Effective Human Resource Management Under Restraint
Authors: Cahoon A.R. , Rowney J.I.A. 
Published: March 2010

Background

Human resource practices in the petroleum industry of Canada have been forced to change because of the recessionary environment imposed on it. Prior to 1982, industry had luxuriated in unreal growth. The negative, inexorable consequences were documented in a previous article in the Journal entitled: The Industry vs Its People (Cahoon and Rowney, 1982). Since 1982, resources of petroleum companies have on the whole, been declining. This slump had been triggered by factors which are all too familiar: National Energy Policy, higher interest rates, cancellation of mega projects and defaults on loans with "restructuring of debts".

But three new ominous features have emerged which may plague the oil patch in an even more severe manner:The seeming inability of Ottawa and the producing provinces to extricate themselves from the pricing agreements of 1981 and the embedded PORT, PTP and the NEP.The difficulty in exporting natural gas to the U.S.Weakening world oil prices. The expansionist policies and practices of the oil patch based on unattainable expectations, were transformed overnight into ones of restraint, retrenchment, reduction and ultimately survival (only for some).

The Realities of Managing Under Restraint

Organizations facing these realities had to choose from various non-mutually exclusive restraint management alternatives. Initially, they could ignore the situation, do nothing, define the crisis as "only temporary", and make moderate reductions in expenditures. Alternatively, they could make short-term, across-the-board expenditure cuts; so as to increase revenue from existing sources. For example, approximately 50% of the energy companies in Calgary imposed comprehensive measures, as an interim means of coping with restraint following the 1982 crises (Evans, 1984). These included wage and salary freezes and/or reductions; cuts in "non-essential" staff programs (e.g. reduced training budgets, educational support cuts, decreased travelling and expense accounts).

Ironically, improvement targets were set by many companies in an attempt to step up employee and organizationalproductivity. Technological innovations were introduced for the same purpose.Other measures included increasing the umber of hours worked per week, eliminating overtime, wiping out or reducing "Golden Fridays".

Companies recognized that the crisis was likely to persist for a longer period (more than one year). As a consequence, asting blame for causes of the crisis became a common conversational agenda. Ad-hoc, invisible expenditure reductions (i.e. elimination of the training and development budget, elimination or drastic reductions in capital maintenance projects, and reductions in depreciation funding) became commonplace.

Organizations were forced to respond to the realities of a retrenchment environment by stretching resources. Essentially the strategy they pursued was one of "decrementalism", i.e. making short-term adjustments in their operational management to yield some cost savings without a corresponding loss of visible operating effectiveness.

Across-the-board reductions continued, plus cuts in specific programs: employee layoffs, early retirement packages, a general reduction in non-essential staff services. Revenue forecasting and expenditure monitoring were implemented and program and policy evaluations were tightened-up more seriously and more objectively. Morale plummetted, as the rumour mill picked up steam, "hit lists" of possible staff and program erminations circulated and employee tension increased.