The legendary Jack Welch liked to give General Electric’s promising young leaders “popcorn stands” – relatively small profit and loss (P&L) units to run on their own. His logic was simple: Provide talented but untested executives the incomparable experience of being personally responsible for how a business performs, but keep the scale small enough to make the risks tolerable. Executives such as Jeff Immelt, GE’s current CEO, ran P&L units while still in their twenties. The result? Early in their careers, GE’s rising stars developed the breadth of leadership competencies required to lead an entire business, which accelerated their path toward becoming well-rounded senior leaders.

Right now there is compelling reason and opportunity for oil and gas companies to provide “popcorn stands” to their own rising stars.

See The Need

The oil and gas sector is more dynamic today than it has been for decades, especially in North America, where the industry is a prime driver of job creation and the economy. With nearly $5.1 trillion in capital expenditures and three million plus jobs to be added in the United States alone over the next 20 years, the industry will continue to rapidly expand. To sustain such dynamic growth, the industry will need its young executives to step up into broader, more complex leadership roles sooner rather than later.

Several challenges stand in the way. In demographic terms, energy’s rising class of leaders is quite thin. Years of weak energy prices and reduced enrollment in STEM (science, technology, engineering and math) disciplines drove talent into other industries. Following a spike in oil prices and the extraordinary growth of the oil and gas industry in the past several years, the demand for talent and leadership grew immensely. The Society of Petroleum Engineers estimates that up to 50% of skilled workers in the industry could retire within the next few years. With a continued shortage of talent and the incoming wave of retirement, the industry will face many challenges in finding and developing the next generation of leaders. At the same time, oil and gas relies heavily on experts who work within functions, ensuring that specialized focus and expertise deliver consistency and excellence. While this approach delivers sustained performance and minimizes risk, working primarily within functional silos makes it harder for rising leaders to gain the broader and more strategic perspective they will later need to oversee entire business units.

In sum, as energy continues to leverage the proven advantages of functional specialization, it must also address two urgent questions:

  • Who can truly drive an entire asset or organization, versus merely filling narrow leadership roles within it?
  • How do you ensure your brightest talent has the breadth of experience needed to understand and lead all aspects of the complex energy value chain, from technical to operational to commercial to political?

Assess Leadership Potential

To reliably answer the first question, organizations need to systematically assess leadership potential, rather than looking only at past performance. Fortunately, we have seen great advances in the science of identifying who has what it takes to succeed in a senior, overarching leadership role. Pioneering psychologist David C. McClelland published research in 1998 showing that competency-based assessment, done right, can predict executives’ performance two years ahead with 80% accuracy. Today, it is possible to assess with better precision whether high-potentials possess the latent leadership strengths needed to perform in roles well beyond the level where they currently work.

When assessing energy executives’ leadership potential, we focus on four fundamentals: curiosity, insight, engagement, and determination.

Assessing potential helps companies determine which rising stars who currently excel within a specific function will best deal with the increased complexity, ambiguity and unforeseen circumstances that come with more senior roles; who will remain resilient in the face of setbacks; and who can effectively engage multiple functions, technologies and expertise to deliver a high-performing asset.

Accelerate Executive Development

The current proliferation of smaller unconventional plays provides the industry a great opportunity to take a page from Jack Welch’s book: Use “popcorn stands” to help high potential leaders gain broader perspective much earlier in their careers.

While many unconventional plays are still complex in operational and technical means, most carry lower risks from both the capital and safety perspectives. By putting its rising stars in charge of these lower risk assets, oil and gas can give its younger executives early exposure to managing the full cross section of the value chain, and so develop broader, more senior leadership capability earlier on.

Twenty years ago, few envisioned oil and gas becoming as dynamic and diverse as it is today. This renewed vibrancy is a tribute to the industry’s relentless drive and remarkable powers of innovation – particularly its ability to apply proven technologies in new ways. That, in essence, is what the industry must do now to accelerate the development of its next generation senior leaders. The two-pronged approach advocated in this article – assess rising leaders’ potential to perform in senior roles, using proven potential assessment methodology, then applying a model to let them run relatively small assets early in their careers – will help us develop more of our high potential leaders, much faster.

Carol SingletonSlade is a Partner and Head of the Global Energy and Cleantech practice with Egon Zehnder, one of the largest retained executive search firms in the world. She is a trusted advisor to global energy organizations at the board and C-level, providing counsel in CEO succession and board effectiveness and working as a strategic partner to fill critical technical and operational leadership roles.

Avery Marcus is a Senior Researcher and the Global Knowledge Manager of the Energy and Cleantech practice with Egon Zehnder. He supports the global practice, building knowledge and capabilities within the energy space and supports key client activities across the segment.

Do you know a young professional in E&P who is worthy of recognition? Nominate him or her for Oil and Gas Investor's second 20 Under 40 in E&P Companies. Click here to submit a nomination online, or send your submission to Associate Editor Caroline Evans at cevans@hartenergy.com. The deadline is February 1.