Since 2008, the oil and gas industry has flourished thanks to the innovation of unconventional technologies, creating an energy renaissance in North America characterized by robust economic growth and accompanied by global geopolitical implications. Today, however, with crude prices down more than 60% since mid-2014, the industry faces a downturn perhaps not seen since the oil glut of 1986, which decimated a generation of leadership and created a talent gap from which oil and gas companies are still recovering. As CEOs and senior executives face one of their greatest tests, many are invoking the advice attributed to Winston Churchill: “Never let a good crisis go to waste.”

Indeed, they should heed this advice. Just as the key decisions of men and women in leadership drove the recent oil and gas revolution, a new class of leadership will have to find opportunity in crisis. Oil markets rebalance over time as price collapses increase discretionary demand and reduce capital investment, curtailing production growth. While a rebound in commodity prices may be the industry’s ultimate panacea, the scope and quality of the recovery will depend, in large part, on the leaders responsible for stewarding assets, capital and people through the uncertainty.

On the heels of the oil collapse in late 2014, Heidrick & Struggles published The CEO Report, a comprehensive study of CEO leadership capabilities. The report outlines five that executives, especially energy executives, must harness to thrive in environments marked by constant change and disruption. Among these skills are: developing an “S3” understanding of change (the speed, scope and significance of change); harnessing ripple intelligence and the power of doubt; adapting authentically; and encouraging a continuous learning mind-set. We believe that oil and gas executives who understand—and apply—these skills will have the edge in an increasingly uncertain world.

Opportunity out of crisis

Naturally, oil and gas leaders are focusing their energies on surviving the current price collapse, but the historically cyclical nature of the industry and our research suggest that they should be thinking more broadly. Missed opportunities of previous downturns, such as underinvesting in future talent and not sustaining a more disciplined approach to exploration and production, require a leadership approach that strikes a balance between short-term demands and long-term investments.

In the midst of the precipitous decline in crude prices and stubbornly low natural gas prices, leaders are taking many of the expected steps. E&Ps are slashing capital expenditure budgets, restructuring debt, selling noncore assets and even issuing more equity to provide future flexibility. Oilfield service and equipment companies (historically more severely affected by downturns than are their customers) are curtailing budgets and also reducing staff—particularly contractors. Midstream companies are scaling back projects and focusing on driving operational efficiencies to enhance the performance, environmental integrity and safety of their pipelines, storage facilities and gathering systems.

Against a backdrop of constant change, executives are also reevaluating traditional approaches to strategic planning. Several CEOs in our study, for instance, suggested scrapping the three-to-five-year planning cycle in favor of repeating, 100-day exercises or supplementing their strategies with contingency plans that can be triggered quickly. As one CEO put it, “Trying to forecast the future has become an impossible task.” Likewise, instead of relying on a quick rebound in crude prices, many energy executives are looking to exploit the crisis and transform an industry that was perhaps overheated, making strategic decisions on assets, capital allocation and people that will deliver optimal performance and value regardless of commodity prices.

Most notably, U.S. shale oil producers are implementing innovative approaches and new technologies to shed costs, moves that will enable them to operate profitability in a world with crude prices of $40 to $60 per barrel. This effort raises the possibility that shale producers will develop low-cost methods of producing oil in areas where the Saudis and other Gulf countries have an historical advantage.

Even ahead of the downturn, some industry CEOs had focused on initiatives such as smarter capital efficiency, operational excellence, standardization of processes and new drilling and completion technologies, all of which reduce costs per well and help build performance-centric cultures. Moreover, as regulatory and stakeholder environments become trickier, leaders are investing in best-in-class systems around financials, safety and environmental stewardship, promoting transparency to ensure compliance. Such actions build greater trust with key stakeholders, reduce permitting time and enhance business performance.

Global management consulting firms have been arguing for years that large oil and gas companies have been leaving money on the table. A report by Bain estimated that better data analysis could help oil and gas companies boost production by 6% to 8%. Big data and analytics are commonplace in manufacturing, banking, telecommunications and airlines, but energy firms lag. A McKinsey & Co. study found that less than 1% of the information gathered from about 30,000 separate data points on rigs around the world was being made available to the people in the industry who make decisions, potentially missing massive savings on drilling and well costs.

Essential attributes

Yet, the opportunity to transform the industry remains still greater. The following leadership attributes will be essential to delivering performance across the business cycle.

The S3 of change. Our research found that executives today need to focus on not only the speed of change but also its scope and significance—that is, having an S3 understanding of change. The speed and severity of the downturn has certainly been alarming, but the response has perhaps been more impressive, with drilling rigs being laid down and budgets adjusted with rapid pace. Industry observers (and perhaps even the Saudis) have marveled at the speed at which oil and gas leaders have already responded to the crisis in these traditional ways.

Nonetheless, the seeds of a more resilient approach were planted by astute executives who had absorbed the lessons of previous cycles. Even before the collapse in crude oil prices, a new generation of leaders was redoubling the focus on operations and underlying fundamentals to be in a position to address the full implications of the changes that lay ahead.

Consider, for example, the CEOs of Apache Corp., Chesapeake Energy and BP U.S. Onshore, all petroleum engineer graduates (and, coincidentally, roommates) at the Colorado School of Mines. Each is a shrewd student of industry history, and they understood that success would be gauged by their skill as capital allocators. They have each driven significant change in their companies by recognizing that success would depend not on finding oil but on getting it out of the ground more efficiently.

In these ways, all three CEOs represent a distinct departure from the stereotypical swashbuckling oil and gas executive whose free spending and large bets on assets risked placing the business in a precarious position as (inevitably) the next downturn approached.

When Doug Lawler became CEO of Chesapeake in June 2013, he instilled a “return-centric” culture focused on capital efficiency and balance-sheet flexibility. Since taking over, he has reduced the company’s debt from $11 billion to $4 billion, sold assets to improve its balance sheet, significantly reduced costs per well and reduced drilling cycle time. From day one, he operated on the principle that focusing on improving financials even during flush times would pay dividends. A year later, his younger brother, Dave, was tapped by BP precisely because of his meticulous focus on operational excellence and expertise in how to operate unconventional shale assets as a low-cost producer. By championing a more disciplined approach to drilling and extraction, the younger Lawler, in previous roles, was able to reduce the cost to drill substantially.

Earlier this year, the third roommate, John Christmann, was promoted to CEO of Apache, largely as a result of his operational discipline and efficiency improvements in running the company’s North American business. Christmann, a successful “intrepreneur” in building Apache’s leading Permian position from the ground floor, led an initiative to apply leading-edge geoscience and process improvements, which should position the company to pursue market opportunities when commodity prices recover.

Anticipating the need to move quickly and focus on disciplined capital efficiency, these CEOs deploy an S3 understanding and skill set that help them respond in quick, measured ways while not losing track of the bigger picture. Their pursuit of operational excellence has improved the odds that their organizations can weather the downturn and take advantage when skies clear.

Ripple intelligence. One of the most important skills in a rapidly changing and uncertain environment is the ability to anticipate and judge how, when and why factors may interact to fundamentally disrupt the business—what our research called “ripple intelligence.” As one CEO put it, “If you haven’t got your antennae out … you’re going to struggle to see opportunities and threats which may blindside you.” This skill is particularly relevant for oil and gas leaders, who will need to develop the ability to discern and connect events, anticipate distant threats and detect promising opportunities.

When Carl Trowell was selected in May 2014 to lead London-based Ensco, one of the world’s largest deepwater drillers, many advised him to focus not on strategy but on getting to know the organization in his first 100 days as CEO (which was just six months before the momentous November 2014 OPEC meeting). However, the former Schlumberger executive, keenly aware of the broader macroeconomics and the overbuilt global contract drilling market, moved sound strategy to the top of his agenda. Trowell focused on building a more disciplined strategic planning process that included contingencies for the months ahead. His seasoned perspective and ripple intelligence helped him see the potential impact of multiple factors simultaneously and get ahead of the crisis, though not at the expense of continuing the company’s focus on operational excellence and customer service.

Similarly, ExxonMobil’s chief executive, Rex Tillerson, has positioned the company to weather the downturn even if prices sink to $40 per barrel. As the leader of an oil giant, Tillerson manages a massive portfolio of projects such as LNG and ultra-deepwater drilling developed to deliver value whether oil is $40 or $120 per barrel. By running arguably the most disciplined global enterprise in the world, he is able to use ripple intelligence to approach the crisis as a unique opportunity not just for growth but also for reform and continuous improvement.

In the same fashion, a U.S. shale producer’s chairman is using ripple intelligence to look well beyond the downturn to consider future market opportunities. After working with service companies to unbundle and slash well costs, he worries that once the market bounces back it may be difficult to sustain savings and capture their attention (and their equipment). He’s using ripple intelligence to investigate whether it is prudent for his production company to build its own service company as a cost center (as some peers have done) in order to provide more capacity and speed in what has essentially become a manufacturing business.

The power of doubt. For CEOs, expressing and harnessing doubt can become a powerful decision-making tool and critical skill. The CEO Report found that doubt is to forward-looking CEOs what nerves are to elite athletes: a source of focus and insight when harnessed constructively, but a threat to peak performance when not handled well. Doubt is a natural product of the oil and gas industry’s increasing complexity and pace of change. CEOs who don’t learn to manage their doubts can be plagued by paralysis, hubris, myopia or a nagging angst that causes them to labor over or revisit decisions.

Doubt can emanate from a variety of sources, including when executives must deal with a barrage of conflicting advice. An oil and gas CEO with one of the healthiest balance sheets among all large independents has carefully cultivated the power of doubt by inviting a range of voices to the table.

By routinely listening to a broader range of viewpoints, the company has created a more disciplined planning process to help its executives consider more timely and accretive opportunities down the road. This breadth of perspectives has been especially valuable in the face of entreaties by bankers and board members for acquisitions of assets and companies, and will help the company make prudent investment decisions in any phase of the business cycle.

Past downturns have been defined by the precipitous manner in which energy companies have conducted layoffs and pushed talent development down the list of priorities. Consequently, CEOs and energy executives now face increased pressure to cut staff dramatically and sacrifice investments in developing the next generation of leaders. One senior executive of a global oilfield service company has identified future technical competencies as a competitive differentiator when the market returns. Instead of responding reflexively to a demand for reductions, his doubts have created a healthy conversation around talent management and a more sustainable outcome for his company.

The value of doubt comes from the way executives adapt their management styles to accommodate other perspectives and consider their options. As one CEO in our study put it, “A [certain] level of professional doubt should be the quality of any good leader.”

Adapting authentically. Facing relentless pressure for change, oil and gas executives must invariably consider the ability to adapt as an essential skill. Yet, as our report showed, authentic leadership in times of uncertainty and change is also required. While a lot of leaders talk about ethics and doing the right thing, the downturn has forced some to make shortsighted decisions—for example, “slow-paying” their service companies—that run counter to the values they espouse, creating discontent among employees and creating flight risk. Integrity is a fundamental element of authenticity. Employees and other stakeholders become skeptical when they sense that leaders change behavior when addressing different audiences and business conditions. As such, it’s critical that executives maintain flexibility but always remain true to their personal sense of purpose and authenticity.

Oil and gas leaders are under massive pressure to adapt, but they must do so in an authentic way—modeling integrity, showing respect for others and building trust. They must move with speed to achieve operational efficiencies while resisting the tendency to cut corners and sacrifice essential values such as health, safety or environmental performance. Driving change while remaining true to their values creates genuine followership throughout the organization and fuels higher performance.

A key element of authenticity is consistent communication and visibility. Clearly defining a purpose and ensuring that decisions are aligned with it can be a powerful way to reduce doubt when tough decisions need to be made. As a CEO in our study confided, “If you have a sense of purpose that is true and genuine and exciting and authentic, the unknown is not an issue.”

One CEO, for example, has been holding regular town-hall meetings to solicit feedback, giving employees access to him and making them feel that their voices are being heard even as he provides candid answers to their questions. Likewise, he has been deliberate in communicating with investors. All of these efforts build support for changes that may be necessary down the road without sacrificing his authenticity as a leader.

CEOs viewed authenticity as an essential attribute both outside and inside the organization. On the outside, it is a means of generating trust among a wider group of stakeholders, not just shareholders. On the inside, it is a touchstone of productive collaboration. Authenticity is the fuel that drives trust.

A continuous learning mind-set. Perhaps the most compelling finding in our study of CEOs was that success today as a senior executive or CEO depends on continual growth in the role more than the preparation beforehand. Yet this continuous learning mind-set must be not only developed by the CEO but also instilled and championed throughout the organization to nurture a talent pipeline.

Continual investment in training can build a sustainable business, create a high-performance culture and increase retention not only by making employees smarter but by making them feel more valued as well.

Take, for example, Noble Energy, which started investing in executive assessment and coaching plans years ahead of the recent downturn. Led by Noble’s former chairman and CEO, Chuck Davidson, a 40-plus-year industry veteran who has seen his share of downturns, the company created sustained development, coaching and succession plans for every major business function. These efforts helped equip the company with the leadership and bench strength to manage in a world of complexity and uncertainty. The commitment of Davidson’s successor, Dave Stover, to continuing this focus has helped maintain morale at the company—always helpful in a downturn.

Similarly, Concho Resources, one of the fastest-growing U.S. oil and gas companies during the energy renaissance, has also made a significant investment in the development of its executives over the past several years. With all senior executives participating in assessments and coaching, the company’s chairman and CEO, Tim Leach, underwent the same workshops for his own continuous learning. This not only helps prepare Leach for the challenges ahead but also sends a clear message to the company that he is not above the kind of assessment and continuous learning that he espouses for his executives.

It is no accident that the energy companies most likely to manage well in the midst of the downturn and thrive once prices recover are precisely those that have invested in leadership development. Global energy companies such as Chevron, ExxonMobil, Halliburton, National Oilwell Varco and Schlumberger have been well-known for sophisticated talent management programs for decades, utilizing rotational talent programs that underscore the value of experiential development.

Regardless of the business cycle, these executives have remained true to their commitment to develop the next generation of leaders, thereby creating sustainability and long-term value. As one CEO put it in our report, “Leaders should believe that change is the oxygen of growth and creativity.”

Although we have discussed each of the five essential skills individually, the reality is that they are closely connected—sometimes interwoven—and mutually reinforcing. For example, it’s hard to imagine an oil and gas executive who excels at having an S3 understanding of change without also exhibiting signs of ripple intelligence. Similarly, the ability to harness the power of doubt and a continuous learning mind-set are skills that contribute to an executive’s awareness and capacity to adapt in an authentic manner. To get the full value from these skills, leaders should seek to master all of them.

Equipped with the requisite skills, energy executives will be in a position to harness this crisis to enhance business performance, long-term sustainability, leadership development and employee morale. They may even be able to usher in a global energy reformation.

Les T. Csorba manages the Houston office of Heidrick & Struggles and is a member of the firm’s Industrial and CEO and Board of Directors practices. He is the author of Trust: The One Thing That Makes or Breaks a Leader. The full CEO report is at heidrick.com.