The roots of oil and gas’ looming talent challenge began with the end of the World War II. Returning GIs anxious to start a new life began getting married and having kids, lots of kids. An estimated 78 million baby boomers were born between 1946 and 1964. They began retiring in 2011 and most will be done by 2029.
Oil and gas had managed to put off the so-called “Great Crew Change” for a time because equity values were “crushed” between 2014 and 2020, said Les Csorba, partner in the Houston office of executive search firm Heidrick & Struggles. But no longer. Oil and gas is now one of the best performing equity classes, and rising stock prices means the sector is seeing more retirements, Csorba said.
To be sure, the pandemic has also played a role, accelerating the pace of retirements for older workers.
“Companies are worried about retirements over the next year to 18 months across the C-suite,” Csorba told Hart Energy. Succession planning is becoming a real issue as oil and gas enterprises wrestle with how to replace experienced senior managers with younger, less experienced workers.
It’s for that reason that Csorba, along with his colleague Clayton Spears, produced the recent report “The next energy crisis? Talent.”
Replacing those retirees is made more complicated by factors specific to oil and gas.
“There’s a huge gap in middle management,” said Csorba. Previous downturns forced layoffs that pushed talent from the sector, as well as growing anti-hydrocarbon rhetoric that has tamped down interest in oil and gas careers.
The true scale of the problem has been masked to a degree by private-equity investment in the sector between 1997 and 2017, said Chuck Yates, a former managing partner at Kayne Anderson Capital Advisors. Such investment created opportunities for young executives to gain experience as part of a startup management team and create the potential for significant rewards, he said.
Private equity’s decreased prevalence shrinks those opportunities for young talent, Yates told Hart Energy. Meanwhile the current state of the market scares off potential new entrants because it creates “unlimited downside and limited upside,” he said.