The Scope and Size of Contractual Workforce in the Industry
Finding and managing the right mix of talent can be challenging for organizations in any industry. Yet few face greater risks associated with workforce management than the oil and gas sector. New and evolving laws, Health, Safety and Environmental (HSE) regulations, labour shortages and heavy financial penalties for compliance violations can cause enormous burdens. Unfortunately these often lead to increased costs, decreased productivity and a damaged reputation.
Oil and gas companies across the globe are struggling with procuring skilled workers, such as engineers, geologists, subsea installation engineers, field safety advisors, etc., and semiskilled and contractors, such as maintenance crews for carrying out planned shutdowns, maintenance etc. to meet their employment needs. A 2012 report from Economist Intelligence Unit cites that the skills shortage is becoming more acute and was ranked by senior oil and gas executives as the second most important barrier to growth.
Frequent turnover, project changes, planned and un-planned shutdowns and fluctuating market conditions can lead to disorganization with current workers and difficulties onboarding new ones. Lack of visibility within the workforce often masks additional problems such as improper certification and licensing errors, inaccurate labour rates, non-productive downtime or, just the opposite, excessive overtime. A 2013 report from Accenture suggests that contingent labor perhaps 30 percent to 50 percent of a typical oil and gas company’s entire workforce – may be under-managed, under-utilized and under-optimized.
The Challenges in Managing Contractual Workforce
Total workforce should be looked at in two dimensions: The first segment is of those direct workers that have a dedicated payroll system or an HRIS to track and manage them. For the most part, organizations already have that problem solved.
The second segment of workers is external workers. Managing them is the challenge. Let’s dig into the various types of contract workers. We have contract workers, outsourced workers, Statement of Work, or SOW, engagements and Independent Contractors. From a hiring manager’s perspective there are a lot of steps involved in engaging an external worker or service: requesting a resource, to onboarding a worker, to tracking them, to reporting on them.
Now let’s take a look at the size of this potential problem for Oil and Gas customers. From a workforce perspective, commonly the external workers represents between 30% and 50% of the total direct workforce. And from a finance and procurement perspective, the external workforce can represent between 1% and 5% percent of revenue.
Quality and Control
Most of the Oil and Gas organizations typically face challenge around ensuring compliance and performance monitoring of various contractors, who provide
manpower services across their locations. Also, once recruited, the process of on-boarding contractors typically involves multiple activities that are required to be carried out before the workers are on-boarded.
- Lack of contractor performance tracking
- On boarding and off boarding are inconsistent
- Compliance not guaranteed
Headcount and Budget
Contractor workforce represents a significant cost for Oil and Gas companies. Hence it is important to know – Who are the contractor workforce employees, what are they doing, where are they location and how much are they being paid. Bringing in visibility is key to manage them and also optimize the cost associated with it. Some of the challenges being faced by Oil and Gas companies are:
- Lack of visibility to contractor headcount and location
- No clear budget reporting and management
- Limited insight to rates paid versus the market
Process and Efficiency
It is imperative that contractor workforce programs are consistently evaluated for successes and to identify areas that need attention. Yet when a large program relies on disparate systems, it becomes impossible to achieve the visibility necessary to make adjustments. Some of the challenges faced are:
- Time to fill is often very long and impacts deliverables for projects
- Many sub processes exist resulting in large scale inefficiency
- Internal staff is stretched and challenged to meet timelines
- Workforce Planning and Analytics
- No insight on business impact
- Inability to decide due to lack of information
- Limited future driven workforce planning
The Answer – SAP Fieldglass Vendor Management System
SAP Fieldglass Vendor Management System is a cloud based solution to take care of all requirements of temporary workers in an organization. It helps manage all categories of non-payroll related worker spend. It supports the complete process of hiring temporary workers – from initial discovery and qualification through performance management and complex invoicing and payment. It supports the following categories of external
- Contingent workers
- Statement of Work (SOW) projects and services
- Independent contractors
- Specialized talent pools
Being a cloud solution, it is easy to deploy and also has a reduced total cost of ownership. Some of the key solution functionalities include:
- Search, identify, track and manage contractor workers across any program type including managed in-house, or manage through a
third party firm
- Streamline and automate essential processes – vendor selection, on/off-boarding, time reporting, and invoicing
- Full workforce interaction audit trail
- One comprehensive platform for recruiting all workers in your network including retirees and interns
- One process for all requests for services and Purchase Orders
- Reporting and analysis tied back to key criteria
- Document management and knowledge repository
- Centralised portal to manage supplier profiles
Benefits of SAP Fieldglass Vendor Management System
SAP Fieldglass software helps navigate the evolving landscape of contingent workforce management. Oil and Gas companies utilize SAP Fieldglass globally to source contingent workers for a wide range of skill and expertise levels. This results in an optimized managed process leading to improved cycle times. In addition the administration costs for this process are reduced and staff has more time to focus on priorities. SAP Fieldglass VMS brings in benefits across the following areas