Attracting Talent in Emerging Markets

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

Multinational organizations are constantly challenged with identifying and attracting the most talented leadership and workforce to their companies. While many succeed in doing so in their offices in developed regions, it can be a struggle in the emerging markets they are operating in. As economic activity shifts from North American and European markets to markets in Latin America, Asia and Africa, an accelerated percentage of global growth will take place in these emerging regions, straining the already tight pool of talent.

Talent remains a scarce commodity in emerging economies. Not to say there are not talented individuals within these markets, they just come at a heavy price and this issue makes them hard to retain. A recent report cites paying top people in Brazil, China and India almost double the pay of peers in the United Kingdom. Managers in China, for example, change companies at a rate of 30 to 40% a year, which is five times the global percentage. Obviously, compensation is a key factor in attracting leaders to these regions, though it is a slippery slope as both companies and regions are getting into salary wars, driving inflation up even further. Offering long-term incentives is one way to offer a creative, yet competitive compensation package whilst also aiding the retention of senior leaders.

Global companies must make themselves attractive to locals in the markets they operate in. This includes not only appointing local content to visible roles within the company but also ensuring that the markets in which they are operating in are represented in some way on their Boards. In the US, less than 10% of directors of the largest 200 companies are non-US nationals. Given the international interests of many of these companies, this is a low percentage. Local leadership development is an incredibly important aspect to this. When appointing a local leader to a senior leadership role, these individuals have the cultural knowledge and relationships with key suppliers and contacts, though they may not have the breadth of international experience expats will likely have. In Africa particularly, there is much emphasis placed on local talent. Companies must be aware that if they cannot find an individual with the right blend of experience, they will have to train and develop them. Developing talent will be increasingly important as these markets continue to mature.

When the brand of an organization is developed effectively, this can motivate and excite future leaders to develop themselves and contributes to building a company’s presence on the global stage. The brand story must be authentic and employees must be able to imagine their rise to Board level. Whilst competitive pay and continued training remain important in emerging markets, it is important local employees’ skills and experience gather pace in conjunction with market growth. Employees will value an employer that plays a part in bettering their own country as well as the world economy. Global citizenship is an important value that should be embodied by both companies and employees to ensure the advantages of international business are visible in all office locations.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Gender Diversity on Boards

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

The issue of diversity on Boards of Directors is an increasingly important topic in today’s global oil and gas landscape. Diversity can include ethnicity, gender and experience. By not having a diverse board or executive team, companies can seriously handicap their operations. Having a diversely well-rounded team allows companies to identify and navigate through the human, social, regulatory and political risks that the oil and gas industry constantly faces.

The issue of gender diversity varies greatly between the US and Europe. In February 2010, the US Securities and Exchange Commission enforced new Proxy Disclosure Enhancement Rules to make companies disclose how they considered diversity when choosing new board members. Several EU countries such as France, Italy, Spain and the Netherlands, have already adopted national quotas, but countries such as Britain and Sweden are strongly opposed to doing so. As such, the EU is pushing for legislation requiring that companies with 250+ employees or that earn more than €50m in revenues must report annually on the gender make up of their boards. If this legislation is enforced, failing to meet quotas would subject companies to administrative fines or to barring from state aid and contracts.

The PwC Insights from the Boardroom 2012 survey revealed that racial and gender diversity continue to receive some attention, with 22% and 25% of directors indicating they are “very important” characteristics of new director candidates. Directors at larger companies, (more than $5 billion in annual revenue), assign higher importance to adding racial and gender diversity than do those at smaller companies. Perhaps this is a result of shareholder pressure that tends to focus on larger companies first and then trickles down to smaller companies.

With several oil and gas companies lacking female board members, it is important to understand the importance of board diversity in the first place. A recent study by Credit Suisse found that the more diverse the board, the better the company performs. Diverse boards offer a better mix of leadership skills, access to a wider pool of talent, a better reflection of decision making customers/stakeholders, improved corporate governance and a higher risk aversion.

Executive search firms can play a direct role in aiding companies to diversify their boards. They must act as true consultancies and challenge leaders on the diversity of their boards. When executing board level searches, these consultants must ensure that diversity is addressed on candidate slates to include women as well as diversity in nationality and experience.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Talent Development

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

The complexities of today’s global oil and gas and energy markets have created a rapidly changing role for the Chief Executive Officer (CEO). The Macondo disaster, the economic crisis and the rise of unconventional reserves, to name a few, have created a vast array of regulatory framework and geopolitical uncertainties that now require much of the CEO’s focus.

Gone are the days when the CEO was focused solely on strategy. Many of today’s CEO roles require an extensive understanding of several disciplines from technology and finance to operations as well as a new set of leadership skills. They must have the networking savvy to engage with governments, policy-makers and other regulatory bodies as well as the ability to act as the public face of their company. The industry could potentially face a shortage of future CEOs and executive managers who have the experience and competencies to successfully navigate their companies through the challenges facing the oil and gas industry.

Chief Executives’ cognizance of this threat has added another task to their plates. There is now an added urgency to put more focus on leadership development, though there must be a sound strategy behind it. While companies need to develop their potential leaders quickly, they must also ensure they do not move these individuals into roles before they are ready and run the risk of failure within an often public facing role.

How should they be developed? Historically, leaders have been developed in one of two ways: functional or rotational. Many times, these leaders progress through their company in one functional discipline be it finance, operations or others. While this gives them a deep understanding of one aspect of the business, they may end up lacking knowledge of other departments, thus hindering their ability in a Chief Executive role. Rotational development also proposes challenges in that rotating through different functions within a company may not give individuals the depth of knowledge they need in each area. The key to overcoming these obstacles is to assess for potential early in employees’ careers and start exposing these future leaders to different geographies and disciplines early on so they develop a sound understanding of all business functions.

This practice is a key component to succession planning and may in fact be one of the most important steps in the process. Companies want to promote their own people and talent development gives them the platform to not only accelerate their employees into senior management and executive level roles, but to give them the proper training they need to succeed in them.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Mapping Out an Effective Succession Planning Strategy

By Jamie Ferguson, Vice President US and Latin America, Maxwell Drummond

As companies continue to focus their best efforts on talent management and development, it is important to revisit a key strategy for oil and gas companies’ success in the coming years: succession planning. As many research reports have indicated over the last year, many organizations do not place the emphasis on building this strategy it deserves, thus it becoming a heavily discussed topic. Several questions surround the topic, such as what companies can do to bring these plans to fruition both easily and effectively? How will succession plans differ when preparing for an executive or manager’s departure?

Developing a sound and effective succession planning strategy is not a task to be taken lightly, though a few key practices can go a long way when beginning to map out a strategy. In order for the process to be as effective and painless as possible, there must be buy-in from the Board level and Senior Management from the very beginning of this process. Executives must map out the future of their company and really understand what the company will need in a leader to navigate through the imminent challenges their company will face. There must also be high quality HR leadership to take charge of the planning and to see that these plans are being carried through and to work with the board and senior leadership to set measurable goals. In working with senior management to set goals, the board will gain support for succession planning and establish ownership for leadership development programs. In setting goals, the Board and Senior Management must keep it as simple as possible-measurable goals could include the ratio of internal hires vs. external hires for executive roles or the number of promotions from a company’s high potential pipeline. Too complex of performance criteria could deter those managing the process from executing.

Once these plans have been created at a high level, they can be applied differently to the different roles in need of a succession strategy. The transition from one CEO to the next is a critical moment for companies and puts the organization in a vulnerable state, so a well crafted and smoothly executed plan is essential to the board delivering on their governance responsibility to stakeholders. A plan for CEO succession should be developed and executed at least six months before the current CEO is ready to step down. In the case of an unexpected transition, there should be a pipeline of capable leadership already in place to take the reins if needed. This requires not only a succession plan, but a talent development plan for high potential employees as well. These high potentials should be identified several years before a likely CEO retirement-giving them the time to be trained and developed into C-level managers. This process does differ slightly from mid-senior level management. The timing and transition of this level of role is not as sensitive as C-level positions as they are not quite as visible to shareholders.

As little as a year ago, several research reports were released indicating that the majority of global companies did not have succession plan strategies in place, which is surprising as governance is one of the board of directors’ must crucial responsibilities. Companies are only at the beginning stages of developing succession plans, but we are indeed seeing a rise in positions that are being recruited as a direct result of succession plans being put into place.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 to focus on executive search in the energy sector. In 2007 he was promoted to General Manager in Aberdeen and in 2009 Jamie relocated to Houston as Vice President of Maxwell Drummond’s USA and Latin America business.

MaxwellDrummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.