Cutting Costs in a Downturn
It’s very easy to have a knee-jerk reaction to a low (ish – let’s be honest, $50 a barrel is what we were delighted by for a long time) – oil price, cutting exploration, decimating staff and reducing external consultancy support. But there are areas that shouldn’t be skimped on – in a cyclical industry we need to have the personnel, knowhow and pipeline business for when the price starts to go up again –as most analysts agree it will.
So what are the vital services we need to keep on hand for when that happens? Which costs can we cut in a downturn?
It is perfectly right and proper that companies boosting their own personnel with consultants should be loyal to their employees above external support, though that depends to a certain extent on the business model. Loyal employers tend to have loyal employees, and in my own experience, a willingness to reduce overtime and even contracted hours in order to support the long-term viability of a business is possible if there is a level of openness about the economic state of the organisation. For me, I would rather keep as many staff as possible on reduced hours (as far as is appropriate) in order to retain that loyalty and expertise, than have to pick candidates for redundancy. They are the personnel that will be there to rejoice in the upturn, having felt supported in the downturn.
For a consultancy, a certain amount of the knowhow is inherent in the personnel, but we are also an industry that is rich in organisational bodies that seek to further collaboration, encourage individuals and allow us to see a future rich with opportunity. Many of these bodies rely on financial support through membership, sponsorship and so on, and I would urge you to consider continuing that support, in order to have these vital organisations available to us going forward. It is they that are the evangelists of what we do – for Data Management, Standards, Education, Training and Networking as well as a rich source of information on all things oil and gas.
Belt-tightening exercises should be done with a view to loosening them again in the future. For any company to be sustainable through a downturn and into an upward cycle, we need to have a source of pipeline business to expand into. At the risk of turning this into a sales blurb, the one thing you should really focus on in a challenging economy is marketing and business development, keeping your company name at the forefront of those companies who are going to be in the market for your product or service as soon as they have the spending power. Now really is the time to think about where you want your company to be in say five years’ time, and how you are going to not only achieve that, but make sure you have a sustainable plan to get you through these challenging times.