A Look into How the Pandemic May Result in a Better Way of Work
September 8, 2020

Let’s face it; 2020 is just a horrible year all around.

Decent writers might, at this point, list the reasons for what has just been opined, but in this case, we don’t feel it’s necessary to pick at the wound, so let’s make the statement and move on to better things.

Among all this turmoil and change, there is talk about the forced move towards remote working, its pros, and cons, and guesses about when (and if) we might all return to normal. The United States has finally dipped its toes into those murky waters and given remote work a large-scale test.

WHAT HAVE WE LEARNED

As Management Consultants who have been working in the O&G industry for 20+ years, we have attended thousands of meetings of all different types in hundreds of E&P companies over the years, seeing these beasts’ inner workings. These gatherings’ quality and efficacy generate almost-universal disappointment (so much so that we spend much of our careers fixing them). At the beginning of the Pandemic, we speculated that the shift to remote work and ‘telepresence’ would make the situation worse. However, the small amount of evidence gathered to date suggests that any losses in efficacy are more than made up for by the general gains in productivity resulting from the elimination of commute times.

So perhaps the advocates of telepresence and distributed workforce models were right all along. Having said that, once the present Pandemic subsides, world commerce, including the Oil and Gas industry, will be faced with a real choice:

a. Double down on the distributed workforce model

b. Go back to our old (original) way of working

c. Craft some kind of hybrid approach

Let’s explore the alternatives.

a. The Case for a Distributed Model

For the sake of clarity, let’s use onshore E&P as our sandbox and ignore the current industry downturn since it’s a temporary and often recurring situation that is at least in part linked to the Pandemic itself.

PRODUCTIVITY GAINS

As previously stated, the small amount of study conducted to date suggests genuine employee productivity gains being made because a distributed workforce does not have to ‘dress for the office’ or factor travel time into their day. Estimated round-trip commute times in Dallas / Ft. Worth are around 54-56 minutes, and Houston is 50-59 minutes. So we can reasonably assume an extra hour of work per distributed employee per day. Trust us; you would have to work very hard for that type of gain via other more traditional routes. These savings would be lower if applied to field-office personnel where commutes are not so arduous, but you get the point.

POTENTIAL G&A (E.G., REAL ESTATE) SAVINGS

This is the savings that people immediately recognize as a potential consequence of the switch. Your corporation no longer requires that vanity tower in the heart of the city, releasing hundreds of thousands, if not millions of dollars to be spent elsewhere. In truth, we should temper our expectations here. Corporate H.Q.s are unlikely to go away (even if it is just because of CEO vanity). Several functions are better performed collectively, or that require real gathering. Let’s say that we could swap the 50-floor building for the ten-floor version and move on, with the savings in our pockets.

THE TECHNOLOGY IS ‘GOOD ENOUGH’

Companies like Zoom and GoToMeeting have been around for years, and Microsoft has placed big bets on products like M.S. Teams. While there have been some cyber-security concerns recently, the fact of the matter is that we have reached the stage in telepresence and networked communication that allows us to function much as we did before the Pandemic, when it comes to holding meetings. Yes, it’s clunky and awkward sometimes. Yes, there is always someone with low bandwidth or a barking dog or kids who want to be on T.V., but it works. What’s more, is this new way of working is spurring managers and supervisors (meeting chairs) to work harder on preparing for such gatherings; making sure agendas are clear, attendance is limited to those necessary, and preparatory materials are distributed beforehand. In other words, it’s forcing us to be better at collaborating.

That’s not to say that we can’t improve (more on that later). In particular, the E & P industry is ripe for someone to come along and produce that silver bullet piece of collaborative software that will connect drilling locations to drilling permits to well logs to production records. Come on, guys!

FIELD-BASED OPERATIONS ARE PRETTY MUCH UNAFFECTED

A large proportion of the headcount in any given E&P company is based in the field e.g., the folks in production (lease operators, supervisors, technical specialists, maintenance specialists, truck drivers, workover crews, etc.). These jobs would be pretty much unaffected by the switch to a more distributed model. So isn’t this true regardless of whether you stick or twist? In truth, there are some small gains on the positive side of the ledger. By eliminating the commute times for office-based employees, you can potentially increase their coverage (e.g., the length of time they are available to respond to questions from the field). Another small point is that as telepresence becomes more ubiquitous, field employees will be more likely to use it as their preferred contact method. Thus, we slightly improve interaction (We can see you rather than just talk to you).

HUGE STEP TOWARDS CAPTURING MILENNIALS

Multiple studies have been conducted, seeking to understand the generational shifts in priorities occurring as we speak. It’s well documented that there is a general trend towards a requirement for more flexible working hours, higher degrees of autonomy, and the ability to trade salary for vacation (to name a few). The move to a distributed workforce is what these later generations have been craving all along; any employer that deliberately accommodates these needs has an instant leg-up on the competition in the war for new talent. Also, let’s not forget that even ‘more mature’ employees seem to be enjoying the current opportunity to work when it suits them, or when they are needed rather than just punching in for the standard workday.

E&P COMPANY VALUE CAN ONLY BE AFFECTED POSITIVELY

This is a hard fact to face, but let’s face it; the value of any given E&P company is based on its acreage position more than anything else. While we all often repeat the mantra about having great people, “our people are what makes the difference…” we can think of no purchase that has gone through to completion based on ‘good people’ without the right Hydrocarbon access to back it up. Industry fundamentals dictate that the shift away from office-based work should not negatively affect value; the G&A release should make companies more attractive. Does anyone get punished for releasing the vanity tower? This line of thought leads to another, perhaps more fundamental revelation… What’s at the heart of an E&P?

An argument can be made that the true value of any given E&P company rests on a small number of considerations:

Holding the right acreage with appropriate access to the right Hydrocarbons

The ability to safely transport those Hydrocarbons to market once captured

The ability to secure process needs (e.g., water, sand, power, equipment, and crews)

The cost of converting that Hydrocarbon access into safe, saleable, and transportable product

So far, we haven’t said anything about people. In truth, the items mentioned ARE somewhat people dependent in that they meet those considerations above: you need the right technical specialists (geologists, geophysicists, landmen, reservoir engineers, production engineers, drilling engineers, and frac engineers, etc.) together with the right level of geographic experience (people who know the land, the rock, and the associated local difficulties or quirks). As long as we have the right technical and geographic expertise in the company, you should prosper. Everything else is not core to your business!

The implications are profound. As long as we secure those technical and geographically specialist resources, it does not matter (within reason) how we service all other functions. Let’s go further. What we are really talking about is technical specialists with experience in given geographies, who can therefore produce great (appropriate) work product, and it should no longer matter where they live.  We can expand our future job searches to include anyone, anywhere with the right expertise and experience. Let’s continue going further.
We currently employ these folks for their output (that great/appropriate work product we mentioned). This means the right locations, the right well designs, the right frac designs, etc.

What if I just paid for the outputs? What if the whole E&P industry moved towards some semblance of the gig economy, and instead of hiring great Scientists and Engineers, we simply established a given market price for a given type of work product? What if an appropriate and specific Well Design was worth $10,000?

All of a sudden, we no longer need hundreds or thousands (or tens of thousands) of employees stacked in skyscrapers toiling for a wage. Instead, we need access to the right technical and geographically specific skills on the open marketplace, allowing us to purchase the necessary work products to feed our E&P machine at standard prices. Add the fact that we could then follow a similar model and contract out ALL non-core activities that did not put commercial information at risk, and voila! We have a vastly simplified and much more economically stable operation model, based on our core skills and fundamental considerations.

We can already guess the objections forming in your mind, but consider the unassailable fact that the world is generally trending in this direction. The gig economy is here to stay, and the great workforce experiment has proven the (early stage) concept. It is, at least, worth considering.

b. The Case for a Return to our Original State (why we should hold off on that great leap)

Change is hard. It’s incredibly hard on the mature; folks who have gained rank and power under a given set of rules may not wish for those rules to change for fear of being toppled by those more expert in the new. Having said that, leaders are generally those who understand opportunity when they see it or at least understand what needs to be done to capitalize upon potential. We have said that we have the technology to make a more distributed workforce possible, but is it the right thing to do NOW? What problems do we need to work on before we jump?

COLLABORATIVE SOFTWARE

Having spent years working in the bowels of the Oil and Gas industry and E&P companies in particular, we can tell you that in general, these companies are not complex. Yes, we said it, this is a relatively simple, ‘primary’ industry. E&P, in particular, turns data-based hunches into permits. Permits are turned into holes in the ground, which are used to suck liquids and gas into pipelines. That’s it.

Every E&P company would recognize this chain of value realization. So why is it that the simple tasks or process steps associated with doing so, followed by thousands of companies worldwide, realizing billions of dollars, is not supported by any recognizable universal process management software solutions? As process consultants, we have been confounded by this gap on many occasions. Yes, there are solutions out there (Peleton and 7 Lakes, to name a couple of our favorites), but the fact of the matter is, there isn’t a silver bullet, and we are continually building workarounds.

This lack of appropriate collaborative software means that whether working from home or working in the office, processes suffer from the lack of ability to move tasks or work products from person-to-person or team-to-team elegantly; the upshot of which is that it’s often easier to walk down the hall and get what you need.

The distributed workforce model exacerbates this issue, and we, as an industry, need some solutions if we are to adopt remote work fully.

DATA, DATA, DATA

The good news is that any Drilling Engineer at any moment of the day is now likely to have the ability to see real-time rig performance data. They can work from anywhere if necessary, as long as they have a mobile device big enough to make the data legible. This ability has greatly improved the responsiveness of the Engineering staff. But we consider that to be table stakes!

Managing ongoing operations is vital, but it misses what is perhaps the next largest opportunity in this kind of operations management; the ability to process through all the data generated by all those PAST operations in order to reveal trends and connections that can save us from producing poor well designs and getting into trouble in the first place. We are picking on Drilling in this example, but the concept is universal. We need the ongoing ability to use A.I. (what used to be called ‘big data’) to make quantum leaps in performance. Individual Engineers cannot meet this need. Corporate collaboration is necessary to build the right models that will provide Engineers with the ability to answer questions they have not been able to before. We should solve this problem before releasing the hounds.

SUPERVISORY AND MANAGEMENT SKILLS

So we have conducted the first great workforce experiment, and there appear to be benefits, but is that all we need to know? Earlier in this article, we mentioned that the vast majority of internal processes and systems we have encountered over the years, which are punctuated by a given company’s cadence of meetings, are pretty bad! Root causes are plentiful, but let’s call out a few. We take great Engineers and make them into supervisors without giving them any training (thus losing a great Engineer and gaining a lousy Supervisor). These folks mimic the lousy Supervisors’ behaviors who came before them, perpetuating institutional timewasting and opportunity missing. People attend meetings and say what they are doing, rather than what they have accomplished and what they need to accomplish more. Actions go unrecorded. Poor meeting behaviors (e.g., side-bars and phone usage) go unaddressed.

What makes us think that by switching to virtual meetings, we have addressed any of these issues? There are some islands of excellence emerging, but these are exceptions. If we are to move more towards a distributed workforce, we first need to teach people how to manage remotely. It’s a whole different (or rather differently applied) skill set that seems to be ignored in favor of ‘just do it’.

MANAGEMENT SYSTEMS

This brings us to Management Systems, i.e., those things used to make sure our processes function correctly (putting the right information in the right hands at the right time to make timely decisions and take appropriate actions). During the Pandemic, have we made any conscious efforts to alter our management systems to adjust for this new way of working properly? Have we altered any metrics to make sure we are tracking the right things? Have we changed meeting attendees and cadences? Have we provided different levels of access to the different (more appropriate) data set? If you have moved your meetings from F2F to virtual, then your management systems need a tune-up and fast.

ORGANIZATION STRUCTURE

Here is perhaps one of the most challenging problems to wrestle to the ground. If you think there is merit in this new way of working, what are the implications for your organization structure? Do you have the right people on the bus? Are there too many or too few of certain disciplines? Are reporting relationships (including spans of control – how many people report to each Supervisor) still correct, or do you need to make adjustments? Do you have too many people trying to work with the same data at the same time? Now that you have realized that productivity gain we talked about, do you have too many people altogether? The fact of the matter is that organizational structures must be adjusted to capitalize upon this opportunity properly and if you haven’t started thinking about it, may we suggest you catch up quickly.

All of these points are different facets of the same underlying problem. If your business model experiences a significant shift, you must adjust your processes, systems, structures, and technology accordingly. Not making these shifts leaves you in a state that is poorly adjusted. If you are not fully ready to make such changes, it’s probably better to go back to where you were when the opportunity arises. At least you know the rules, and you won’t be alone.

c. The Hybrid Approach

We should finally discuss the possibility of living in that nether-world between states. It’s worth discussing because it is our guess that this is where most organizations will find themselves in the next couple of years. Our assumption is that the productivity benefits of remote working are too good to ignore and that employees, given this taste of flexibility and freedom, will begin to demand that some aspects of this practice will become permanent, or at least permanently available to them. So these practices will become far more common in the world than they were pre-COVID. It’s also highly probable that most folks reading our argument for doubling down on remote work and moving to a gig-style environment will be terrified AND happy in the knowledge that such a change would require the entire industry to act as one, which is not likely to happen anytime soon (although who would have guessed we would be where we are today on January 1, 2020)?

Such seismic change is unlikely to happen quickly and would require a large number of free-market forces to come together to produce the desired outcome. We are not holding our breath!

That leaves hybrid models as the most likely going forward, i.e., the states where employees gain significant changes to their working conditions and requirements, in return for substantial productivity gains. That’s all well and good, but the reasons we outlined above for returning to our original state still stand. You cannot truly exist in this hybrid state without taking the time to understand the implications for your business thoroughly, and what must be done to best capture the opportunity thus presented (and prepare for the switch to gig-work; trust us, it’s coming).

So ask yourself, What’s at the heart of my business? What do I need to do to reinforce my fundamentals while reducing the effect of weaknesses? 

Don’t bury your head in the sand. Unlike the virus, this isn’t going away!

CONCLUSIONS

  • The world has tested remote work and found the general concept to be sound
  • Employees are likely to demand some form of this flexibility and freedom going forward
  • Current systems, structures, and processes are not aligned with this change and will require a systematic overhaul in the immediate future
  • This seismic shift in work-practices is likely to engender another, longer-term shift towards gig-work that will ultimately revolutionize this and many other industries
  • The Oil and Gas industry should endeavor to work on the required short-term changes while planning as an industry for the greater shift in the future

ABOUT THE AUTHORS

Brian Smith

Managing Partner

Brian is our resident change agent; he has spent many years training 100’s of change agents (internal and external). He specializes in the design and delivery of large and complex change programs and has been successfully guiding companies through comprehensive change processes for the past 25 years.

Jim Murdoch

Managing Partner

Jim is our ‘numbers guy’. He provides analysis and clarity, helping our clients turn the mountains of data into actionable intelligence, thus providing the foundation used to develop meaningful financial and operational targets and objectives.

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