Recently, G100 Network and SSA & Company, in partnership with Spencer Stuart, hosted a group of Fortune 500 CEOs and talent experts from the energy industry in Houston for a discussion on attracting and developing talent.
The roundtable featured Douglas Foshee, former Chairman, President & Chief Executive Officer of El Paso Corporation. The discussion was co-chaired by Jim Berrien, President of G100 Network, and Tom Simmons, Global Energy Practice Leader of Spencer Stuart.
Below we offer some key insights shared at the meeting.
When Doug Foshee came to the helm as CEO of El Paso in 2003, the company was a mess. It was involved in the California energy crisis and knee deep in litigation and investigation; strategic decisions were questioned; debt accumulated; the company lost its investment-grade credit rating; a public proxy fight arose; investors lost faith in the company, and its stock plummeted.
Over the course of his tenure, Foshee alleviated El Paso of its debt, turned the company profitable, and tripled shareholder value. In doing so, Foshee first set a core purpose for the company and used that to set a stake in the ground for determining which assets to sell off and which to keep. Foshee narrowed the company’s focus from 22 different industries to two: running its pipeline network and turning around its E&P unit. Throughout this process of restructuring, El Paso went from 15,000 to 5,500 employees.
In order to turn around the leaner company, Foshee had to win back the hearts and minds of his employees (many of whom had come from other companies acquired by El Paso) and focus hard on developing talent from within. Foshee was hugely successful in this effort, and built a culture of truly engaged leaders, who were tremendously proud to work for El Paso.
TURNING AROUND A COMPANY & BUILDING A LEADERSHIP CULTURE
Trust your people, and communicate relentlessly (even when it is hard to do so).
- Get your values and vision right.
— Hold management accountable to your core values in order to gain the trust of your employees. Be persistent, and incorporate your values into every presentation and company communication. Do not simply create a poster with your values.
— People can deal with bad news, but they cannot deal with not knowing the truth.
- Close the communication feedback loop.
— Employees take it better if you tell them why you made the change, even if they didn’t like the change. When you get employee feedback results, tell employees what you heard, tell them what you are doing or not doing, and explain why.
Tap into what motivates your employees to engage them.
- Everyone wants to work for a winner, so you have to get the momentum wheel moving in your direction.
- You have to over-communicate, and avoid doing this through email, video clips and huge town hall meetings (though these all have their place); instead, focus on small intimate meetings, even though it puts a huge burden on senior management.
- The classic mistakes for achieving a leadership culture are bringing in leadership experts and motivational speakers, and over-creating documented plans. Instead, focus on the following:
— Define leadership. Develop your definition of leadership in the form of competencies and the specific actions to achieve them. This will improve employee engagement, as employees will understand what you are asking from them.
— Discover your employees’ passions. If you can figure out a way to tap into an employee’s passions and exploit those passions, they will not listen to the call from the recruiter who tries to offer them 15-20% more pay. El Paso did this by giving back to the community (which became one of three pillars of the company), and through a wellness program. These initiatives drove engagement more than anything else.
Your leaders have the ability to change the culture of your organization— hold them accountable for this.
- One company’s employee engagement survey included questions such as, “how do you feel about your immediate supervisor?” Or, “do you think often of quitting?” For 98% of employees, the survey showed a direct correlation between how employees felt about the leadership capability of their immediate supervisor, and whether or not they often thought of quitting. The study also revealed that the results were not impacted by whether or not employees were above or below the median for their pay grade. These findings were shared one day with 500 supervisors. At the meeting, the supervisors were told this: “As of today, if you say you have a high attrition rate because your budget isn’t high enough, we assume you are not a leader. We will therefore select those of you with the highest attrition rates, and focus on you for leadership training.”
Identify and develop the real leaders in your organization.
- Ask your leaders how much they would need to be paid in order for them to bring solutions along with problems. You may not know if it’s a person’s inclination not to take leadership, or if its 10-20 years of culture that discourages them from doing so. By asking those questions (especially at the senior level), you will quickly find out who the leaders and managers are.
- Paint a picture of what the future-state of your company’s leadership looks like, and ask anyone who doesn’t feel they can go in this direction to let you know. Leaders will self-select, if you do this.
- Do not promote high-performing individuals to a supervisory role without spending time to train them for a leadership role. They should know how to do a performance appraisal, how to manage people, what a P&L looks like, etc., before going into a management role.
- Some people might perform better in more narrow leadership jobs. Map skill sets and analyze behavior to determine if individuals should be moved to positions where they could be more impactful with their technical knowledge than they would be with their leadership skills.
Use external expertise to build your talent, but never outsource decisions to external teams.
- It is dangerous to say the answer to everything is “another McKinsey.” Narrowly define the scope of your external partner’s work to focus on what they are good at. Then take the best and brightest of your people to learn from those external resources, and make sure your teams own the projects and results.
Ensure the CHRO is a true strategic partner to the management team.
- A CEO does not need his or her head of talent to explain the intricacies of the company’s benefit plans. Nor does he or she need the head of talent to be the world’s expert on executive compensation. A CEO needs the HR leader to sit with the management team, focus on human capital, and be a real strategic partner (e.g., point out gaps in succession talent and identify ways to train and develop talent to close competency gaps).
Do not be afraid to move people around, from a development standpoint.
- The former CAO of El Paso, who led the successful leadership transformation, had an engineering background, not an HR background. She excelled in this position, and was able to redirect the HR department to focus on becoming a true partner with the business. She helped the business see human capital as a key driver of performance.
- Find good talent and give them the job. A newly appointed CEO noted that his HR group was broken, mainly because it was not trusted by employees. However, there was one extremely bright woman in the department who had an extensive PR/Corporate Communications background. This leader was both accepted and respected by many employees because she was a relentless communicator. She was promoted to head the HR department because the CEO needed someone who could over-communicate with, and win over employees.
TALENT DRIVES PERFORMANCE
You do not need a burning platform to make substantive change.
- The only way to measure your performance is to measure against the best you have ever done. You can always create the burning platform by raising the bar.
- If a company is well capitalized, has good market position, and its stock performs pretty well, the CEO should ask this of its leaders: “What would we need to do to beat the best we’ve ever done (which might already be the best in the industry)? Maybe we have to redefine the industry.”
- The difference between someone who is good at their job and someone who is the best at their job is a 10X factor, not a 1-2X factor.
Get succession planning and talent pipeline planning right.
- Many companies face the issue of the aging workforce, where more than half of their employees are getting close to retirement, their average employee’s age is late 40’s, and there’s a shortage of skilled-recruits. Therefore, it is imperative to transform your succession and talent pipeline plans from a book on the shelf into something that really matters. Start with the critical people at the top, go down to the next level, until you reach the rank and file. Develop people practices, focus your leaders on human capital, and hold them accountable for developing their employees and putting them in the right positions. That way, you are actually ready to fill a position when someone leaves.
- Outside hires can be riskier than inside promotions. It is tough to know how you avoid making mistakes when you do outside hires, and in theory, you should not make as many mistakes with inside hires.
- Mergers and acquisitions provide a great opportunity to find talent. When you hear of merger activity, call up the company and find out who the really good people are. Always be in recruiting mode, 24-7.
Do not let short-term pressures overtake what should be done for the long-term.
- A slow economy tends to be a great retention tool. However, drawing back and not bringing in talent now is a concern because people will hit the door when the economy turns around.
- Compensation incentives work, but wage inflation is also rampant. (A slightly above average petroleum engineering graduate of Texas A&M will make $100K, plus a $30K guaranteed bonus for the first two years).
- Recent news articles talk about America becoming energy independent. This presents an opportunity for the energy industry to bring talent out of the university, and into the industry. It is time to stop competing for talent and start building it from the ground up. The Shale play presents a unique opportunity (whether in gas or oil sector) to make the industry attractive for college recruits.
INNOVATION, GROWTH &TALENT
For companies that are continuously reinventing themselves, finding flexible talent is key.
- In order to differentiate your company and constantly innovate, you have to look at your customer and markets and always look ahead. To do this, you must have production flexibility, and therefore need people who understand manufacturing flexibility. As a result, on-boarding can take much longer, so quickly getting new hires up to speed and integrated into your culture is critical.
Globally growing businesses need to flatten their organizational structure to attract talent (and new customers).
- For companies with the ambition to grow internationally, and truly deal with a completely new customer base, one centralized decision center will not work. Instead, those organizations have to decentralize their structure by hiring people who look like, feel like, and understand their new customer base, and entrust them to make decisions for their divisions.
Businesses that are growing from the US to Canada need to find creative ways to attract talent and build culture.
- Some companies currently have their biggest growth opportunities in Canada and have put together unique incentive plans to get people to go there. Identifying and selecting the talent pipeline to meet this growth is vital. Nothing changes unless you change the people. What is going on in the Western Canadian oil sands is like Houston in the early 80’s; innovation is required to be in this highly competitive environment.
FILLING THE TALENT GAP
Find unique ways to recruit the next shift of people.
- The biggest challenge with the demographic shift is that those in the energy industry are going to have to recruit people who don’t look like them, but do look like their customers. Put recruiting in the hands of the people in your company who are currently in the positions you are looking to hire.
- Create strategic partnerships with educational institutions to start to build and attract talent to the energy industry.
- Summer internships are one of the best ways to get people. It is a three-month job interview. If your internship program is not excellent, though, students will decide to work elsewhere. Everyone who goes to college in America knows the quality of a company’s summer internship program. (There is a website for this, and social media makes sure everyone knows about it.)
Tap into new and different talent networks.
- People with a military background provide a great talent source, as they have discipline, they are great team players, and they receive great education and training through military programs.
— Summer internships for veterans provide a great way to access this group.
— One company holds a “veterans day” twice a year where they interview veterans for open positions. At these events, the company’s HR team and front-line employees also help veterans transform their military resumes into corporate ones. (Veterans often do not understand their value or how to translate their military experience into business language.) These initiatives allow companies access to a new talent network, while simultaneously providing a great service back to those who have served our country.
- Some companies have started rolling out transitional programs to target women returning back to the workforce.
This selection of observations from our 2012 Houston Energy Dinner is intended to capture what we hope to achieve at every G100 Network and SSA & Company event: a link of the best ideas from experienced business practitioners to a handful of insights and actionable ideas for our participants.