Thursday, November 01, 2007

Replacing Human Reserves

If I had a quarter for every time someone at my former company said, "People are our most important resource," I could retire now. And when confronted with the unsavory nature of many of the governments with which oil companies must routinely deal, how many of us have replied, "You have to go where the resources are"? An article in Monday's Wall Street Journal section on the environment describes the human resource challenges of the oil industry in a way that puts those two clich├ęs into an entirely different context, in terms of how potential employees view the future prospects for alternative energy and a transition away from oil. This issue ought to prompt oil companies that have resisted investments in renewables and other new energy technologies to rethink their "cleantech" strategy.

Oil and gas companies are enjoying a run of extraordinary profitability. The mounting attacks from the Congress on "windfall profits" are as good an indication as any that these are truly boom times for oil firms. But many of these same companies contain within them a sort of demographic I.E.D., as the big bulge of employees in their 40s and 50s moves ever closer to retirement. Replacing those reserves might be even more important than replacing the hydrocarbon reserves they consume annually, if these companies are to continue serving the energy needs of their customers, and the financial needs of their shareholders. As the Journal describes, the ability to hire enough first-class talent to tackle the technological, environmental and economic challenges ahead may depend less on corporate salary and benefit policies than on the public's perception of the business in which these companies engage.

In the late 1990s, my former employer, Texaco, rolled out a new advertising campaign called, "A World of Energy." It was built on the premise that we were transforming from an oil company into a broader "energy company." BP has endeavored to convey the same message in its "Beyond Petroleum" rebranding. Such efforts have been criticized as being either cynical or entirely aspirational, rather than reflecting a serious portfolio realignment. I've seen BP advertising touting their revenues from non-traditional energy, but noted that they include natural gas--generally not regarded as a form of alternative energy--to make the numbers sufficiently impressive. However, they might doing this for reasons having little to do with boosting sales or the current bottom line.

Now, you could view the efforts of companies like BP, Shell, Chevron and ConocoPhillips to branch out into wind, solar and biofuels as the early stages of diversification into the types of energy that must someday replace oil & gas, or you may regard these steps as having a large PR component. Both views are probably correct, today. But I would argue that these companies are also beginning to react to the feedback from their college recruiting efforts. Several former colleagues that still do this have told me that new engineering graduates mainly want to hear what the company is doing in renewables or new energy technology, rather than deepwater drilling or enhanced recovery. The thinner the new energy story, the less likely you are to attract the top graduates.

One of the largest oil companies in the world, ExxonMobil, has stated that it won't invest in alternative energy project until it is profitable to do so. If you're the biggest and most profitable publicly-traded firm in the sector, you can probably follow that strategy without drying up your sources of new technical talent, or having your experienced scientists and engineers lured away by cleantech startups. Or perhaps Exxon's partnership with Stanford University sends the necessary signal to new graduates interested in cleantech, but desiring the stability and benefits that Exxon can offer. While these attributes may carry Exxon through this looming HR challenge, there's no other company in the industry that can be assured of winning the same bet. Rapidly growing renewable energy companies could alter the market for the industry's human resources faster and more profoundly than they affect the market for its products. That's an implication that many of these firms haven't anticipated.


Don't forget today's webinar on "Fuels for Now and the Future", hosted by Cleantech Collective. For more information and to register for the webcast, which is scheduled for 2:00 PM EDT, please follow this link.

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