The Compensation and Motivation of Petroleum Engineers
Authors: Gallas Daniel O. 
Published: December 2007

The policies and practices companies adopt to obtain, retain, and effectively use petroleum engineers are identified in terms of salary administration programs, compensation plans, and employee incentives.

Introduction

The assets available to any company are frequently divided into three major categories - money, materials, and manpower. Petroleum engineers spend a large percentage of their professional time making the most of the first two. Employment and effective use of the third asset, manpower, is the primary concern not only of many company executives, but also of every individual petroleum engineer.

Industry's salary administration programs, compensation plans, and employee incentives directly reflect industry's policies and long-range plans regarding manpower. Long-range plans of companies always include consideration for manpower requirements. Here is a typical example of a manpower policy statement included in a major oil company's long-range planning program: planning program:Institute programs required to insure that no existing operation, growth area, or diversification program will be delayed or dropped because of the lack of qualified personnel. personnel. To accomplish this kind of policy, it is necessary to employ and motivate the number of petroleum engineers that operating managers feel are necessary to conduct their business. The purpose of this paper is to correlate the policies and practices that companies adopt to obtain, retain, and effectively use petroleum engineers with salary administration petroleum engineers with salary administration programs, compensation plans, and employee incentives. programs, compensation plans, and employee incentives. Obtaining Engineers

Salary Administration - Starting Salaries

To obtain petroleum engineers, companies respond to simple market supply and demand in setting starting salaries. Supply is reflected by college petroleum engineer enrollments, and demand pressures are petroleum engineer enrollments, and demand pressures are reflected in starting salaries. It does not take a great deal of logic to explain the continuous upward movement of starting salaries.

Fig. 1 shows the trend of total enrollment of petroleum engineers graduating over the last 12 years. petroleum engineers graduating over the last 12 years. It follows that the greatest inflation of starting salaries will occur when the supply of the desired skills is low and not equal to demand. When a company's need for petroleum engineers becomes critical enough, the company will decide to pay a competitive salary or accept the fact that operations will be delayed or averted for lack of manpower.

Fig. 2 shows the trend of increase in average starting salaries over the last 6 years. The rate of increase has reached a high of about 7 percent/year. As long as the supply of petroleum engineers continues to fall short of companies' demands, this rate of annual increase can be expected to continue.

Adjustment of Internal Salaries

Another salary administration fact is that rapid inflation of starting salaries will also cause rapid inflation of salaries paid for experienced personnel.

JPT

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