A recent WSJ article titled ‘Cutting Staff Pay to Keep Workers’ highlighted how some firms are doing anything they can to avoid layoffs, despite the dramatic decline in oil prices. This caught my eye due to a recent three-part series one of our associates, human resources expert Alec Schrader, put together on this very topic.
Finding Alternatives to Layoffs
In his three-part series on ‘Finding Alternatives to Layoffs’, Alec highlighted some of the same strategies these firms are taking – including work hour reduction and delays in pay raises and bonuses.
Related Article: Layoffs Are Not Always The Answer – Part 1
Managers mentioned in this WSJ article agree.
Graduated salary reductions are the preferred way to reduce costs, as it allows everyone on the team to stay together, and more important, work together, to focus on creating value in these challenging times.
-Steve Laut, President, Canadian Natural Resources
Referring to what’s become known as the Great Crew Change, the oil and gas industry can hardly afford to have yet another gap in it’s line of future talent.
Related Article: Finding Alternatives to Layoffs – Part 2
As the WSJ article mentions:
Everybody that went through this before all knows it really hurt oil companies in terms of not having a generation ready to move into management positions.
-Dan Hill, Texas A&M University
Innovation Is The Other Casualty
A recent study by Lloyd’s Register Oil and Gas highlights the fact that head counts aren’t the only thing set to suffer from low oil prices. Their Technology Radar 2015 finds what was probably expected.
Innovation is likely to be a casualty of difficult market conditions.
This is despite the overwhelming agreement that oil companies need to be more innovative in order to compete in the future.
While immediate innovations that will survive budget cuts will be focused on technologies that deliver immediate cost efficiencies, the study also showed that collaboration between firms with the goal of accessing skills and knowledge is paramount.
The study is summed up in the infographic provided.
Innovative Firms Will Thrive Post-Downturn
In Alec’s series, he mentions a Harvard study that evaluated the effectiveness of different strategies used by companies during recessionary periods.
The evidence was clear.
Firms that cut costs faster and deeper than rivals had the lowest probability of pulling ahead when things got better.
Firms that pursued cost reduction through operational efficiency, not staff reductions, and maintained strategic investment, outperformed their peers.
Related Article: Mobilizing Teams Around Productivity Improvement – Part 3