Oil and gas companies facing a restruc¬turing or bankruptcy have a difficult road ahead. Developing a new stra¬tegic direction in a dramatically changed market requires leadership teams to make an array of critical decisions under intense pressure.

In the midst of such change, it is easy to overlook one of the basic building blocks in any company’s success—its talent.

During a major transforma¬tion, it is more important than ever to remember that even the most brilliant strategy won’t succeed without the proper people with the right experience and skills to carry it forward.

Creating a plan to identify and retain the pivotal employees who make your busi¬ness run—and who will drive success in the future—is among the most noteworthy deci¬sions you can make on the road to a restruc¬turing or bankruptcy. But it can be especially difficult during a period of distress, when cash is tight and cost-cutting is imperative.

There is considerable stress on companies facing change, and employees are often fear¬ful of the ramifications.

Of course, the biggest question is, Will I have a job? But that is just the start. Employ¬ees’ concerns run the gamut. Will I be required to move? Will my job change? Who will my supervisor be? How will my favorite cowork¬ers be impacted? And, also significantly: What is the long-term viability of the company, and how will that affect my future?

These types of fears often lead employees at distressed companies to look for work else¬where. The fact that the industry as a whole confronts similar market challenges isn’t always a deterrent to turnover; employees who work in staff positions, such as accounting, legal or human resources, may look to change industries to escape energy’s up-and-down cycles. And highly skilled technical employees may decide a troubled company limits their growth and seek opportunities with a stronger competitor. Or they may even be recruited away, since healthy organizations use down¬turns to bolster their talent bench.

Think about the implications of losing a handful of major performers during a bank¬ruptcy, for example. Replacing those people could be close to impossible, given the uncer¬tain path that the company faces. And when one or two principal people leave, it often cre¬ates a panic situation where employees who hadn’t considered moving on suddenly feel as if they will be left behind on a sinking ship.

Keeping top performers does more than just confirm you have the talent you need to rebuild. It aids in creating a feeling of “busi¬ness as usual,” since leaders are staying put, and reduces employees’ desire to leave.

A new view

Companies seeking to stop change-related turnover often utilize retention bonuses. These are especially common during merg¬ers and acquisitions. But they can also play a fundamental role during a restruc¬turing or bankruptcy and can confirm that your best employees stay on board to drive the new strategy.

The original retention bonus consisted of a cash outlay, scaled to position and responsibil¬ity, which would be paid off if the employee remained with the company through a specific time period.

However, the current financial situation troubling many oil and gas companies can make cash rewards difficult. Instead, compa¬nies must be creative in their retention efforts and identify meaningful, cost-effective mea¬sures that can make a difference in an employ¬ee’s decision to stay or leave.

Smart companies are using a combination of financial and nonfinancial rewards—includ¬ing noncash perks personalized for individual employees—to communicate to leaders and top performers that they are needed and will
play a vital role in helping the company thrive in the years ahead.

Companies are also recognizing that increased communication, through both for¬mal and informal channels, can considerably improve employee engagement and make it easier to hold on to integral staff members. In combination with a quality retention pro¬gram, improved employee communication can strengthen employees’ emotional ties to the company. It can also warrant that the right people understand the company’s future path and remain committed to its success.

Who is important?

Most oil and gas companies today have processes and systems in place to identify crucial employees and those with high-po¬tential futures. So, determining who should be included in a retention program shouldn’t be an issue for the typical human resources function.

The process gets trickier, however, if the company’s restructuring or bankruptcy means a different focus or the sale of certain assets. One example of this would be a company that decides to limit future exploration activ¬ities to focus on production. This change in strategy shifts the core competencies required for success and may necessitate a change in who is considered critical to the company’s success. Employees with specific geographic focus, asset knowledge or job skills may not be as valuable to the new company, and other employees may become more critical.

Thus, the alignment of the retention pro¬gram with senior management’s planned stra¬tegic approach is an essential element in the overall success of the effort.

Rewards for retention

One common financial tool is the use of company stock or stock options to demon¬strate that the executive or employee is val¬ued. Offering a tiered reward of stock or options—with payouts at the completion of a bankruptcy, and again at three or five years, for example—could provide employees with a significant financial incentive to stay, as well as create additional motivation to aid in the company’s success.

The effectiveness of this approach depends on the individual; while many employees appreciate a long-term reward of this nature, others may believe it is too removed from their day-to-day issues to be consequential, especially if the full payout is years away. Front-loading the rewards, with the majority of the bonus paid at completion of a restruc¬turing or bankruptcy, may alleviate part of this problem.

In addition to structured financial rewards, nonfinancial programs can also assist in improving engagement and retention and can be tailored to meet the specific needs of indi¬vidual employees. These include:

Schedule flexibility. Helping employees achieve a better work-life balance can be an especially successful retention strategy.

The most popular options being imple¬mented by oil and gas companies for indis¬pensable employees include compressed workweeks, the addition of new part-time roles or job sharing, telecommuting and unpaid furloughs that allow employees to retain their medical benefits. Creative scheduling can make an appreciable dif¬ference for employees who are struggling with responsibilities outside of work, such as caring for children or elderly parents. This type of flexibility—especially during a time of reduced activity—can be crucial in retaining high-performing employees who might otherwise step away from work due to other commitments.

Internal mobility. Giving valuable employ¬ees stretch roles or project leadership positions to gain skills and broaden their experience is a win-win: It boosts morale and sends a clear signal the individual is imperative to the company’s future. At the same time, internal mobility gives the company’s paramount employees insight into different functions and strengthens their overall understanding of the organiza¬tion. However, companies must be careful to confirm these opportunities are seen as enhancements to the employee’s career and not additional work without proper com¬pensation.

Special access. Top performers appreci¬ate having access to special training or one-of-a-kind programs that will extend their knowledge base and enable them to network with other talented individu¬als across the company. For example, a monthly strategy discussion session with select senior executives—available by invi¬tation only—can be a powerful reward for high-performing employees.

Nonmonetary benefits. Inexpensive bene¬fits such as financial planning services or wellness classes can also benefit engage¬ment and retention, especially if they are tied to the company’s core values, i.e., leading a healthy lifestyle as a component of safety.

Employees’ different needs

We find age is one of the biggest differenti¬ators in how employees view retention efforts.

In general, younger employees have a greater appreciation for nonmonetary rewards such as enhanced training and development; sched¬ule flexibility for personal travel, hobbies and volunteer work; and opportunities for foreign
assignments. Younger workers also enjoy unique workspaces that support collaboration and interaction with peers, along with the latest technology and tools.

Not surprisingly, older workers respond more to long-term benefits, such as enhanced 401(k) options or stock or stock option rewards.

To serve key employees in all age groups, smart companies are designing customized retention programs to allow individuals to pri¬oritize the rewards most meaningful to them.

Executing on this vision can be difficult; selecting the right mix of benefits and expe¬riences takes a good deal of insight into employee needs as well as the willingness to accept some trial and error throughout the pro¬cess. Focus groups and surveys, along with one-on-one discussions with primary employees, can help companies create retention programs that have the greatest impact.

Removing the stigma

Are your company’s engagement and reten¬tion efforts adequate to safeguard your best performers? Consider the following questions:

Do you know what engages your top per¬formers? Is it job opportunities? Compen¬sation? Benefits? Foreign assignments? Work-life flexibility?
• Have you completed an analysis of which existing rewards programs are most highly utilized and valued by employees?
• Are you open to improving flexible work options or adding new scheduling arrange¬ments for key individuals in certain jobs?
• Have you increased your transparency and improved communication with your employees?

One of the most substantial benefits of a strong, customized retention program is that it can remove the stigma from a bankruptcy or restructuring and give employees a material sign that the company will survive and will remain a good place to work.

When your best employees believe in the company and recognize there is a path forward to a successful future, they are more likely to stay—and more likely to contribute to the turnaround.

Rachel Everaard, executive director, Ernst & Young LLP, is based in Houston in the firm’s People Advisory Services Practice. The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.