The Leadership Challenge in the Energy Sector
Energy industry leaders know they operate in volatile, uncertain, complex, and ambiguous environments. However, what may be less apparent are the skills they need to succeed.
Given the complexity of the industry and market — with regulatory challenges, geopolitical pressures, and environmental issues — it can be difficult to know if organizations have the leadership talent needed today and if they’re effectively developing the energy industry leaders needed for tomorrow.
Amid debate over topics like regulation, sustainability, importation versus domestic production, and government incentive priorities, the energy sector faces significant and rapid change. When circumstances are stable, good management is key to success.
However, in challenging times, energy companies can’t afford to pour resources into generalized development, expecting that they’ll end up with employees who are well equipped to lead the business. Well-targeted development initiatives for energy industry leaders are essential for success. Organizations need good leadership to set new directions, align people with mission-critical imperatives, build a commitment to new vision and action, and develop talent.
Energy leaders and organizations also need to create career and development strategies to provide significant broad, cross-organizational experiences and learning. These findings are consistent across the fossil fuel and utilities sub-sectors.
Understanding the Challenges Facing Leaders in the Energy Sector
To help our energy industry clients better understand and focus their leadership development efforts, we analyzed leadership effectiveness data from about 11,200 energy industry leaders. These are the 3 key issues around leadership challenges in the energy sector:
1. Importance: What leadership competencies are most important for energy organizations?
Our research has identified 16 key leadership competencies and 5 “derailment factors” (warning signs that a leader’s career is in jeopardy).
All the competencies are important; however, some are more critical than others in various industries or organizations. Gaining clarity about what matters most within the energy sector allows organizations and individuals to focus and tailor their learning and development.
2. Effectiveness: How well do energy leaders demonstrate the leadership skills that are required?
Organizations (and individual leaders) need a clear picture of how leadership skills match up to organizational needs. This begins with identifying and understanding leadership strengths and weak spots, then determining how well individual strengths align with organizational priorities. Significant discrepancies between areas of strength and areas of need indicate leadership pain points.
3. Sub-sector variation: Are there differences between energy industry sub-sectors?
Recognizing that the energy sector is not uniform, we also examined the data by 2 distinct sub-sectors: fossil fuel organizations and utility companies.
Competency Benchmarks for Energy Industry Leaders
Using data from our Benchmarks® 360 assessments, leader evaluations rated the relative importance of key competencies for success in the energy industry and the effectiveness of their coworkers at executing each competency.
Here are some key findings from the study:
The top priority for leadership development in the energy sector is to improve the ability to lead employees.
This skill was ranked #1 in importance by both fossil fuel and utility organizations.
However, the ability to lead employees ranked very low on the effectiveness scale, revealing a significant limitation for energy organizations (#14 out of 16 items by the fossil fuels group and #15 by the utilities group). This large gap between importance and effectiveness suggests that investments are needed to close this competency gap.
Energy leaders show a skill gap in other key areas.
Notable weak spots include building and leading a team, confronting problem employees, building a broad functional orientation, and career management.
Findings suggest that training and development, succession planning, and individual and organizational development efforts might be best focused on these competencies, alongside efforts to improve the ability to lead employees.
Energy leaders have important strengths, too.
The good news is that energy industry leaders are highly effective in meeting business objectives and being resourceful — 2 high-priority skills. The study shows that energy leaders are also strong in areas that are not high priorities for energy organizations, including putting people at ease and recognizing and appreciating differences.
With this knowledge of leadership strengths, individuals and organizations can find ways to leverage them in new or more intentional ways. An accurate picture of strengths also helps to clarify where training and learning investments are not as important.
Sub-sectors within the energy sector show little variation.
Dividing this data into 2 sub-sector groups (fossil fuel and utilities), we discovered remarkable similarities between the groups. This is useful information as energy organizations look to recruit employees and collaborate across the sector.
When important competencies are found to be weak spots, targeted development initiatives can be put into place. Energy companies can move rapidly to strengthen the leadership capability of people in key roles, to create more focused leadership development strategies, and to build greater leadership capacity throughout the organization.
What Matters Most for Energy Industry Leaders? Clarifying Necessary Competencies
Many organizations and management experts develop competency models by which they evaluate individual leadership skills, plan development, and manage the talent pipeline. Identifying the most important competencies for an industry sector or an organization isn’t (or shouldn’t be) a haphazard process.
To gain an understanding of the competencies that energy organizations need most, we turned directly to the people who work in the sector.
Tens of thousands of mid- and senior-level managers participate in our leadership development programs and complete our Benchmarks 360 assessments, providing us with a vast database of information on the competencies required for effective leadership and the skill level of managers in each area. It’s from this database that we were able to analyze energy sector leadership needs.
The leadership skills and perspectives ranked most important for success in both energy groups were:
- Leading Employees
- Straightforwardness and Composure
Understanding the Individual Energy Industry Leader’s Effectiveness
In completing the Benchmarks assessment, respondents also rate an individual leader’s effectiveness at executing each of the competencies (both the leadership skills and the derailment factors).
The 3 skills and perspectives that were rated by observers as least effectively executed by leaders in the energy sector were:
- Leading Employees
- Confronting Problem Employees
- Career Management
The derailment factors that were identified as especially problematic for energy industry leaders were:
- Difficulty Building and Leading a Team
- Too Narrow Functional Orientation
Observers in both groups indicated that energy leaders were most effective in the following categories:
- Differences Matter
- Being a Quick Study
- Putting People at Ease
- Doing Whatever it Takes
From the derailment list, both groups rated Failure to Meet Business Objectives with the lowest score, suggesting that energy leaders are usually effective at meeting business objectives.
Solutions for Energy Industry Leaders
Efforts can (and should) be made at both the individual level and at the organization level to understand to improve and foster leadership development in these areas.
Strengthening the ability to lead employees and teams is the top priority for energy organizations looking to invest in talent development. In parallel, the research suggests, energy organizations should help their current and upcoming leadership pool to think strategically about developing the skills and perspectives needed to grow and succeed in the industry.
As the energy sector faces challenges and changes, how can it address these leadership priorities? How can the leadership needs of organizations best be developed as leaders operate in real-time in the context of regulatory, environmental, geopolitical, and global pressures?
This information can help senior management facilitate conversations about the organizational leadership capacity and to create new approaches to developing energy industry leaders. Using our research as a starting point, energy organizations have the opportunity to reassess their leadership strategies and place their talent development efforts where they’ll have the most impact on the future.
Ready to Take the Next Step?
Effectiveness is important for energy industry leaders and leaders in any sector. How do your leaders rate when it comes to leadership? Combine our Benchmarks® 360-degree assessments with customized leadership development to take your team’s leadership to the next level in your industry.