On New Year’s Day, Texans woke up to stories about the first baby boomers reaching age 65. By 2025, companies, on average, will see 29 percent of their workforce eligible to retire. When coupled with Gen Y’s alarming turnover rate, Texans will likely see the most significant workforce event of the next two decades. What makes this eventuality even more pressing are the leadership positions being vacated which will probably exceed 40 percent.
In Texas, we have an even more challenging aspect to that knowledge gap because of our energy industry – America’s best and brightest are simply not going into careers in science and engineering.
To explore the challenges facing our business leaders, Texas CEO held a roundtable discussion in Houston with Jack Babcock, Founder & President of Glori Oil; Pat French, Senior Vice-President of the Texas Alliance of Energy Producers and President of the Foundation for Energy Education; Phil Moncrief, Senior Vice President and General Manager of CDI Engineering Solutions; Todd Runkle, Managing Director of the Austin office of architectural firm Gensler; and Dr. Michael Economides, Professor in the Cullen College of Engineering at the University of Houston, and a petroleum engineer. The panel was moderated by Editor-at-Large, Jason Myers.
Moderator: By 2025 we’re going to see 29 percent of the workforce eligible to retire. This is potentially an issue for the oil industry as well as others. How is this issue affecting your industry, and are you beginning to see any effects now?
Phil Moncrief, CDI Engineering: I’m 66 and just went back to work – I retired at 59, and now I’m back. My lead mechanical engineer is 78 years old. Of the 75 people I have in my office now, half of them are 60 or older. Now we’re trying to find the next generation, and it’s a struggle.
All engineering is the same way – it goes in peaks and valleys. When we have a bust like we just had, there are less people going into the industry. When we get a peak again, people start going back into engineering. Throughout our history, we’ve had these peaks and valleys. When these valleys come through and you need a senior person, there may not be somebody to hire.
Moderator: And what about the so called “crew change” in the oil and gas business? The boomers are getting ready to retire, the midlevel managers have lost their jobs in the boom and bust cycle of the industry, and the future petroprofessionals are not ready or not going into engineering – how do we handle what’s coming?
Michael Economides, University of Houston: The changing of the crew in the energy industry is not as bad as everyone thinks. That is because the oil industry is no longer an American industry – there are a lot of international people working in the industry, and a huge influx of people from other countries.
I have gone to marquee high schools to recruit students. The University of Houston chemical engineering program is ranked as one of the highest programs in the state of Texas. When I go to recruit in AP chemistry, physics, and math, 17 of 20 are Asian kids, one is a girl, and two are often misfits. This is not politically correct, but it’s true. Americans are not interested in science.
For the last 30 to 40 years, I’ve seen a significant downturn in the quality of the American undergraduates we are getting. It’s a very serious problem, and it affects the quality of the workforce.
I used to be a professor at Texas A&M, and Texas A&M is a conservative place. Once in a while we were asked by legislators why we didn’t hire American graduate students. Some departments have virtually no U.S. born graduate students at Texas A&M. It’s as conservative as you can get – an all American place. And yet the only way to get American students is to drop the scores for admission, and that affects the quality of students in the program. To get an American college graduate into a good engineering program like A&M, we have to lower our standards. There is no way to avoid addressing this problem as a society and as a government.
Jack Babcock, Glori Oil: As a petroleum engineer, I’ve been in the energy industry my entire career. When I reflect back, there was an implied lifelong employment contract with the oil company when I went to work. As long as you didn’t break any of the fundamental commandments, then you were insured of employment. In the mid 80’s when the consulting companies came down through the “energy corridor,” they affected the workforce forever in our industry.
Pat French, Texas Alliance of Energy Producers: When you consider the number of older baby boomers leaving the industry that shrinking labor pool is critically important in the hiring strategies of our member companies. We have to develop the technical expertise as quickly as possible with customized career planning, and flexible work schedules.
Quality of life issues seem to be much more important to the new generation. In my experience, baby boomers have been primarily motivated by compensation and the prospects for advancement. In general, quality of life issues were subordinated to the needs of the organization. Today, there’s a very different mindset, and employers need to adjust accordingly.
Moderator: How does this effect architecture? Are you seeing the effects of an aging workforce?
Todd Runkle, Gensler: Dramatically. People we recruit, whether out of school, or lateral hires, are not necessarily interested in running an office or the firm. They want flexibility; they want to be able to work from home, or work when they are on vacation. What we’re seeing is the concept of the ability to work from anywhere so you’re not tied to a workstation or an office or a specific location – that is the driving key these days. They want to do good work with a flexible work environment, and be creative and do a good job, but they don’t want to be tethered to a desk or an office.
Today, there’s a balance between compensation and a flexible schedule to be with their families. Priorities are different. The opportunity to rise to be a senior manager or leader in our firm, there are simply fewer people who are interested. They see us running around non-stop, hopping on planes, and some people just don’t see the value of that – that’s part of the struggle.
Moderator: What problems do you foresee if we do not solve these challenges of knowledge transfer?
Babcock: We can get taken over by any emerging country – India or China. There’s a huge talent pool of education in those countries, so we evolve or we die. There are some really good examples of industries which have made the transition with technology. In agriculture we went through a period where they were able to put bigger and better technology in place to improve yield. But then they got to a point where they could only make the plows and tractors so big. The real breakthrough came from the biological side.
In the energy industry bigger is better. We’re in the most remote places in the world with the biggest hammer we can get, and the biggest frac we can do, but those days are coming to an end rather rapidly. We’re going to have to find more sophisticated technology that is able to extract more energy from a smaller footprint than we’re doing right now. The application of technology may come from another field – maybe it’s from the medical field – the challenge will be to bring that technology into our industry and be more open about adoption.
Runkle: I think we have to take advantage of the global economy. Technology will lend itself to take advantage of this.
What our firm has done exceptionally well is investing in their people with Gensler University. It’s a two year program and you meet every three months and learn on topics like finance, management, leadership, client relationships, and they literally invest with the principals and the managers of the firm to teach you these skills. It’s now opened up to 200 people, and is the next step for future leaders, and gives them the opportunity to interact with senior leadership, and gives them exposure and travel to other cities in the company – it pushes them to find more leadership solutions.
Moncrief: When I joined CDI, I found we have CDI University online. There are about 200 classes you can take; you can become a professional project manager and pass the exam by taking the classes and you can learn all sorts of new skills. We have a huge IT department, and you can learn most programs online through our university. It’s pretty remarkable, and the way we can touch people quickly.
Runkle: It makes you realize the normal eight to five day is really a thing of the past.
Moderator: Has the economy had an effect on knowledge transfer programs?
Economides: There are two types of companies in a downturn. Some companies cut everything off, and there are companies that increase their training. The marquee service companies like Schlumberger and Halliburton actually increase their training budgets during downturns, and small service companies cut everything off. Education is a good retaining tool in a recession – but, it’s not a straightforward answer.
Babcock: In a small company if a couple of key people leave, you are in a world of hurt. Retention is not the only issue, you have to place this knowledge elsewhere – it can’t just reside in a couple of people, you have to get that broadly out to a larger segment. Sometimes that’s outside your own organization.
Moderator: The internet is one strategy for doing that, what are some others?
Babcock: There’s nothing better than face-to-face meetings. When you are trying to create something new, interaction at the coffeepot or interaction in offices is critical; you cannot replace it with internet conversations. These are impromptu moments – it’s like creating jazz, together you start making music. That wasn’t your purpose when you came into the office in the morning and it wasn’t on your schedule – this is where your day has taken you, this is where the creativity and the breakthroughs come through – at those unlikely events and meetings. We have to keep that going all the time and we have to break down the hierarchical barriers. It’s about the value you add to the discussion, not your title. That’s what people respect, what you’re able to contribute in real time when you interact. We want people that speak what’s on their mind; we can’t have a shy person who’s only done a model in their classroom, they have to interact with people and you can’t learn that from the internet. If they are able to interact and convey what’s on their mind then we can start to have these collaborations. We do a lot of face-to-face meetings.
Moderator: How do those issues impact your ability to do research in terms of knowledge transfer?
Babcock: Historically we had apprenticeships where you spent a number of years, and I don’t think you can get around that. There are no shortcuts. You have to do the hard work and put in the time. We call that ‘bench work’ in the laboratory. Having a junior scientist who is perhaps a post doctorate out of the university and in their first commercial job, where they are transitioning from an academic mindset to a commercial process. Next to them is a senior bench scientist performing protocols and providing training. This is a natural transfer of knowledge. You don’t have to have a classroom discussion because it’s real time knowledge transfer. That ramps the organization up very quickly with one-on-one training. Mentoring is not a program, it’s a natural process.
Runkle: I think commerce has always been face-to-face. You can supplement communication with the devices we have . . . you can make friends and connect that way, but to do business together, ultimately it’s done face-to-face.
I think that’s one of the fears for the younger generation. They feel they can be completely independent without any transfer of knowledge. They graduate from school, go into the work force and believe they can do the job just like anybody with 15 or 20 years of experience. I think that’s one of the fears technology has provided.
Moderator: We’ve discussed the challenges in recruiting students into science and math, and talked about how that impacts transferring knowledge. Yet, the energy industry has issues other businesses don’t face.
Economides: The petrochemical industry has a public relations problem which no other country has. I work in China almost every month. Working for Exxon Mobil here, you hide that from your neighbors. In China you work for CNPC, (China National Petroleum Corporation), and you’re a national hero. There’s a big difference.
Moncrief: In Mexico, engineers are addressed as, “Engineer Lopez,” just as you would call someone, “Doctor Lopez.” It’s an esteemed profession. In India and China it’s an esteemed thing. Here, you’re not much better than a guy driving a UPS truck; you make more money, but the prestige is not there and I think a lot of the young people are going to be looking hard at that. They say, “I want a prestigious job, good pay and flexible hours.” Well, I can give you two out of three. And I don’t know how we get that prestige back. It’s something society has to do.
French: Also, there are many people both here and in Washington D.C. who believe the transition from fossil fuels to alternative and renewable energy sources will happen tomorrow. The reality is far different. Fossil fuels will predominate our energy mix for at least the next 30 years.
Economides: Fossil fuels will be around through this century. I calculate oil, gas, and coal will account for 75 percent of the world energy demand without government subsidies.
French: For America’s oil and gas industry facing an aging workforce and shrinking labor pool, implementing strategies to recruit and retain employees have never been more imperative.
Economides: It’s incredible how much ignorance is out there. We have a Secretary of Energy with a Nobel Prize in physics, and his biggest pronouncement was to announce the way to solve our energy crisis is we have to paint our rooftops white. If you have this level of ignorance, it’s almost from the top down, to understand the importance of this industry.
What every company in the oil and gas industry must do is take a serious position in explaining how important oil, gas and coal are – there needs to be a constant theme here of educating the American public on how important energy is.
The 1940 Air Terminal Museum at Hobby Airport hosted this event. We thank them for their hospitality, and sharing a piece of Houston’s aviation history.
OUR KNOWLEDGE TRANSFER ROUNDTABLE WAS PROUDLY SPONSORED BY:
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