Energy Boom

http://www.okhorizon.com/shows/2013-show-archive/april-2013/Show%201317/Energy%20Workers%20In%20Demand

All the rage about Union rights..... and Employee Engagement

It is very interesting to me that just two years ago - the big union issue was the effort to pass the so called "Free Choice Act" (popularly described in some HR circles as the Forced Choice Act). After the election of the Democratic administration after years of Republican dominance - it was time for the unions to exert their powers.

The current unionization process allows for solicitation of interest with a signature indicating the employee would be interested in unionization (this is often done in secrecy). With enough interest - a campaign is held and both parties (Union and Management) have the right to discuss the issue and employees vote yay or nay "behind the curtain". The proposed Free Choice Act would require the Company to recognize the union with just the signature process (card check).

Now - just two years later - we are no longer talking about expanding unionization - but in Wisconsin, Ohio and other states - the talk and controversy is about limiting union bargaining rights. Historically, unions, once certified, can bargain on wages, benefits and working conditions. With the state budget issues - one of the areas that is targeted for cuts are state workers benefits. State workers are largely unionized - so the unilateral Governor budget proposal to cut benefits without bargaining has created an uproar around union bargaining rights. Ironically, the unions have now agreed to the budget cuts but state government are not backing down on the state rights to unilaterally make these changes (i.e. the unions protest on weakening of their bargaining rights).

So with that background - how does this impact the Energy Industry? With the exception of Refining, Chemicals and Power sectors - the Energy industry has largely gone union free... so the impact should not be large.

In most companies that "get it" - engaged employees are the key to improved business results. There are numerous studies that shows that companies with engaged employees deliver far better performance than companies with low engagement. A TowersPerrin Global Workforce Study showed that companies with high employee engagement had a 19% increase in operating income a 28% growth in earnings per share. Conversely, companies with low levels of engagement saw operating income drop more than 32% and earnings per share decline by 11%.

So what is the connection -- in my view - during the industrial revolution era - companies did not get the need to engage employees and thus there was a need to unionize to get basic rights. However, in today's highly competitive global environment - enlightened companies treat their employees basic needs and involve them in the business creating an environment where unions are not needed. In fact, my view is that the inclusion of a third party (unions) in the Employer and Employee relationship is a hindrance to engagement. However, if you do find yourself in a union environment, don't forget that you have rights to engage your employees directly.

As Gasoline Prices Rise - Time to bash Oil Companies

They have started -- the emails about boycotting the bad and greedy oil companies by not purchasing gasoline on a certain day or through other boycott ideas.

There has never been much love between the general population and Big Oil - and it certainly heats up anytime the price at the pump escalates.

The fact is that the U.S. needs a comprehensive Energy Plan that addresses all forms of Energy including fossil fuels (which will be the dominant form of Energy for many years) and alternative Energy sources.

Today, the U.S. consumes roughly 21 million barrel of oil today out of the 85MM barrels that are produced around the world daily. That is 25% of the World daily oil production by 4% of the World population - Houston we have a problem!

Since the U.S. produces roughly 9 million barrels of oil today - to meet our demand we must import 12 million barrels a day.... and we wonder why problems in the Middle East cause our gasoline prices to rise.

T. Boone Pickens has been outspoken about the U.S. need to develop an Energy Plan. You can learn more about his idea at Pickens Plan.

Egypt, Wisconsin and the Dodd Frank Bill...

What do these three events have in common? To some degree they are all protesting the gap between rich and "poor". In Egypt and many other countries in the Middle East and Africa, wealth is concentrated at the top while others suffer through unemployment and high cost (especially the recent food inflation). Wisconsin budget issues has resulted in a crackdown on the high cost of union negotiated health care benefits. Protesters are concerned about their union rights (that is topic for another blog post) and what they believe is an example of the continuing chasm between the upper echelon and the common worker in the U.S.

Finally, one of the key features of the Dodd Frank bill is the requirement to show a CEO/Worker ratio of pay. It requires disclosure of “the median of the annual total compensation of all employees of the issuer,” except the CEO, the CEO’s annual total compensation, and the ratio of the two amounts.

This will put a tremendous amount of effort on the Company's part to calculate all the components of pay for all workers. Previously, the Compensation Discussion and Analysis (CD&A) section of the Proxy required detailed calculation for generally the top five paid employees.

It will be interesting to see what kind of gap exists in U.S. Company pay. As always, we can help you navigate the new requirements.

Updates

Wow - it's been a while since I posted on the blog. I do find it therapeutical so I need to start blogging more often!

The job market has improved over the past few months - but still not robust. An article today indicated that many for people resigned last month versus layoffs - indicating they are moving to other jobs or are confident in the market.

For the past three months, I have been working for a Drilling company -- so I am right in the middle of the action in the Gulf. The company I work for is a smaller company operating exclusively in the Gulf and in shallow water so we are definitely impacted.

I will post more thoughts on the BP disaster as time goes on.

Disappointing Jobs Report

The economy shed 85,000 non-farm payroll jobs in December - the expectations were flat to positive gains. November was adjusted upward such that it turned positive - which is good news. I need to better understand the December numbers (e.g., construction jobs were down - could it be the weather) to see if this is indeed a big step back. Temporary jobs continued to increase which is always a good sign in a recovery, as many companies will first begin hiring temps before regular full-time employees.

If you are in need of some temporary support as we begin the new year, please contact HR Energy Pros as we can help fill your temporary HR needs.

Lessons from Tiger

It is now more than four days since Tiger Wreck began and questions still remain. I'm sure Tiger truly believes it as a "private matter" when he says it is.... and many will agree. However, a public figure or public company is often better served by coming forward with the truth - no matter how painful. Take the case of Andy Pettitte who admitted steroid use (albeit "for rehabilitation purposes rather than to enhance his body") ... this is largely forgotten now. Now take Roger Clemens who is using all efforts to deny ever using steroids despite the mounting evidence. The Roger story is still very much in the public view. Everyone remembers the efforts of Tylenol to quickly come forward and remove their product from the shelves after learning of contamination. But how about Ford who knew the Pinto had issues that could cause explosion of the gas tank in rear-end collisions but denied this until the discovery process revealed some damaging documents. Some argue - Ford has never been the same since.

As HR professionals, we are often in a position to advise leaders or employees when negative situations occur and we should remember the lessons of coming forward versus stonewalling. In my view, Tiger would be better served to come clean and let the media move on to the next big scandal

The Public Option is Back in

All indications are that the Senate Democrat Health Plan that will be revealed on Thursday will include a "moderate" public option. Details need to be reviewed but it may not be as bad as it could be. One of the features will be the ability for states to "opt out", giving states with plenty of competition (like Texas) the ability to bypass a public health plan. For those of you that have had operations in Mississippi or Alabama, you understand the issue with Blue Cross Blue Shield being the only game in town making it difficult (impossible?) to negotiate rates.... so these states could benefit from a public option. The original version was to have a public option - subsidized by government - compete with insurance providers.... which would be very difficult for these providers to compete on cost. One of my biggest concerns with the original version was the notion that companies must offer health coverage to their employees or pay something like 9.5% of payroll into the public option and employees would then be required to use the public option. I've been around the table when Health Care costs are being discussed with Sr. Executives, and my concern is during difficult times (like we have been through in the past year and 1/2), it would be easy to see that 9.5% is a less costly option. Of course we would argue the need to have a competitive health plan and how it would be difficult to attract and retain talent - but all it takes is one energy company to move forward with the public option (especially a large company) and everyone will follow suit. Before you know it - the Public Option is the only game in town. Hopefully the new "moderate" public option will alleviate this concern.

Government Meddling in Executive Pay

Well today the "pay czar" Kenneth Feinstein announced that those companies that received TARP funds will have their base salaries cut by 90% in 2010. This will only impact the top 25 executives at these firms.
Fortunately, the Energy industry did not fall under TARP and is not impacted by these changes. However, President Obama quickly followed the announcement by urging Congress to pass "say on pay" for all publicly traded companies.
So what will happen? More than likely, Congress will pass a non-binding "say on pay" where shareholders will have the opportunity to vote on management pay packages. It will likely be a vote on the Compensation Discussion and Analysis (CD&A) section of the proxy.
HR should begin to review their pay philosophy and practices looking for "red flag" issues. Most energy companies are owned primarily by large institutional investors that may have their "red flag issues" clearly identified, or they will likely subscribe to shareholder services groups like Glass Lewis or Risk Metrics (ISS). Some of these services have requirements such as: disclosing performance measures and targets, listing peer companies, risk evaluation, etc. If you need help reviewing your Executive Compensation prior to "say on pay" being required, feel free to contact me for assistance.

Today's Job Report

The consensus seems to be that the recession is over and we can now expect growth in the economy to begin. Unfortunately, as many of you know, jobs are always the last thing that recovers following a recession. Today's job report showed that new claims for jobless benefits fell to 550,000 versus the expected 560,000. While this is good news in the fact that the worse seems to be over, there is still not enough confidence for full-fledged hiring to begin.

In the energy sector, a report indicated that Shell continues to go through their major restructuring previously announced by the new CEO in attempt to simplify the organization. The report indicated that Shell's upper level management count was reduced by about 20% from about 750 t0 600 and now each department is finalizing plans to reduce their organizations. Some posters have indicated that employees are having to reapply for their jobs or can apply for others.

Hopefully we will see a recovery in jobs in the energy sector soon.

HR Hiring Activity in Energy

Last last year and early this year (first month or so) -- there were several senior level HR jobs out for search in the industry. Then during February, March and part of April - it seemed to just dry up. Many jobs were put on hold, retirements were postponed and HR hiring activity stalled. Then it appeared that activity was starting up in late April and May -- but then the summer came and jobs stalled again.

There are some jobs that are being filled - but nowhere near the level that the industry has seen in the past. I have some inquiries about temporary or contract help - but even this seems to be quiet. My experience is that there is cost control efforts and bringing in anyone new - is noticeable and questions are asked.

Looking out - oil prices have recovered some, demand looks good in the out years for oil (think China)... so hopefully hiring activity will pick up. Natural Gas prices in U.S. are still under pressure and so are Natural Gas companies, so don't expect much for awhile.