with a raft of external forces, technical challenges, and significant labor market issues, energy industry HR teams and the leaders they support face volatilities and a unique set of challenges that threaten to derail ongoing operations and long-term objectives.

Understanding the Energy Industry

Despite a focus on oil and gas companies, the industry is substantially bigger and more complex. Global energy spending is estimated at $15 trillion per year, exceeding the combined profits of all corporations worldwide by 50%. In fact, the industry is estimated to account for 14% of global GDP. It is no wonder it generates so much attention. It comprises organizations involved in the discovery, extraction, production, processing, transportation, and distribution of energy to consumers for residential, business, industrial, governmental, and transportation purposes.

It is segmented into three primary categories: non-renewable energy (oil, gas, coal, nuclear); renewable energy (solar, wind, hydro); and the power or electricity sector, which is a secondary source generated by both. Companies operating in each category are further segmented into stages of value generation, such as Oil & Gas’s upstream (exploration and production), midstream (transportation and storage), and downstream (refining and distribution), or Electricity’s generation, transmission, and distribution. Renewable energy companies generate power from wind, solar, hydroelectric, geothermal, and biomass sources that are converted into electricity, heating, transportation fuels, and power for industrial processes. 

According to the U.S. Energy Information Administration (EIA), energy consumption is dominated by petroleum (38% of total) and natural gas (36%), followed by nuclear (9%), coal (9%), and renewable (9%) sources. Its heaviest outputs are for electricity (34%), transportation (30%), industry (24%), residential (7%), and commercial (5%).

Despite continued reliance on fossil fuels, the EIA projects that renewable energy sources are growing faster globally, with their capacity projected to exceed the U.S. total energy capacity by 2029.

Primary business and operational challenges

Energy industry HR leaders and strategists need to maintain constant awareness of external forces, market shifts, industry and economic trends, climate, and political and regulatory positions across domestic and international markets. Any of these can cause major disruptions to production and distribution operations, as well as to staffing and employee well-being.

Shifting political and regulatory requirements

Meeting requirements and adapting to changes across multiple economies worldwide presents unique challenges for energy companies. The political moves towards and then away from alternative energy sources in the U.S. are a challenge, particularly given the relative stability provided by the 194 other nations that signed the 2015 Paris Agreement. Major investments are required to meet those requirements, as carbon reduction and capture, as well as lowered emissions requirements, must be interpreted differently across countries and regions.

Persistent cost pressures

The costs of developing, producing, and delivering energy continue to increase across industry segments. The challenge involves managing inflationary pressures, rising demand, disruptions from geopolitical and supply chain issues, extreme weather events, and infrastructure modernization and maintenance requirements. Given the price swings that typify global energy markets, the ability to withstand those and adapt is essential.

Technological advances

The introduction of AI and machine learning technologies is creating intense competitive pressure to adopt them to improve efficiency and reduce costs. AI and automation are touted as offering substantial opportunities to optimize power supply and demand management, predictive maintenance, and risk signaling. The cross-industry race to adopt AI is projected to drive exponential data center power demand, with processing and cooling requirements expected to strain older municipal and rural electric grids.

Infrastructure capacity and health

Aging and under-prepared electrical grids are projected to struggle as transmission volume grows, extreme weather events increase in frequency, local opposition to larger, more prominent facilities mounts, and existing infrastructure's ability to absorb surges and meet increased demand for always-on capacity declines. Common mechanical and physical degradation, weather events, human error, and misdeeds (e.g., eco-terrorism) will continue to threaten operations by causing power disruptions, platform explosions and fires, pipeline damage, and maritime mishaps. The investments required for needed improvements and accelerated renewable generation, capacity, and community-level storage are enormous and will require regulatory approval and consumer acceptance of larger rate increases.

Digital security

With ongoing automation and rapidly advancing AI, the challenges of ensuring trustworthy process execution and cybersecurity will only multiply. For example, given their promise of autonomous management of production and distribution processes, potential failures during early adoption create substantial risks that must be managed. And the more that access, operating processes, tracking, oversight, and record keeping are digitized, automated, and controlled, the more cybersecurity and information security risks must be managed.

Major talent challenges and concerns

Energy industry HR leaders must be well aware of and prepared to effectively address the myriad issues they and their business leaders face in pursuit of business, financial, operational, and talent objectives. While many of these cut across industry segments (e.g., oil and gas, electricity, nuclear, solar, or wind), some loom larger for some than for others. Regardless, as energy industry HR leaders and professionals move between segments, understanding the common issues and solutions that work in one segment will largely transfer to another.

Labor markets

Global demand remains high, with 2.2% annual job growth, adding to the employment of over 76 million workers. The power segment has accounted for over 70% of new roles (with solar contributing 50% of those), and coal employment growth in Southeast and East Asia is offsetting losses in the US and other advanced economies. But talent shortages are a key driver of infrastructure project delays and cost increases, as skilled trades and engineering professionals are in short supply. Concerning news has emerged that relevant skills graduation rates are not keeping pace with the growth needs, as the demand for technical workers grew 16% while vocational school graduation rates increased by only 9%. Electricians, pipefitters, power line workers, plant operators, and nuclear engineers are among those facing the greatest shortages.

Similarly, an aging workforce is creating energy industry HR and recruiting teams, with IEA reporting that for every (1) new energy worker, 2.4 experienced employees are approaching retirement age. It projects that, to prevent the skills gap from worsening by 2030, the number of new qualified entrants to the global energy industry must increase by 40%. Replacing nuclear- and grid-related professionals represents the most significant demographic challenge here.

Competition for tech-savvy workers

A related but separate talent issue facing energy industry HR teams stems from the rapid advances in digitization and artificial intelligence. Similar to the experiences in old-line manufacturing and automotive industries, the shift towards renewable energy sources and growing investments in advanced software-based technologies are increasing the demand for digitally skilled professionals. For example, jobs in renewable energy require greater skill in engineering, environmental science, data analytics, and automation, while 54% of companies in that sector cite a general shortage of cybersecurity professionals as a significant risk.

Across the industry, LinkedIn reports that demand is growing for professionals with skills and experience in data analytics, project management, materials science, and software engineering, with roles such as software developer, cybersecurity analyst, and AI specialist projected to grow by 6% by 2033. Similar projections from Phenom indicate significant growth in demand for advanced analytics and data science expertise, with experts needed to develop capabilities to optimize predictive maintenance, performance, and grid management. 

The competition for such talent is significant, as companies must contend not only with those across energy industry segments but also with those in most other sectors, especially tech, financial services, healthcare, and manufacturing.

Industry image problems

Expanding relevant labor pools by the energy industry's HR and recruiting teams will require fresh approaches, as research shows the industry faces an image problem among younger workers who could be new entrants. Attracting and engaging younger workers with the necessary skills is challenging due to a perceived clash of values and ideals around improving society’s “common good,” given concerns about climate change and an overreliance on fossil fuels. Furthermore, Kearney reports that 44% of STEM students and young professionals worldwide view oil and gas as an “industry of the past,” and that more than half of millennials view the energy sector as “unappealing.”

Worker safety and well-being

The physical nature of many energy industry jobs remains a challenge. Consider that many generation facilities and resources are located and spread across uninhabited areas, with output transported over, under, and across vast physical barriers (oceans, mountains, deserts) and delivered via multimodal supply chains that use hazardous transport and transfer methods. Exposure to physically demanding tasks, dangerous equipment, high-voltage power sources and related hazards, and hazardous materials, along with irregular work schedules and high-stress conditions, is exacerbated by the fact that much of the work is performed in increasingly volatile, unpredictable weather and challenging locations. 

The safety and security of employees and contractors pose significant risks and require knowledge of a wide range of national and cross-border legal requirements, as well as of the various regulatory bodies and agencies. The nature of the work and the environments require stronger employee support to improve productivity and reduce turnover due to burnout, stress, health, and financial concerns.

Strategies for addressing Energy Industry HR challenges

Energy industry HR professionals need to prioritize and balance their efforts as they navigate market volatility with ongoing business, financial, operational, and workforce transformations. Several strategies stand out as having the potential to significantly impact business outcomes by focusing on capabilities related to workforce assessment, planning, and development; cost management; proactive digital transformation and change management; and advanced candidate sourcing, management, and hiring practices.

1. Anticipate and plan future workforce needs

A significant shortcoming across most companies worldwide is that energy-industry HR teams are among the least likely to benefit from data-driven, strategic workforce planning, given the rapid market shifts and crises they face. Scenario planning that aligns talent requirements with future trends and events can be used to project labor supply and demand across skill sets, geographic locations, operation types, and supply chain nodes. 

Skills-based assessments and gap analyses can identify future requirements and individual or job-family upskilling opportunities, reducing reliance on recruiting and contracting to meet staffing needs. Talent intelligence (TIPS) and Labor Market Insights (LMIs) platforms can identify where targeted labor pools are located, and advanced analytics, including statistical methods and AI, can evaluate opportunities to meet staffing requirements worldwide.

2. Enable digital and skills transformation

Preparing the organization for the development, adoption, and application of advanced technologies and digital methodologies, such as AI, data science, and automation, is essential, as the impact on how work is performed and the skills required is continuously evolving. Leading the strategy and supporting the organization's movement forward with advanced technology training, application, and practice opportunities, skill development assignments, job mobility, and strategic change management. 

As an organization transitions to developing, producing, using, or providing a different mix of energy sources, upskilling current workers and testing their ability to adapt and succeed will drive higher engagement and retention, and lower replacement recruiting volumes and costs.

3. Improve HR cost efficiency and scalability

Any opportunity to lower the internal operating cost profile (in stable or turbulent times) should be planned and acted on as a cultural imperative for energy industry HR teams. Consider adopting process improvement approaches, such as Lean, to identify opportunities to streamline processes. Conduct assessments and explore leveraging AI, automation, HR shared services, chatbots, and outsourcing to optimize cost, flexibility, and scalability as business and staffing needs fluctuate.

4. Reframe the employer value proposition to attract talent

Energy industry HR and recruiting teams should flip the script and perceptions about working in the sector by understanding and speaking directly to the values of targeted candidate (and current employee) pools. Building awareness about the ubiquity of petroleum byproducts as the base for so many essential consumer and industrial products, including those in beauty and personal care, plastics, fabrics, tires, and critical medical devices. Promote the societal value of renewables and “cool” technologies, tools, and techniques for their environmental impact. Highlight an employee value proposition (EVP) that emphasizes messages such as a commitment to comprehensive employee well-being (physical, psychological, and financial), a positive and attractive culture, meaningful work, development and advancement, personalized benefits, and community and social welfare contributions.

5. Expand and diversify talent sourcing models

Finding a sufficient volume of qualified candidates to fill a range of roles across business units, functions, locations, and facilities, domestically and internationally, remains a persistent challenge for energy industry HR teams. With so many barriers related to security protocols, background checks, immigration and visa support, and language and cultural translation, creativity and resourcefulness are essential. Create a multi-model, globally-aligned but locally tailored mix of talent attraction, nurturing, and hiring strategies, including:

• Talent pool development takes a longer-term approach to identifying and nurturing critical skills in individuals, turning them into future candidates by inviting and engaging them in talent pools or communities. Locate them using web crawlers and related technologies, and use a CRM capability to build trust and interest in jobs that are projected to be open in the coming months and even years.
• Skills overlap assessments can use labor market intelligence platforms to identify potential labor pools, locate and engage candidates using candidate relationship management (CRM) tools, and develop onboarding and continuing upskilling programs to fill their gaps. Look for unique sources of the needed core expertise across adjacent employment fields, such as military veterans (e.g., nuclear-powered submarine engineering, digital and aerial monitoring), or overlapping industry skills without the exact applications (e.g., Solar Consultant and Wind Turbine Technician without prior “green” experience). An analysis by the International Energy Agency (IEA) found that 66% of oil and gas supply workers and 50% of fossil-fuel power supply chain workers have base skills that can be upgraded, unlike (sadly) 100% of coal miners. 
• Advanced talent strategy creates a multi-source approach to filling jobs by planning a balanced, structured staffing approach to support the cost-effective, blended use of employees, contractors, and automation. It leverages the “6B’s” (buy, borrow, build, bind, bound, and bot) approach, strategically blending targeted hiring, contractor management, employee development, retention, internal mobility, and automation tactics to fulfill staffing requirements.
• Offshore location recruiting, as the IEA reports, that EU, China, Indonesia, and North Africa are producing a larger share of new qualified entrants into the energy fields, with the volume of people starting energy-relevant degree programs having grown by 25% over the past 10 years.
• Apprenticeship, educational alliances, and trade school relationships that can be leveraged by offering company-branded scholarships, sponsoring tailored (real-world) technical challenges, hackathons, competitions, summer internships, and after-school employment opportunities. Engage employees to interact directly with students, using executives to oversee, evaluate, promote, and champion the programs and events; use subject-matter experts to staff events and coach individuals and teams; and talent acquisition (TA) and HR staff members to coordinate programs and build relationships with faculty and students.
  
  

6. Strengthen leadership capability for volatility and change 

An analysis by McKinsey found that leadership style and effectiveness account for the largest shortfall among the primary drivers of EVP and employee retention in oil and gas companies. Inspiring, transparent, and authentic leadership is needed to guide teams and organizations through market and technology shifts. As a result, focusing leadership development on effective communications, resilience, and adaptability capabilities is an essential step towards improving employee mission alignment, motivation, engagement, and retention. Making the middle management role more effective requires simplifying responsibilities to declutter schedules and maximize time spent coaching, motivating, and guiding skill development, thereby increasing retention, performance, and productivity.

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