Although the energy industry has been through multiple cycles and downturns, the unprecedented speed and acceleration of the recent drop in oil price has taken many by surprise. Many projects that have had significant investment – unconventionals in Canada and the US for example – are now clearly on the threshold of profitability. Onshore drilling in the US has been curtailed significantly. Many of the deep-water initiatives in the Gulf of Mexico, Brazil, Angola, and elsewhere are still moving ahead given the long-term cycle to production. This supports the overall view that the energy industry as a whole will recover; the question, of course, is when? With pressure on both assets and organizations, there is general consensus that this is the time to acquire – if cash is available. In the last downturn, those that were aggressive and took advantage of lower valuations came out of the downturn stronger than those who followed a hold-tight strategy. There is still activity within private equity, which also suggests that energy assets are seen as differentially attractive in the current economy.
The utility sector is also in a state of change, with consolidation expected in the US, led by cash-rich energy players such as E-On and RWE. Within alternative energy and cleantech, consolidation has already started with, for example, Bosch buying Ersol, and Siemens/GE buying small wind-energy companies. The large utilities are also still entering the market (E-On in Germany, for instance) while the regional customer markets are changing (Spain, France, Germany, the USA, for example) together with the regulatory environment. The Obama administration has so far continued to support investment in clean technology. Private equity has also been moving into alternative energy, but the principal investment hurdle of a perception of regulatory risk, together with falling oil prices, has affected the viability of those investments.
Faced with these changes, energy companies must prepare a new generation of top executives to lead in a world that grows more complex by the day.
The current global economic turbulence, including a falling demand for commodities and residential real estate and a tightening of the credit markets, is creating great uncertainty in the engineering and construction sector.
Both building construction and the residential market are currently weak and suffering severe reductions in volumes. The impact of the challenges involved in financing larger infrastructure projects is still being reduced by the existing back-log, as well as by state initiatives. There remains, however, a strong need for greater competitiveness and flexibility in adjusting to volatility in demand in a changing market.
Aspects of quality are increasingly important, in terms of reliable delivery on time and within budget, with appropriate functionality. Growing complexity and the need for customers to manage all aspects of risk are making it more difficult to focus on sustainability by adopting a life-cycle perspective on project costs and environmental impact.
The years ahead are likely to be characterized by a shake-out and restructuring of the market. Leaders will strengthen their positions by integrating businesses along the value chain or by further developing niche expertise.
What skills are needed now?
Even the best up-and-coming executives may be hard pressed to succeed in an arena that increasingly challenges top leaders to influence stakeholders over whom they hold no formal authority, forge productive partnerships, leverage the best emerging technologies, and navigate unprecedented risks. Compounding the challenge: the rising generation of experienced senior leaders is thin, because many energy companies scaled back hiring and executive development during the 1990s.
How can Egon Zehnder International support the energy industry?
The growing complexity of energy, coupled with the limited supply of qualified candidates, makes building the top-tier talent portfolio a strategic imperative for all energy CEOs. Egon Zehnder International is highly attuned to the concerns in the energy sector about the capability and availability of senior leadership. Our Energy Practice supports your organization with a rigorous, research-based strategy for building your executive talent portfolio.
Our experienced energy-sector consultants work with you to determine what competencies your executive successors must have, and to identify which competencies they currently lack, so you can take practical steps now to close those gaps. Competencies define your talent portfolio: they make it tangible and measurable.
Defining a competency model for your senior levels is especially important because the stakes are so high at the top. The next generation of top energy-sector leaders must excel in:
- Collaboration and influencing: excelling at relationships, displaying superior emotional intelligence.
- Strategic orientation: factoring diverse variables into decision-making, thinking many steps ahead.
- Change leadership: leading the company through changes of considerable magnitude.
- Developing organizational capability: quickly creating the major new organizational capabilities needed to deliver on new strategies.
Your company will also need high-performance executive teams. Egon Zehnder International has identified six core competencies that distinguish successful teams:
- Balance: incorporating diverse skills and strengths
- Alignment: sharing a sense of higher purpose
- Resilience: responding effectively and cohesively to stress
- Energy: showing ambition, taking initiatives and sustaining momentum
- Openness: engaging actively with the broader organization and the outside world
- Efficiency: optimizing resources, achieving results cost-effectively.
The vast majority of competency measurement models have focused on middle managers and salespeople. Many “executive competency” models are actually just variations of models intended for lower levels. Egon Zehnder International does not make that compromise. Our executive assessment methodology is keyed to competencies that apply validly to top executives, and can predict promotability five years ahead with 85 percent accuracy, while our competency-based leadership evaluations are demonstrated to increase key performance measures by 25 percent. We also provide executives with competency-based coaching to help rising leaders integrate into higher-level roles.
How we operate
Egon Zehnder International gives you global access to the best executive talent. Each year, Egon Zehnder International places nearly 2,000 executives around the world. Our entire firm operates as a single profit center, which both encourages and rewards collaboration. The Energy Practice works seamlessly with Egon Zehnder colleagues around the world to mobilize the resources, knowledge, and relationships needed to deliver your company extraordinary value.
To ensure the ongoing success of your energy enterprise, you will need to develop executive talent with the same forethought and diligence you already apply to shaping your company’s asset portfolio. After all, even companies with superior assets will underperform if their top executives are not fully prepared for new marketplace realities. Our Energy Practice works with you to objectively identify the ways every rising executive must develop to succeed in top posts and as a member of your top leadership team.
