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1、The State of Energy Organizations 2024Energy organizations in transition 3Operating model 8New energy businesses:The independence versus integration dilemma 8Five features of operational excellence in oil and gas organizations 18The productivity prize in oil and gas:Lessons from top performers 22Tal

2、ent 27Talent squeeze:Planning for the energy sectors talent transition27Employee retention trends and challenges in the oil and gas industry 36Leadership 43Powering up new leadership for a changing energy environment 43Transforming an oil and gas equipment leader:A case study 54M&A 59 Success in the

3、 M&A rebound:Riding the coming wave of upstream deals 59 Beyond G&A:Maximizing synergy from oil and gas mergers 65The importance of cultural integration in M&A:The path to success 73Contents2The State of Energy Organizations 2024Energy organizations in transitionOrganizations in the energy sector ar

4、e evolving in response to the energy quadrilemma.With critical choices and challenges on the horizon,making proactive moves now could determine future success.This article is a collaborative effort by Robert Belanger,Ignacio Fantaguzzi,Christopher Handscomb,Jesper Ludolph,and Phil Quadri,representin

5、g views from McKinseys Global Energy&Materials and People&Organizational Performance Practices.3The State of Energy Organizations 2024The coming decade will be a defining moment for the global energy system.Institutional and public interest is at an all-time high,driven by the ever-increasing need f

6、or affordable,reliable,secure,and competitive energy.Companies must navigate the task of maintaining a strong,high-return“traditional”core,while building businesses in the fast-moving,high-growth space of renewables,low-carbon solutions,power,and retail.This challenge demands bold action and innovat

7、ive solutions,as we work toward a sustainable energy future that benefits our planet and our economies.For the world,solving this energy quadrilemma will require significant investment,technological advancements,and a favorable operating environment.However,at the heart of this journey are energy or

8、ganizations and their leaders.Being fast,agile,and efficient will be essential as competition for talent intensifies,integration of mergers and acquisitions becomes crucial for value creation,and generative AI(gen AI)changes the workplace as we know it.In this report,we build on our flagship cross-i

9、ndustry State of Organizations research and take a closer look at the State of Energy Organizations.We identify and explore four key themes for energy companies in the coming year:operating models,leadership,talent,and mergers and acquisitions,with reflective questions for organizations to consider

10、as they navigate through 2024 and beyond.Choices to define the next decade Over the past 18 months we have seen several energy companies announce strategic adjustments that reemphasize the importance of their traditional core businesses.This reflects the growing importance of energy reliability and

11、security,as well as slower than expected cash flows from new energy businesses.Against this backdrop,companies are recognizing that now is the time to maximize value creation in the traditional business,grow cash flows,and take advantage of the high returns.However,as this momentum grows,an old ques

12、tion has resurfaced:business unit-or function-first for the traditional core business?What primary axis should be used for the traditional core?The choice between business unit(BU)whether asset,regional,or value chainor function-centric as the primary organizational axis has been a hot topic for sev

13、eral decades,with many companies switching between these models over time.The choice of model essentially reflects a fundamental belief about how a company creates distinctive value:on the one hand,a functional model enables you to optimize across portfolios,and drive global scale,standardization,an

14、d functional excellence.On the other,anchoring ownership in the BU incentivizes local optimization,aiming to capture value in each and every facility,with the potential to move more quickly and unlock significant growth.Over the past year,we have seen an increasing number of companies begin to revis

15、it this choice and we expect this to be a growing theme through 2024.To contribute to this debate,we reviewed over 20 years of McKinsey proprietary performance datasets to draw insights linking asset performance with operating model choices.We found,on average,that BU or asset-centric models have th

16、e edge in terms of operational performance,but that they can compromise on consistency and produce a wider range of outcomes on both operating cost and production efficiency.Irrespective of the choice made,companies can also go back to basics by focusing on some fundamental step changes across their

17、 operating model:radical simplification,value-backed technology deployment,1 The state of organizations 2023:Ten shifts transforming organizations,McKinsey,April 26,2023.4The State of Energy Organizations 2024delivery through agile teaming,and other efforts to close the productivity gap.Additionally

18、,we are observing a trend of companies going even deeper into their operating modelreimagining both technical and nontechnical support models.Naturally,gen AI and digital will play a leading role,however,many companies are rethinking their geographic footprint,tapping into large engineering talent m

19、arkets,and revisiting their operating models for technology development and deployment to ride the next technology S-curve.Key questions to consider Do you have the right tension between a BU-and function-centric organization to deliver your ambitions?What are the big unlocks in 2024 that would driv

20、e performance?How could changes to your geographic footprint or technology operating model enable stronger performance?Should new energy businesses be integrated in or independent from the core?Most energy players have ambitions to grow new energy businesses alongside enjoying continued success in t

21、heir existing core.These twin objectives require winning simultaneously in very different markets,with different drivers of success and,therefore,different operating model needs.As a result,we see energy companies around the world grappling with profound questions over how to set up their organizati

22、on to win in both worlds.First,the bad news.The data shows that most corporate new business builds are not a great success.Just 16 percent of all new business builds in Fortune 100 companies since 2000 have turned out to be blockbuster successes;the remainder were partial successes at best.Overcomin

23、g these odds will not be easy and the fundamental question is how to harness the advantages of being an incumbent while providing the freedom to deliver with the agility of a start-up.The answer is not the same for all;however,purposeful decisions are needed sooner rather than later to deliver on th

24、e growth promised to investors.Key questions to consider At the strategic level(including capital allocation)how autonomous should your new energy business be?What are the right key success factors that will enable your new energy business to grow?What are the right architecture,corporate functions,

25、technical support,midstream gas or trading decisions that will set your new energy business up for success?What are the talent and leadership needs for a new era?The focus over recent years has been to secure specialist engineering,digital,and commercial talent to develop new businesses and capabili

26、ties.This challenge remains alive,and competition for talent continues to be fierce.However,a new challenge of equal proportion is bubbling under the surface:the need to retain and refresh the skill base to sustain the existing core business.This challenge will grow in prominence against a backdrop

27、of significant retirements,with 400,000 oil and gas employees in the United States approaching retirement,and the increasingly negative perception of the traditional energy sector among younger workers in some parts of the world.2 Matt Banholzer,Markus Berger-de Len,Subu Narayanan,and Mark Patel,“Ho

28、w industrial incumbents can create new businesses,”McKinsey,November 13,2019.3“Labor force statistics from the current population survey,”U.S.Bureau of Labor Statistics,2022.5The State of Energy Organizations 2024The good news for employers in the new energy space is that knowledge,expertise,and com

29、petencies gained in more traditional energy businesses are relatively easily transferred.However,this transferability further compounds the challenges in retaining and attracting talent to the historic core.To enhance their attractiveness to the talent market,many firms are reevaluating their employ

30、ee value proposition(EVP),focusing on creating broader,or faster career opportunities,reshaping the corporate culture,and changing the perceptions of senior leaders.At the same time,many firms are broadening their accessible talent market,taking advantage of the global talent pool to strengthen thei

31、r bench.Whichever way this challenge is addressed,it seems that early and purposeful moves in 2024 may position firms ahead of their peers for the next decade.Beyond the talent squeeze,leaders hold a unique position in the journey ahead.The leaders of today are shaped by their traditional business a

32、nd corporate histories;however,what lies ahead will be different in terms of challenges and opportunitiesand only accelerated through the emergence of new technologies like gen AI.These will place different demands on leaders and require an evolved leadership model.Our survey of over 140 senior lead

33、ers indicates the change needed as leaders move from a“traditional leadership”style prioritizing elements such as planning,directing,and controlling to an“emerging leadership”approach that values a visionary style where leaders act as an architect,catalyst,and coach.Achieving this goes far beyond de

34、fining desired leadership behaviors and running development programs,but into the DNA of corporationsrequiring a culture and operating system that reinforces and rewards the desired behaviors rather than hindering orworst of allpunishing them.Key questions to consider Do you have sufficient strategi

35、c talent plans for the next five years,and do they take advantage of the global talent market?Does your EVP fit the modern expectations of employees?Do you and your leaders understand the transformation ahead and are you ready for it?How do you create value from M&A in an era of consolidation?Operat

36、ors are already taking advantage of the high cash flows generated in the latest market cycle,with many pulling the traditional levers of capital management,shoring up their balance sheets,and returning cash to shareholders.However,we are already seeing the next wave of M&A activity globally,with a h

37、igh likelihood of acceleration in 2024.4 Oil and gas is moving with this trend,with recent megadeals such as ExxonMobilPioneer Natrural Resources,ChevronHess,and Occidental PetroluemCrownRock LP,with new energies following closely behind with a more programmatic approach.5Executing the deal is one t

38、hing,and for many,acquisitions are seen internally as“bread and butter,”however,more than 50 percent of deals in the exploration and production sector dont create value for shareholders.6 As we begin the next wave of M&As,it is clear that it must be differentthe creation of value will underpin succe

39、ss,with organizational unlocks at the center.4 Robert Belanger,Jeremy Brown,and Tom Grace,“Success in the M&A rebound:Riding the coming wave of upstream deals,”McKinsey,February 24,2023.5“ExxonMobil announces merger with Pioneer Natural Resources in an all-stock transaction,”ExxonMobil,October 11,20

40、23;“Chevron announces agreement to acquire Hess,”Chevron,October 23,2023;“Occidental to acquire CrownRock,strengthening its U.S.onshore portfolio with premier Permian Basin assets,”Oxy,December 11,2023.6 McKinsey analysis.6The State of Energy Organizations 2024There are three characteristics we obse

41、rve to create value in both the short-and long-term.First,integrationcapturing value far beyond general and administrative expense synergies is critical.The best use the moment of transaction to catalyze a step change in performance across all levers and create an inherent“deal and integration machi

42、ne”to deliver value creating integrations over and over again.Second,enabling long-term growth by selecting the right end-state operating model,striking the right balance between dependent and independent.Third,focusing on managing culture from the very start of the M&A process is important to deliv

43、ering long-term success.Key questions to consider Do you have the inherent capability to build the“deal and integration machine”required?How can new opportunities be catalyzed at the point of integration to realize step changes in performance?How will you make the right decision when selecting the e

44、nd-state operating model?What role can gen AI perform for energy organizations?Gen AI has the potential to revolutionize the energy industry by enabling more efficient operations,better decision making,and improved resource management.Potential applications include data analysis and interpretation,p

45、redictive maintenance,and virtual monitoring and simulationamong many more yet to be imagined.Gen AI can analyze large volumes of data from sources such as seismic surveys,well logs,and production logs to identify patterns,anomalies,and correlations that can help optimize production,reservoir modeli

46、ng,and allow for higher quality decision making.It can analyze sensor data and historical maintenance records to predict equipment failures and recommend proactive maintenance actions to improve operational efficiency,reduce downtime,and improve safety.The technological side of the equation is compl

47、ex but may not be the biggest challenge.There will be a huge impact on people:the capabilities and skills they need and how their day-to-day jobs might change.The introduction of gen AI could lead to the evolution of existing job roles and the emergence of new ones.It opens up amazing opportunities

48、as well as challenges.To make the most of both,it will be critical to stay ahead of the trend and plan for how this may impact your people model and require investments in reskilling and upskilling parts of the workforce.Key questions to consider What proportion of jobs will be significantly exposed

49、 to automation due to gen AI in the next decade?What impact does gen AI have on the capabilities needed in your workforce in the coming decade?Do you have a plan in place to close the capability gap and capture the gen AI revolution?Faced with changeand opportunityon several fronts,energy organizati

50、ons have critical choices to make to shape their future in a low-carbon world.Thinking strategically now about operating models,leadership,talent,and M&A could position energy organizations to evolve ahead of these major trends.Those who dont plan now risk being left behind.Robert Belanger is an ass

51、ociate partner at McKinseys Houston office,where Ignacio Fantaguzzi is a partner;Christopher Handscomb is a partner in the London office,where Phil Quadri is an associate partner;Jesper Ludolph is a partner in the Bengaluru office.7The State of Energy Organizations 2024New energy businesses:The inde

52、pendence versus integration dilemmaEnergy majors set ambitious targets for new energy businesses (renewables,CCUS,hydrogen).They need an operating model combining the strengths of an incumbent with the agility needed to succeed.This article is a collaborative effort by Esmee Bergman,Ignacio Fantaguz

53、zi,Christopher Handscomb,Jesper Ludolph,and Phil Quadri representing views from McKinseys Global Energy&Materials and People&Organizational Performance Practices.Operating model8The State of Energy Organizations 2024There is enormous value at stake in the energy transition as the world continues to

54、move toward cleaner energy.Electrification and renewables,in particular,show accelerated growth,with electric power and hydrogen expected to represent 32 percent of the global energy mix by 2035 and 50 percent by 2050(Exhibit 1).Its hardly surprising that energy incumbents are entering this new ener

55、gy space.The potential 2030 market opportunity in new energy businesses is estimated at$3 trillion,with top energy majors expected to make an average investment of$35 billion between 2022 and 2030.7Exhibit 1The share of electricity in energy composition will continue to grow.199001002003004005002000

56、20102020203020402050CAGR 201950,%OtherElectricityHydrogenBioenergyNatural gasOilCoal1381334Final energy consumption by fuel,Achieved Commitments scenario,million TJ1Includes heat,geothermal,and solar thermal.2Includes synthetic fuels,biofuels,and other biomass.Source:Global Energy Perspective 2023,M

57、cKinsey,October 18,2023The share of electricity in energy composition will continue to grow.McKinsey&Company6%7 McKinsey analysis.9The State of Energy Organizations 2024As many energy majors embark on their own new energy business ventures,an important question on their minds is whether they can str

58、ike the right balance between dependence and independence,harnessing the advantages of being an incumbent while enabling the agility of a start-up.With new energy businesses in their early days,there are no definitive answers to this question of independence or integration;different types of new bus

59、inesses are seeing initial success with different operating models.However,there are key choices and considerations that can help incumbents avoid the most common pitfalls of business building.This article explores the different operating models chosen for new energy ventures by companies with an es

60、tablished incumbent business(for example,oil and gas and utilities).Why the right choice matters Leaders can underestimate the difficulty of starting a new venture within the boundaries of existing processes,systems,culture,and behaviors.New businesses often fail to scale.Only 16 percent of executiv

61、es in Fortune 100 companies report that their corporate business builds have achieved blockbuster success after four years.8 The remainder were partially successful at best.Disruption was once considered the domain of start-ups.Today,however,incumbents are actively using this strategy themselves to

62、disrupt the industry.Incumbents are rightly asking how to strike the right balance between dependence and independence when it comes to their new energy business.The pressure to make the right choice is enormous,given its impact on operational performance.Clear prioritization and end-to-end accounta

63、bility for business units and teams can drive an uplift of more than 30 percent in operational performance.Ensuring purpose and the ability to operate autonomously to get things done can increase employee engagement by 30 percentage points.And creating teams of doers and removing red tape can turn p

64、lans into action five to ten times faster than if the incorrect operating model has been chosen.9 8 Matt Banholzer,Markus Berger-de Len,Subu Narayanan,and Mark Patel,“How industrial incumbents can create new businesses,”McKinsey,November 13,2019.9 Wouter Aghina,Christpher Handscomb,Olli Salo,and Sha

65、il Thaker,“The impact of agility:How to shape your organization to compete,”McKinsey,May 25,2021.As many energy majors embark on their own new energy business ventures,an important question on their minds is whether they can strike the right balance between dependence and independence,harnessing the

66、 advantages of being an incumbent while enabling the agility of a start-up.10The State of Energy Organizations 2024Case study:Eni creates an independent renewables businessPlenitude In 2023,Eni,a leading energy company,decided to fully carve out their renewables business in order to diversify their

67、portfolio and accelerate their growth.As part of this process,they combined their existing renewables generation business with their retail,energy management,finance,and environmental,social,and governance operations.In doing so,a financially self-sufficient company was created with an entirely inde

68、pendent operating model from the parent company,with some exceptions on risk management,compliance,and selected audit processes.The board of the new venture was made up of independent board members as well as several members selected from the parent company.Creating the fully independent organizatio

69、n,Plenitude,allowed them to integrate the renewables value chain(from generation to consumers),better position this part of the business to attract green financing,and achieve a higher valuation for the combined entities.1 Eni retail and renewables capital markets day,Eni,November 22,2021.Weighing t

70、he options Corporate structures for new energy businesses range from full business separation to full integration within the core business,each with its own benefits and risks.Full separationIn a separation model,the new business can be set up as a separate entity(such as a subsidiary).As a subsidia

71、ry,the new business has its own legal and financial structure,leadership team,processes,and people model.In many cases,it is largely funded by the parent company but often attracts additional external funding and partners(see sidebar“Case study:Eni creates an independent renewables businessPlenitude

72、”for an example of this approach).An alternative approach is to form a partnership with an existing renewables venture.The incumbent often provides the brand,access to customers,capital,and seconds specific key capabilities into the venture while the renewables venture provides the lean governance,p

73、rocesses,and culture required to grow at pace(see sidebar“BP partnered up with a renewables venture”for the story of how BP formed a joint venture to accelerate their solar business).11The State of Energy Organizations 2024BP partnered up with a renewables ventureAn example of a partnership approach

74、 is LightsourceBP.In 2017,BP initiated a collaboration with Lightsource Renewable Energy,investing$200 million for a 43 percent stake.Two years later,this collaboration became LightsourceBP,a 50:50 joint venture.For BP,it offered a way to establish a start-up-minded renewables business with solar ex

75、pertise.Conversely,Lightsource Renewable Energy gained credibility,capital,and process standardization through the BP association,leading to rapid growth in the pipeline from five markets and 1.5 gigawatts(GW)to 19 markets and 55 GW in the pipeline in just five years.LightsourceBP is being fully int

76、egrated into BPs Gas and Low Carbon unit,after BP announced it was acquiring its outstanding 50 percent stake,aiming to share the capabilities,experience,and learnings from their other technologies(for example,onshore wind).3What can we learn from this?Opting for this level of independence for the n

77、ew venture offers autonomy and decision making free from the processes in the parent company which are often designed for a different type of business.External talent can infuse an entrepreneurial mindset and drive rapid expansion.However,such independence potentially sacrifices benefits like access

78、 to the parent companys customer base,stakeholder network,distribution channels,and assets.It also necessitates establishing its new processes,systems,and support functions.1“The deal on the Lightsource deal,”BP,March 15,2018.2“Better together:Five years of Lightsource bp,”BP,December 14,2022.3“BP a

79、grees to take full ownership of Lightsource bp,”BP,November 30,2023.Integration into the existing structureMany incumbents choose to set up a new energy business within their existing structure,with varying degrees of independence.The level of independence may vary over time,driven by the maturity o

80、f the business,the type of technology,and perceived synergies with the core business(see sidebar“EDP Renewables goes through a journey with varying levels of integration over time”to read the story of how EDP evolved the level of integration of their renewables business over time).This is a choice w

81、e also see in Equinor and others where the business is kept closer to the core when incubated and,over time,given more independence as it matures.12The State of Energy Organizations 2024EDP Renewables goes through a journey with varying levels of integration over timeEDP Renewables(EDPR),one of the

82、largest renewables players in the world,has been through a journey in terms of its level of independence.EDPRs origin story is closely tied to EDPs strategic decision to expand into the renewable energy sector.In 2006,EDP created a dedicated division focused on renewable energy,which laid the founda

83、tion for what would become EDPR.This division was tasked with developing,building,and operating renewable energy projects,with a particular emphasis on wind power.Over the years,EDPR experienced significant growth and in 2008,EDPR completed its initial public offering(IPO),becoming a publicly traded

84、 company.This move allowed it to access additional capital for its renewable energy projects and signaled its commitment to further growth and expansion.Over time EDP and EDPRs story has remained closely intertwined.This is a story about creating a renewables unit flexible enough to grow in an envir

85、onment closer to a start-up than the conventional business with the ability to raise external capital needed to do so.EDP always retained more than 70 percent ownership of their EDPR listed subsidiary and they continue to be core to EDP with a shared CEO and CFO.1 Alex Bugge,“EDP raises$2,4 bln in r

86、enewables unit IPO,”Reuters,June 2,2008;EDP Renovveis announces launch of its IPO at a price range of 7.40 to 8.90 per share,”EDP,May 15,2008.2 Capital markets day,EDP,2023.A more integrated new energy business,especially in the early phases,allows incumbents to provide their new ventures with advan

87、tages not available to an independent venture.These include customer access,brand recognition,negotiation leverage,stakeholder relations,existing base of suppliers,talent,intellectual property,distribution capabilities,as well as easier access to capital.There is still a spectrum in terms of the lev

88、el of integration across five relevant dimensions:steering model,who sets targets,capital allocation process,talent approach,and operational processes(Exhibit 2).The first factor to consider is the steering model of the new business.In addition,incumbents need to decide what level of control the cor

89、e business will have over the new energy business,and which part of the business sets the strategy and targets for the new venture.Capital allocation needs to be considered as does the talent approach.Where will the new energy venture source its talent and capabilitiesfrom within the core business o

90、r from outside the core?And,lastly,what are the operational processes that the new venture will use,and specifically,which parts of the business are involved in project delivery?13The State of Energy Organizations 2024Exhibit 2Five key choices drive the level of integration of new energy businesses.

91、Key choicesIntegration levelsExample businessesSteering modelWhat level of control does the core business have over the new energy business?New energy business has full control only constrained by high level directional frameNew energy business sets its own direction but must follow similar core pro

92、cesses and leverage central teams where applicableNew energy business is highlyreliant on the core businessNew energy business independently develops strategy and targets within directional frameNew energy business is accountable for the strategy and targets but needs to leverage the strategy team f

93、rom the core businessNew energy business is heavily involved but strategy and targets for the new business are developed in the central strategy unitStrategy and targetsWhich part of the business sets strategy and targets for the new energy business?New energy business gets an envelope and can fully

94、 decide within thatNew energy business gets an envelope and needs approval from core business to release funding for projectsNew energy business competes for capital for projects with core businessCapital allocation How does the new energy business access the required capital?New employees are hired

95、 on potentially diferent contracts and can build a new cultureCombine new hires and hires from the core business and follow people processes directionallyCombine new hires into the new energy venture,lean on central HR team to execute and follow exact same processes and compensation strategyTalent a

96、pproach Where do the green businesses source talent and capabilities from?New energy business delivers projects independently,with own tech and projects teamsNew energy business leads on project delivery,leveraging help from central projects and tech organizationsCentral projects and tech organizati

97、ons are accountable to deliver new energy projects,with limited involvement from new energy teams past developmentOperationalprocessesWhich parts of the business are involved in project delivery?12345UtilityOilmajor 2MoreindependentMoreintegratedOilmajor 112312314The State of Energy Organizations 20

98、24Organizations make different choices on each of these five dimensions when setting up their new energy business.However,for capital allocation,we do see a trend that the large majority chooses to allocate an envelope to the new business with stage gates to release funding.For their talent approach

99、,many of the oil and gas majors start out using a very integrated HR process but over time move to more independence for the new businesses.Integrating a new business into the core traditional business of an incumbent does not come without risks.It is important to make sure entrenched ways of workin

100、g,relatively cumbersome processes(compared to those of a start-up),cultural norms,and mindsets do not hamper the success of the new venture.Incumbents must be mindful of the risks and purposefully mitigate those.Based on our experience,eight imperatives are starting to emerge that leaders could cons

101、ider when starting a new business that is integrated within the existing business:1.Avoid short-term earnings pressure.Start-ups often prioritize market share and scale over short-term profits.If a parent company pressures its new businesses to meet return thresholds similar to the parent companys,t

102、hey are more likely to make decisions that limit long-term prospects.2.Provide rapid access to capital.Access to capital is fundamental for scaling.The operating model could facilitate securing the necessary funding for projects,whether through internal resources,external investments,or partnerships

103、.Financial flexibility is key to seizing growth opportunities when they arise.3.Allow customization of core processes and project design.Streamlining operational processes is essential for cost-effectiveness and scalability in a low-margin industry(especially compared to major capital projects in oi

104、l and gas).Lean and efficient processes help manage project delivery,reduce overheads,and allocate resources effectively.In addition,designing projects with scalability in mind is essential.The new business could be set up to replicate successful project models in different markets,minimizing the ne

105、ed for reinventing the wheel.4.Create shortcuts for decision-making processes and avoid red tape.A parent companys bureaucracy can limit the ability to make quick decisions.The new business could be allowed to make swift decisions without being bogged down by bureaucratic processes.A streamlined dec

106、ision-making framework accelerates the response to market opportunities and challenges.5.Freedom in talent acquisition and retention.Attracting and retaining top talent is crucial.The setup could enable the new energy business to recruit skilled professionals who are passionate about the renewable e

107、nergy sector.Offering competitive compensation,growth opportunities,and a compelling employee value proposition(EVP)is vital to building a talented workforce.6.Allow for partnerships and ecosystem integration.Building strategic partnerships within the new energy ecosystem can accelerate growth.Colla

108、borating with other industry players,research institutions,and start-ups can provide access to complementary capabilities,technologies,and markets.7.Autonomy when setting up enabling services and platforms.Our research shows that successful business builders grant their new businesses considerable a

109、utonomy in core IT,marketing,data and analytics,and HR while making sure the new business stays aligned with the overall strategy of the company.1010 2021 Global report:The state of new-business building,McKinsey,December 6,2021.15The State of Energy Organizations 20248.Entrepreneurial culture,align

110、ed with the values of parent company.Ensure that the new businesss culture,while different,aligns with the mission and values of the parent company.A cohesive cultural framework fosters collaboration,knowledge sharing,and a sense of purpose.By carefully considering these critical factors incumbents

111、can position themselves for rapid growth and success in a competitive and evolving industry.The first steps for incumbents Choosing an operating model for a new energy business isnt a matter of right or wrongits about being clear on the choices and consequences.Striking the balance between dependenc

112、e and independence to harness both the strengths of incumbency and the agility of start-ups is a complex challenge.The next steps for established energy majors involve carefully weighing the options,understanding the spectrum of integration,and mitigating potential risks.To navigate this transformat

113、ive journey successfully,leaders can consider various factors,including how much the new venture would benefit from customer access,brand recognition,negotiation leverage,stakeholder relations,existing base of suppliers,talent,intellectual property,distribution capabilities,as well as easier access

114、to capital.They can also ask whether any of these benefits can be provided while balancing the need to create a lean,fast-growing organization with a different metabolic rate than the traditional business.Once the corporate structure and level of independence versus integration have been chosen and

115、the business has started,the next questions arise.How do you accelerate growth and scaling in terms of project pipeline,required workforce,and capability building?In terms of growing rapidly,new businesses can look at acquisitions as one potential avenue for accelerating growth.An acquisition not on

116、ly provides access to physical assets and partnerships,it also offers access to a new talent pool when executed well.For example,new businesses were 25 percent more likely to significantly exceed expectations when they made two acquisitions early in the scaling process compared to businesses that ma

117、de no acquisitions or that made three or more.11 The new venture may need an“acquisition playbook”to ensure successful integration and retention of talent and constant screening of acquisition targets.For talent strategy,the new business could focus on improving its EVP scores to attract and retain

118、talent.Leaders could consider their EVP right from the start by designing an action plan that gives them a talent advantage.11 2021 Global report:The state of new-business building,McKinsey,December 6,2021.16The State of Energy Organizations 2024On the leadership front,leaders need to operate with s

119、ubstantially greater speed and entrepreneurialism when entering the new energy sector.They may need to develop innovative ways of collaborating,both within their organizations and in the emerging energy ecosystems.A major challenge is attracting and retaining talent in an environment where tradition

120、al energy companies are under intense negative public pressure.These leadership challenges will be more keenly felt in the more integrated operating model,where leaders have to be the bridge between the old and new worlds.New energy businesses have the potential to thrive,and many incumbents are eag

121、er to enter this high-growth space.The operating model that energy players choose can directly impact the success of their new business,and incumbents need to decide what strategy would best suit their business needs.This decision is only the beginning,but it can pave the way for future success.Esme

122、e Bergman is an associate partner in McKinseys Oslo office;Ignacio Fantaguzzi is a partner in the Houston office;Christopher Handscomb is a partner in the London office,where Phil Quadri is an associate partner;and Jesper Ludolph is a partner in the Bengaluru office.The authors wish to thank Alessan

123、dro Agosta,Andre Anacleto,Robert Belanger,Giorgio Bresciani,Oriane Chamoun,Sherlyn Chen,Tom Coxon,Lena Lindvall,Hege Nordahl,Francesco Parente,Des Paschou,and Christian Repole for their contributions to this article.17The State of Energy Organizations 2024Five features of operational excellence in o

124、il and gas organizations New McKinsey analysis shows that while asset-centric models on average produce better results,function-centric models tend to perform more consistently.By Robert Belanger,Christopher Handscomb,and Asha Lemsom.18The State of Energy Organizations 2024Operating models are emerg

125、ing as a crucial performance differentiator as upstream oil and gas operators seek to improve the resiliency of their businesses amid energy transition uncertainty.To understand which types of operating models are delivering the highest near-term value from efficient operations,we evaluated the perf

126、ormance of different operating models across oil and gas organizations using our Energy Solutions operations benchmarking database.Analyzing the production and operation cost performance of more than 45 upstream business unitswhich operate more than 180 distinct assetshighlighted the trade-offs betw

127、een the two approaches to managing assets:asset-centric and function-centric models.In an asset-centric model,the asset teams are the“center of gravity.”All operational decisions are made by the asset or business unit leadership,and they are also accountable for profit and loss(P&L)results.Asset-cen

128、tric models tend to embed technical and functional support within an asset team or business unit.In contrast,a function-centric model is where functional teams are responsible for the outcomes in their respective domains.Decisions within a functions remit require the approval of the functional team,

129、and in some instances,P&L accountability may be shared between functional and asset or business unit leadership.In this model,functions are often centralized into global teams that support the companys entire asset base.The results of this analysis indicate that while asset-centric models tend to ac

130、hieve better operational outcomesmeasured as higher production efficiency and lower operating coststhey also experience a wide range of outcomes.The function-centric model tends to produce more consistent results,however,with lower operational performance.Asset-centric models tend to outperform on o

131、utcomes On average,asset-centric models have the edge in terms of operational performance.Operating costs are generally 6 percent lower when normalized for asset scale and complexity and show two percentage points higher production efficiency than their function-centric counterparts(Exhibit 3).This

132、translates into tens of millions of dollars in cost savings and thousands of barrels a day of additional production.This outperformance means that the average function-centric business unit was on par with the third-quartile asset-centric business unit in terms of production efficiency.However,there

133、 is a trade-off between higher average performance and greater variability.Asset-centric models have a wider range of outcomes on both operating cost and production efficiency than function-centric models.This occurs in both directionsthe best outcomes for asset-centric models are better than the be

134、st outcomes that can be achieved when using function-centric models,but the opposite is also true.The worst outcomes when using an asset-centric model are far worse than the potentially bad outcomes of a function-centric model.19The State of Energy Organizations 2024Exhibit 3Asset-centric operators

135、tend to average better cost and production efficiency but experience a wider range of outcomes.%(higher is better)Cost performance index(lower is better)GlobalmedianFunction-centricGlobal medianHighMaximumAverageTop quartileMinimumThird quartileLowLowHigh1cision making includes asset and BU leadersh

136、ip and functional team leaders.2Asset-centric model is where P&L ownership is primarily held within asset or BU leadership and operational decisions are owned by asset or BU leaders.3Cost performance index is a measure of operating cost performance normalized for asset complexity scale and indexed t

137、o global average normalized cost performance.Increasing cost performance index(lower is better)Increasingproduction(higher is better)Asset-centricLowHighMaximumAverage+2 ppThird quartileMinimumTop quartileAsset-centricFunction-centricAsset-centricFunction-centricLowHigh6%Cost versus production efcie

138、ncy by business unit20The State of Energy Organizations 2024Enabling operational excellence:Five success factorsBased on our extensive work with operators,our experience indicates that asset-centric operating models can far outperform function-centric models because they streamline and boost perform

139、ance through five crucial characteristics:Simplicity.High-performance assets tend to have operating models underpinned by simplified processes and minimal reporting lines.Control.Functional and technical support is carefully controlled,with integrated teams embedded in the asset creating an empowere

140、d frontline.Expertise.Staffing is tailored to each assets needs,with the required expertise embedded into the asset team and expressly dedicated to that team.Asset team leadership tends to have extensive experience within a particular asset or region(often more than 20 years)while function-centric l

141、eadership often rotates in and out of postings every few years.Efficiency.Workforces are streamlined with limited layers between asset leadership and the frontline.They tend to have an optimally sized workforce,with high levels of visibility into the corporate functions costs,which helps drive effic

142、iency.Accountability.High asset performance is incentivized for the whole team,KPIs cascade down to the frontline,and performance is reviewed regularly to ensure transparency.Asset-centric leadership bears a high degree of ownership for performance outcomes because there is no tangential functional

143、leadership to deflect blame;they are ultimately responsible for the results of their specific units.Function-centric models hold their own advantages However,function-centric models are not doomed to poor performance.In fact,they might have some distinct advantages that can support broader strategic

144、 goals.Function-centric operators typically have a deep talent pool of expertise they can pull from to take on extreme technical challenges,like establishing infrastructure in a new region,supporting large capacity expansion projects,or integrating different asset types in a merger or acquisition,as

145、 it can be optimized across assets and countries.An example of where this model would be very beneficial for these types of challenges is during major project procurement and rig sequencing.Because they tend to achieve more consistent results,this can be reassuring to investors and provide stability

146、 after market shocks.With some targeted changes,function-centric models could get the best of both worlds by adopting the winning principles exhibited by asset-centric operators.For example,function-centric operators can adopt transparency in functions to help drive efficiency,challenging costs and

147、support levels to ensure the right level of technical and functional support per dollar spent.Functional operators can further streamline their operations by optimizing organizational reporting layers and emphasizing more time in the seat for asset and business unit managers.Evaluating the effective

148、ness of your operating model is a critical and often overlooked lever that operators can pull on to drive performance and cost efficiency.Identifying and implementing the right model can significantly improve performance,and our study indicates that asset-centricity may be the way forward for many o

149、il and gas organizations.Robert Belanger is an associate partner in McKinseys Houston office;Christopher Handscomb is a partner in the London office;and Asha Lemsom is an associate partner in the Amsterdam office.The authors wish to thank Tyler Goldsmith for his contributions to this article.21The S

150、tate of Energy Organizations 2024The productivity prize in oil and gas:Lessons from top performersWorkforce productivity varies significantly across upstream oil and gas companies.Understanding the productivity gapand the three levers to close itcould boost company performance and resilience.By Robe

151、rt Belanger and Christopher Handscomb22The State of Energy Organizations 2024In their efforts to improve margins,many upstream oil and gas players are turning their attention to workforce productivity.This focus on productivity may prove especially important given industry headwinds:a looming retire

152、ment wave,the sometimes negative perception of the traditional energy sector among younger generations,significant talent outflow from the industry,and increasing competition for talent and capital from new energy industriesall of which are likely to make it harder for oil and gas producers to maint

153、ain and improve their productivity.A recent study of workforce productivity in the upstream oil and gas industry,using McKinseys Energy Solutions Organization Benchmark,found a substantial productivity gap across operators.12 Analysis of over 50 business units from more than 30 oil and gas companies

154、 from the global dataset found that the most productive companies were 150 percent more productive than the average operator.This productivity gap is driven by all functions across the typical organization.Analysis of these top performers indicates there is significant room for improvement for much

155、of the sector,representing a major “productivity prize.”Analyzing the productivity gap The productivity gaps we observed between upstream oil and gas companies are substantiala top quartile peer can deliver 150 percent of the output of the average organization with the same-sized workforce.Remarkabl

156、y,this increase in productivity does not come at a cost in terms of operational performancetop quartile peers on average have similar levels of production efficiency and safety performance,delivering these outcomes with lower operating cost.13 Top quartile organizations are delivering 2.5 times the

157、drilling activity,managing more complex reservoirs,operating twice the number of assets,and spending 20 percent less on maintenance costs.Top performers can also deliver the same output as an average peer with 40 percent fewer full-time equivalent(FTE)employees(Exhibit 4).12 McKinsey Energy Solution

158、s Organization Benchmark,July,2023.13 McKinsey analysis.A top quartile peer can deliver 150 percent of the output of the average organization with the same-sized workforce.23The State of Energy Organizations 2024Measuring productivity in a targeted way One of the most important ways to assess organi

159、zational performance is to measure productivity and the potential to improve it.At its core,and simplest means of expression,productivity is the output for a given input.Traditionally,workforce or labor productivity has been measured by labor input such as working hours and financial output,includin

160、g revenue.14 However,these measures typically mask many of the underlying reasons for high or low productivity,and do not consider the nuances of each individual organization or provide specific insights into which levers have the greatest productivity potential.Measuring staffing intensity offers a

161、n alternative approach that assesses workforce size per unit of activity,or the number of FTE employees and contractors(input)per unit of activity(output)an inverse of productivity.An advantage of this approach Exhibit 4The most productive operators can achieve the same outcomes as peers with a frac

162、tion of the organizational resources.Organization size,normalized for operator activity,%Source:McKinsey Energy Solutions O&G Organization BenchmarkThe most productive operators can achieve the same outcomes as peers with a fraction of the organizational resources.McKinsey&Company3Q peersAverage BUT

163、Q peers100604014“Productivity measures:Business sector and major subsectors,”U.S.Bureau of Labor Statistics,September 23,2020.24The State of Energy Organizations 2024over traditional productivity measures is that it provides a way to normalize for different activities conducted by different function

164、s.The activity set for Finance and Accounting,for example,looks very different from the activity set for the Subsurface or Wells functions,and traditional methods of productivity measurement make it hard to compare across functions.It also provides a way to adjust for structural differences between

165、companies for things like scale,portfolio composition,asset complexity,and growth plans.Different“activity drivers”are used to normalize each functions size to provide a like-for-like comparison against peers.For example,reservoir complexity can be used as an activity driver for the Subsurface funct

166、ion,while an index of drilling activity could be used for the Wells function.This removes any differences in performance due to factors outside of productivity and ways of working,which helps managers understand their organizations true productivity opportunities.How operators improve their producti

167、vity There are many levers that organizations can pull on to drive productivity.These fall into the three main categories of people,processes,and structure.People levers include improving the culture to create a more collaborative work environment,reconsidering the size of the workforce,enhancing ta

168、lent through skills building(for example,multiskilling offshore personnel),and acquiring talent from outside the company.McKinsey research shows that the best performers are 800 percent more productive than the average employee in highly complex roles,highlighting the potential that can be unlocked

169、by focusing on people levers.15 However,people levers are often enabled or magnified by improvements to process and structure.Process levers can be used to streamline workflows,improve the efficiency of decision making,or enhance technology systems to support more efficient processes(for example,dep

170、loying advanced analytics systems in maintenance processes to improve equipment reliability).Finally,structure levers include reconfiguring the“boxes and lines”of how the company is organized to better align to sources of value creation.For example,our research shows that an asset-centric axis of or

171、ganization can yield better operational performance than a function-centric orientation(see article,“Five features of operational excellence in oil and gas organizations”).This includes rethinking the location footprint to provide better access to assets and talent or altering roles and responsibili

172、ties to align the highest performers with the biggest sources of value.McKinseys oil and gas workforce productivity study found that the productivity prize applies across all functions,both technical and nontechnical,meaning there is no one functional culprit for low productivity(Exhibit 5).Rather,l

173、eading producers tend to apply multiple levers across multiple functions to drive holistic productivity improvements.Sometimes,a specific functional transformation is needed(such as a financial system digital transformation)in order to enable additional operating model changes to drive productivity

174、improvements.15 Scott Keller,“Attracting and retaining the right talent,”McKinsey,November 24,2017.25The State of Energy Organizations 2024The upstream oil and gas productivity gapand on the flipside,the potential productivity prizepresents a significant opportunity for upstream oil and gas companie

175、s to improve their resiliency as they face pressure to provide affordable,reliable,secure,and cleaner energy.A holistic approach that encompasses people,processes,and structure could help under-pressure oil and gas producers achieve the productivity levels of their top-performing peers.Exhibit 5All

176、functions have substantial productivity improvement potential.Normalized staffing intensity by selected function1Non-exhaustive.Normalized staffing intensity measures the number of Full Time Equivalents(FTEs for both employees and contractors)per unit of activity driver,which varies by function(for

177、subsurface,reservoir complexity;for wells,drilling activity;for production operations and logistics,operated asset scale and complexity;for maintenance and reliability,maintenance activity spend).Source:McKinsey Energy Solutions O&G Organization BenchmarkAll functions have substantial productivity i

178、mprovement potential.McKinsey&CompanySubsurfaceCompared to theAverage Operator,TQ Operators have AvgTQ25%fewer subsurfaceFTEs or30%more reservoircomplexity40%fewer wellsFTEs or2.5more drillingactivity25%fewer productionops and logisticsFTEs or2number ofoperated assets30%fewer maintenanceand reliabil

179、ityFTEs or20%less spend onmaintenanceWellsAvgTQProduction operationsand logisticsAvgTQMaintenanceand reliabilityAvgTQ25402530Robert Belanger is an associate partner in McKinseys Houston office and Christopher Handscomb is a partner in the London office.The authors wish to thank Corryn Bourgeois for

180、her contributions to this article.26The State of Energy Organizations 2024Talent squeeze:Planning for the energy sectors talent transitionAmid increased demand,an aging workforce,and decreased recruitment levels,the energy sectors talent pool is under pressure.Five strategies can help executives fil

181、l their talent pipeline.By Ignacio Fantaguzzi,Christopher Handscomb,Iyad Sheikh,and Aly Torres Talent27The State of Energy Organizations 2024As the energy transition gathers pace,there is an increasing need for energy talent.The global demand for oil and gas is projected to remain roughly stable,whi

182、le indicators point to substantial growth in supply from new energy sources by 2035.16 The energy industry is therefore facing two significant and interacting areas of talent demand:securing talent to build and run fast-growing new energy businesses and maintaining core talent for traditional oil an

183、d gas production.While demand for energy talent is growing,the energy sector is expecting to lose a substantial portion of its existing workforce;in the United States alone,as many as 400,000 employees in the sector are approaching retirement,expected to retire in the next 10 years.17 Given the oil

184、and gas industrys negative perception among younger workers,traditional energy businesses may find themselves at the short end of an upcoming talent squeeze.Transferable competencies can help meet talent demandDemand for talent from new energy businesses is likely to increase rapidly over the coming

185、 decade.18 The good news for renewable energy employers is that knowledge,expertise,and competencies gained in oil and gas are relatively easy to transfer to green energy businesses including carbon capture and storage(CCS),hydrogen,and wind.CCS has the greatest transferability of both knowledge and

186、 experience,which is unsurprising given that many oil and gas companies have been capturing and storing carbon for some time.Hydrogen has fairly high transferability for most knowledge areas,though challenges remain regarding experience,especially in business development,commercial roles,and supply

187、chain partnering.Offshore wind has the lowest relative transferability of these three,though it still offers ample opportunity for upstream employees to move into the new energy space.19 McKinseys Organization Data Platform analyzed publicly available data from LinkedIn to explore the talent circums

188、tances of new energy businesses globally.They found that employees in the hydrogen space hold similar degree subjects to the degrees of those in traditional exploration and production(E&P)(Exhibit 6).This overlap underscores the high level of knowledge transferability between roles and indicates tha

189、t there may be growing competition for talent between traditional and new energy businesses.16 Global Energy Perspective 2023,McKinsey,October 18,2023.17 Current Population Survey,United States Bureau of Labor Statistics,2022.18 Global Energy Perspective 2023,McKinsey,October 18,2023;Statistical rev

190、iew of world energy,Energy Institute,2023.19 McKinsey analysis.The good news for renewable energy employers is that knowledge,expertise,and competencies gained in oil and gas are relatively easy to transfer to green energy businesses.28The State of Energy Organizations 2024McKinsey also looked at th

191、e tenure of those in hydrogen-related roles and found that nearly four-fifths of employees have worked in the space for less than five years and only 10 percent of the total talent pool have more than ten years of hydrogen-related experience.20 This means that hydrogen businesses could struggle to f

192、ind experienced people to fill positions and will need to establish programs to rapidly build expertise.Exhibit 6There is high overlap in degree subject between traditional upstream and hydrogen talent.3435384045596273104107117369406453Top 15 degree subjects for hydrogen talent,August 2023,number1n=

193、4,926.Source:LinkedIn;McKinsey Org Data PlatformThere is high overlap in degree subject between traditional upstream andhydrogen talent.McKinsey&CompanyAccountingAerospace engineeringIndustrial engineeringEducationLawProject managementPhysicsElectrical engineeringChemistryEconomicsFinanceMechanical

194、engineeringChemical engineeringBusiness administration20 Organization Data Platform,McKinsey,September,2023;LinkedIn;McKinsey Org Data Platform.29The State of Energy Organizations 2024Traditional upstream businesses continue to need talentMeanwhile,demand for talent from traditional oil and gas comp

195、anies is not going away.Globally,McKinsey expects to see broadly consistent demand for workers through to at least 2035.21 Meeting this demand could be challenging amid growing competition from new energy businesses,and workforce demographics that point to a looming talent crunch.In the United State

196、s,over a quarter of employees are at or near retirement age,many of whom are frontline workers(Exhibit 7).In the United Kingdom,demographics are similar,with 43 percent of offshore workers currently over the age of 45.2221 McKinsey analysis.22 Workforce insight,Offshore Energies United Kingdom,2022.

197、Exhibit 7The oil and gas workforce is aging,with particular challenges among the frontline.01020304050All engineers andengineering techniciansMaintenance andrepair workersFirst-line supervisors ofmechanics,installers,and repairersFacilitiesmanagersAverage,all occupations1619 years2024 years2534 year

198、s3544 years4554 years5565+yearsPercent of employees in each occupation,%Source:US Bureau Labor Statistics from Current Population Survey(CPS)2022The oil and gas workforce is aging,with particular challenges among the frontline.McKinsey&Company30The State of Energy Organizations 2024While this does n

199、ot exactly represent a retirement cliff,it does emphasize the importance of maintaining a healthy recruitment pipeline into traditional oil and gas businesses over the coming decade.Energy companies will also need to reckon withand develop plans to addressthe impending loss of a valuable source of t

200、echnical skills,industry knowledge,and institutional expertise.Thinking creatively about how to manage this aspect of the talent transition now could spur innovation,alternative work approaches,and an entry of fresh talent into the sector.23 Competition for employees is also heating up.Since 2016,ou

201、t of all the employees who left their roles in energy and materials companies,42 percent moved to a different industry.24 This underlines the very competitive nature of attracting and retaining talent within the sector.Companies that lack a clear talent strategy could face a talent shortage in the y

202、ears to come.As one upstream executive put it,“The average age of our rig workers is 58 years old.We expect them to retire in ten years,but the life of our asset is 20 years.We currently dont have a fact-based view on how big the problem is or how we are addressing it in the future.”Hiring talent to

203、 backfill critical roles and fill new roles presents a unique set of obstacles in the energy sector.Experienced workers are retiring,mid-tenure employees have new opportunities in adjacent industries,and data indicates that fewer new employees are entering this workforce.The percentage of employees

204、with less than two years of tenure dropped from 16 percent in 2012 to less than 4 percent in 2022.An improved value proposition could attract fresh talentAnother challenge is that the oil and gas sector may not be perceived as attractive by potential employees.Research shows that a compelling employ

205、ee value proposition(EVP)is strongly correlated with lower attrition rates and that this is an important and influential notion for younger generations(see article Employee retention trends and challenges in the oil and gas industry).To understand the impact of EVP in the traditional upstream sector

206、,McKinsey examined employee satisfaction across industries on a range of dimensions.While oil and gas still scores above average for compensation,it is towards the bottom of the pack for career opportunities,corporate culture,and perceptions of senior management.In short,oil and gas companies tend t

207、o score lower on their EVP relative to other industries(Exhibit 8).23“Renewable-energy development in a net-zero world,”McKinsey,October 28,2022.24“Great Attrition,Great Attraction 2.0 Global Survey,”McKinsey,2023.Since 2016,out of all the employees who left their roles in energy and materials compa

208、nies,42 percent moved to a different industry.31The State of Energy Organizations 2024Exhibit 8Oil and gas lags many peer industries in several key dimensions of their value proposition to employees.CompensationTMTTMTTMTTMT4Aerospaceand defenseAerospaceand defenseAerospaceand defenseAerospaceand def

209、ense3O&GO&GO&G365O&G42123AdvancedelectronicsAdvancedelectronicsAdvancedelectronicsAdvancedelectronics110ChemicalsChemicalsChemicalsChemicals211AutomotiveAutomotiveAutomotiveAutomotive1BankingBankingBankingBanking4335722BasicmaterialsBasicmaterialsBasicmaterialsBasicmaterials13InsuranceInsuranceInsur

210、anceInsurance334Career opportunitiesCultureSenior management1000071Rating relative to peer-industry average,%1Based on Glassdoor ratings from employee reviews in the US from 2018 to 2023.Reviews are gathered for the top 100 largest companies(by head count)per industry;total sample consists of 475,00

211、0 reviews across nine peer industries.2Denotes the percentage difference in ratings for companies within a specific industry and the average sentiment across the peer industries.Oil and gas lags many peer industries in several key dimensions of their value proposition to employees.McKinsey&Company32

212、The State of Energy Organizations 2024Charting a course through the talent transitionExecutives in traditional oil and gas businesses may need to think about driving talent transformation to underpin long-term success.To do this,senior leaders could focus on the following five areas and address the

213、associated underlying questions:1.Building strategic talent plans.A successful talent strategy most often hinges on facts rather than intuition when it comes to understanding future talent needs and is anchored in the companys strategic and business goals.Talent plans can be built up from project-le

214、vel talent needs to inform an integrated skill-based talent view.Executives could consider:which roles are likely to be impacted by retirement in the next six months,Employee value propositionAn EVP defines the unique promise made to employees regarding experiences and benefits that they can expect

215、to receive from a company.Effective value propositions typically encompass four components:the companys purpose,values,and culture;its leadership,which includes the employee relationship with managers;the employees role(including developmental opportunities);as well as their rewards,including intang

216、ible benefits,such as the ability to be home every night at a consistent hour.25 McKinsey analysis.26“Agile transformation in heavy industries:An interview with SOCAR Trkiye,”McKinsey,March 21,2023.However,employees perceive oil and gas companies differently across regions,and EVP scores differ sign

217、ificantly(see sidebar,“Employee value proposition”).Oil and gas employee satisfaction is generally lower in developed markets,whereas jobs in oil and gas are still seen as one of the most desirable placements for top talent in many parts of the world.These regional differences may play an increasing

218、ly important role in talent decisions for global operators in the years ahead.When rating their employers in terms of worklife balance,European employees reported the highest satisfaction(3.8 on a scale of one to five).On the other end,employees from Northern Africa,North America,the Middle East,and

219、 the Pacific Islands rated their worklife balance lowest,at 3.5,respectively.On average,Central Asian and Russian employees ranked their employers highest in terms of culture(4.1),career opportunities(3.8),and senior management(3.7),while North American employees expressed lower ratings across all c

220、ategories except compensation,where Caribbean and Latin American employers ranked highest at 3.9.33The State of Energy Organizations 2024one year,three years,and five years?What are the critical capabilities needed?What are the underlying drivers of attrition?Where are the existing hidden pockets of

221、 talent with required skill sets?Do we want to take an incremental approach to manage our talent transition,or do we need to drastically correct course?For example,one leading aerospace and defence company derisked a$100 million program by focusing on trades talent and attrition and responded with a

222、 clear talent strategy,EVP,and improved use of advanced analytics.It was able to reach an equilibrium between talent demand and supply to meet its strategic plans.2.Renewing efforts to transform the employee value proposition.Driven by data,the best efforts aim to achieve specific outcomes.An exampl

223、e of this is retaining more senior talent in the industry by changing the work environment.Another is delaying retirement or creating flexible career paths to allow graduate hires to work across traditional oil and gas companies and new energy businesses within the same company.Executives can ask:wh

224、at do our employees really value?What are the risks?How are we measuring success?How will we act faster,more nimbly,or under different resource constraints?A leading energy company established a talent“war room”to bring together resources from across the organization(including programs,human resourc

225、es,data science,analytics,and IT)to create a faster,more agile,and more streamlined talent management and EVP evolution process.It was able to address short-and medium-term talent challenges head on.3.Modernizing ways of working to meet rising employee expectations and increase productivity.There ha

226、s been continued uptake of agile teaming and increasing sophistication when devising flexible working policies.Leaders could ask themselves how to make priorities clear from top to bottom in the organization?Where could we release value between functional silos through agile teams?What workplace and

227、 hybrid working policies best balance employee satisfaction and productivity?For example,several energy companies are organizing for agility at scale to improve results,speed,and employee experience.4.Taking advantage of global talent markets by revisiting technical hub strategies.This is relevant f

228、or both traditional and new businesses.Companies are thinking hard about which activities need to be done“close to the assets”and which could be undertaken in other regions to access the worlds largest engineering talent pools.Questions include:how do we evolve our global mobility programs?What type

229、 of talent is critical to have close to the workfor example,frontline talentand what can be sourced elsewherefor example,talent from the same regions?How can we adopt a more global perspective for difficult-to-fill technical roles?And how do we leverage talent from other countries with renowned engi

230、neering or technical programs and educational institutions?27 McKinsey analysis.34The State of Energy Organizations 2024 Several oil and gas companies are reshaping their technical functions,such as engineering,to build and grow hubs in other regions.Such moves provide access to large,high-quality t

231、echnical talent pools and create stronger central support models.5.Exploring tech such as generative AI to improve productivity and augment capabilities.Recently,many companies have developed proof of concepts for generative AI(gen AI)that can allow employees to spend time doing higher-value tasks.C

232、ompanies could ask themselves:how could gen AI tools help with knowledge and experience transfer between generations?What opportunities exist to use digital tools to accelerate training for technical and operational hires?This is an unprecedented time for the energy industry as it transitions into t

233、he net-zero world.Like many other industries,the talent that oil and gas companies can attract,develop,and retain will shape the companies of tomorrow.The key question isnt so much“How do I get enough talent to deliver on my plans?”but rather,“How can we confidently use this transition to our advant

234、age?”Ignacio Fantaguzzi is a partner in the Houston office,where Aly Torres is a consultant;Christopher Handscomb is a partner in the London office;and Iyad Sheikh is an associate partner in the Boston office.The authors wish to thank Giulio Carbone,Evgeniia Levich,Hege Nordahl,Cecily Urnes,and Siru

235、i Wang for their contributions to this article.35The State of Energy Organizations 2024Employee retention trends and challenges in the oil and gas industry Oil and gas companies are struggling to retain top talent.Focusing on EVP can improve retention but levers to boost EVP differ widely across the

236、 industry.By Robert Belanger,Giulio Carbone,and Ignacio Fantaguzzi 36The State of Energy Organizations 2024In our conversations with oil and gas executives,discussions around talent are converging on a theme:companies are finding it increasingly difficult to attract and retain employees,especially s

237、ince skill requirements are changing dramatically in the decarbonization era.Building a distinctive employee value proposition(EVP)which is a set of benefits that an employee gets for what they give,including aspects like compensation and benefits,career opportunities,worklife balance,company cultur

238、e,and managementcould prove pivotal to attracting and retaining the best talent as compensation for workers heats up.Analyzing more than 70 major organizations across different parts of the oil and gas value chain,we found a direct correlation between a companys EVP score and tenure rates:when a hig

239、her EVP score is observed,employees generally remain at the company for longer.While our research suggests that retention dynamics vary strongly across industry subsectors,leadership style,more than compensation,is generally key to driving a distinctive EVP.EVP scores vary widely across the industry

240、 With the support of the McKinsey People Analytics experts,who collected publicly available information from LinkedIn and Glassdoor,we analyzed the EVP ratings of more than 70 organizations and their corresponding attrition rates and found a clear link between low EVP scores and higher levels of att

241、rition.We broke down the findings to understand how these trends are playing out across the different types of major oil and gas companies(Exhibit 9).Leadership style,more than compensation,is generally key to driving a distinctive EVP.28 For more information on these trends,see:“Renewable-energy de

242、velopment in a net-zero world:Overcoming talent gaps,”McKinsey,November 4,2022.37The State of Energy Organizations 2024The data shows that EVP and retention dynamics are specific to the different subindustry segments,and therefore require different“calls to action.”Majorslarge global oil and gas com

243、panies operating in different parts of the value chainare closely aligned in a“midrange”position with a limited degree of differentiation in terms of EVP and attrition rate.Most big corporations have an EVP score of between 3.3 and 4.1(out of a 5-point scale)and corresponding attrition rates of 9 to

244、 11 percent.Majors could create a more distinctive EVP to better differentiate themselves from peers and attract the best talent in the sector.National oil companies(NOCs)have the strongest position across oil and gas,both in terms of EVP and low attrition,as they are often the leading employers in

245、their countrys energy sector and face less national competition for talent.It is important for NOCs to build a well-rounded EVP,leveraging distinctive compensation,benefits,and broader organizational Exhibit 9Outside-in data of key oil and gas players suggests a link between EVP and attrition.Source

246、:LinkedIn and publicly available reviews from data sources including Glassdoor reviews over 2016-2021.LinkedIn sample size,latest year:Downstream:50112;EPCM:80844;Major:365795;Midstream:26740;NOC:133590;Services and Equipment:342595;Upstream:37081.Glassdoor sample size:Downstream:5,351;Major:30,200;

247、Midstream:3,035;NOC:7,201;Services and Equipment:27,801;Upstream:2,98238The State of Energy Organizations 2024health to attract unique capabilities and young talent,not only within national boundaries but also from abroad.Upstream companies are seeing the highest levels of attrition in the industry,

248、despite their EVP scores tending to be in line with the sector average.This might be related to the high demand for specific technical skills,which are difficult to develop internally and are instead acquired through the job market via competitive offers or outsourced.Other factors may include worke

249、rs leaving the traditional oil and gas industry for new energy companies,or market volatility as the energy transition accelerates.Since the high attrition rate is partially structural in this subindustry,upstream companies could focus on reliable and fast recruitment processes to ensure continued i

250、nsourcing of required talent.Midstream companies are closely aligned with low attrition overall and an average EVP.Like majors,midstream companies could create a more distinctive EVP to differentiate themselves as an employer of choice.Downstream companies are closely aligned with a low attrition ra

251、te overall and above-average EVP.There are,however,a few outliers that are challenged by high attrition.The outliers in the downstream subsector may need to quickly align themselves with the standards set by their market peers.Services and equipment companies tend to have below-average EVPs and high

252、 levels of attrition.Talent in services and equipment companies is generally in demand outside of the oil and gas industry,and companies may need to act quickly on their EVP to address high attrition rates.As a first step,service and equipment organizations can investigate the root causes of their h

253、igh attrition and develop context-specific strategies for better talent retention.Leadership style is key to driving EVP We also analyzed the different drivers of EVP across five categories:worklife balance,culture,career opportunities,compensation and benefits,and leadership style(Exhibit 10).While

254、 differences are not high,on average,we found that companies in oil and gas across subsectors score the lowest in leadership style and the highest in compensation and benefits.39The State of Energy Organizations 2024These findings have practical implications for how oil and gas companies across diff

255、erent parts of the value chain can strengthen their EVP.Regarding leadership style,it is important for the CEO and other leaders to be recognizable and charismatic role models,not only within the company but also toward the external stakeholders.We have observed that a new leadership style is emergi

256、ng in the industry around five shifts that change how leadersand companies EVPs are perceived.Setting focus and direction:from executive to visionary.When defining the direction of their company,it is important for executives to not only ensure that profits are predictably delivered to shareholders

257、but also that they take a visionary stanceengaging employees with a compelling purpose to deliver impact and value to all external stakeholders and society.Designing how value is created:from planner to architect.Rather than taking a traditional,planner-oriented view focused on capturing a greater s

258、hare of the existing value from their competitors,leaders can adopt an architect mindset by working with customers and other external stakeholders to reimagine and disrupt industry norms to generate new value.Exhibit 10The major gap for employee value proposition is not compensation but management.E

259、mployee value proposition(EVP)by specific drivers(values from 1 to 5)Note:Employee value proposition(EVP)is measured as the average rating(from 1 to 5)of user reviews on Glassdoor for a company.Source:Based on publicly available reviews from data sources including Glassdoor reviews over 20162022,Apr

260、il,2023;Sample size:Downstream:5,351;Major:30,200;Midstream:3,035;NOC:7,201;Services and Equipment:27,801;Upstream:2,982The major gap for Employee Value Proposition is not compensation but management.McKinsey&CompanyLeadershipstyleCompensation/benefitsCareeropportunitiesCultureWorklifebalance12345Ov

261、erallMidstreamMajorDownstreamNOCEPCMUpstream29 Anton Derkach,Ignacio Fantaguzzi,Neil Pearse,and Micah Smith,“Powering up new leadership for a changing energy environment,”McKinsey,February 3,2023.40The State of Energy Organizations 2024 Organizing how people work together:from director to catalyst.T

262、raditionally,leaders took a directors approach to developing defined organizational structures,with clear roles,responsibilities,and authorities.A catalyst approach,by contrast,allows leaders to encourage transparency,collaboration,and inclusiveness across the organization and externally,guiding emp

263、owered teams and cross-unit networks with external stakeholders.Getting work done:from controller to coach.Leaders can combine the traditional,controller leadership style with the coach style.In this way,they will operate through detailed analysis and precise planning to deliver outcomes and minimiz

264、e variances,while also focusing on a more innovative coaching view,operating through short cycles of rapid decision making and experimentation while learning to respond to new challenges and opportunities in the external environment.Showing up as a leader:from expectation-setter to authentic leader.

265、Blending the traditional expectation-setter approach of setting clear professional expectations for subordinates with the emerging style of“authentic leader”can encourage openness,personal well-being,creativity,and autonomy.By embracing emerging leadership qualities,industry leaders could tailor a u

266、nique and powerful leadership style to improve their EVP,attract the right talent,and reduce attrition.A step-by-step approach to strengthening EVP:A case study The European subsidiary of an oil and gas giant found itself facing a shortage of the right talent to address its strategic goals of decarb

267、onization and digitalization.While the company was highly regarded by tenured oil and gas professionals,it was falling short in attracting the new engineering and digital talents required,especially women.The CEO understood the gravity of the challenge and closely partnered with the chief human reso

268、urces offices(CHRO)and the rest of the leadership team to attract and retain the right talent through a phased approach:Aspire.The leadership team worked together to translate the business strategy into a compelling vision for the future,centered on decarbonization and digitalization,to ignite purpo

269、se and passion in current employees and future candidates.Assess.A rigorous approach was followed to listen to the“voice of employees”through employee surveys(such as our Organizational Health Index),interviews,and focus groups.This was complemented with an external diagnostic(using publicly availab

270、le data from LinkedIn and Glassdoor)to identify the current EVP perception and key opportunities for improvement.The results highlighted that employees were looking for more emphasis on inclusion and diversity,flexible working hours to cater to family needs,and a compelling purpose focused on decarb

271、onization.41The State of Energy Organizations 2024Architect.Leveraging the insights from the diagnostics,the CHRO,with guidance from other leaders,shaped a cultural and organizational action plan to address the identified areas for improvement.The company created a compelling EVP with career paths f

272、or the specific talent pools required,a new diversity and inclusion strategy,and gender quota objectives,and collaborated with leading universities in Europe to improve their employer brand among students.Act.The defined plan was actioned collaboratively at all levels of the organization.The company

273、 mobilized employees to identify change ambassadors to drive change in the different units and geographies.For this activity,data-driven insights from social network analyses helped the company identify key actors to catalyze change within the organization.At the same time,top executives embraced th

274、e new leadership style in line with the five shifts,shaping a different culture and ways of working.After almost two years since the launch of the project,the company achieved a leading position for EVPwithin the top-quartile of industry peersand a CEO rating of over 80 percent.The company is now co

275、nsidered a best-in-class workplace for women to build a career in the oil and gas industry.Oil and gas companies may need to think beyond compensation and create a positive working environment if they want to attract and retain talentespecially as they face increasing competition from new energy ind

276、ustries requiring competencies that are easily transferable from the oil and gas industry.By improving leadership styles and company dynamicsand therefore EVP scoresemployees may want to stay with their company longer,allowing institutional knowledge to grow within the workforce,and ensuring fewer r

277、esources are spent on hiring and onboarding.Robert Belanger is an associate partner in McKinseys Houston office;Giulio Carbone is an associate partner in the Zurich office;and Ignacio Fantaguzzi is a partner in the Houston office.The authors wish to thank Ivan Dyakonov and Evgeniia Levich for their

278、contributions to this article.42The State of Energy Organizations 2024Powering up new leadership for a changing energy environment Realizing it can no longer be business as usual,industry chiefs need to transform themselves and their organizations to succeed.By Anton Derkach,Ignacio Fantaguzzi,Neil

279、Pearse,and Micah SmithPublished on McK,February 3,2023.Leadership43The State of Energy Organizations 2024Technological,economic,regulatory,and geopolitical forces are driving a rapid evolution of the global energy landscape.Although opinions vary on the pace and extent of the resulting transitions,a

280、ttempts to balance energy security,affordability,and long-term decarbonization ambitions are contributing to unprecedented uncertainty about the global energy future.While transformation of the global energy mix is not new,the current transition is larger in scale and more complex than previous ones

281、 due to the multitude and sometimes divergent drivers of the transition.As one industry CEO summed it up:“The energy industry has basically been static for a long time,although we did not know it was static.Weve now moved from a largely internal,incremental agenda,to a whole set of existential risks

282、 and opportunities in front of us.”On one hand,the increasing urgency around climate change and reducing greenhouse gas emissions is driving the transition to cleaner energy sources.30 Many countries and corporations have committed to achieving net-zero emissions within the next few decades.Early mo

283、versindustry incumbents and pure-play,clean-energy playersare leading the paradigm shift,disrupting traditional business models and making permanent structural changes to these industries.On the other hand,the rebound in energy demand after the first wave of the COVID-19 pandemic,coupled with supply

284、-side constraints over the past year,have revealed the magnitude of the challenge in achieving climate change ambitions.Global energy demand and supply-side variability are expected to increase over the next decade.Until alternative energy sources are universally efficient,scalable,and affordable,tr

285、aditional energy sources and related infrastructure will continue to play an essential role.These considerations introduce a high degree of uncertainty about the path ahead,including how energy supply and demand,competitive and geopolitical dynamics,and societal implications will evolve.One thing is

286、 clear,however:the search for sustainable,reliable,and affordable energy will be at the core of global aspirations.Five ways leaders can transform to succeed in this shifting landscapeThese unprecedented and evolving challenges need to be tackled by all leaders of companies in the energy sector,from

287、 pure-play,new-energy start-ups to more traditional oil and gas companies balancing old and new business models,risk profiles,and cultures.Many of the elements of what it takes to succeed in the evolving energy environment will likely differ from those experienced in the past.Fresh demands may be pl

288、aced on leaders,and a fundamentally new approach to leadership will likely be required for incumbents and start-ups.This is irrespective of the business strategy adoptedwhich may range from a full pivot to clean energy,to a combination play,to an ongoing focus on a core hydrocarbon business but with

289、 the introduction of emissions abatement.Overall,we see companiesand leadersneeding to operate with substantially greater speed and entrepreneurialism,and this is especially applicable in the new energy sector.They may need to develop and practice fresh ways of collaborating,both within their organi

290、zations and in the emerging energy ecosystems.A major challenge is attracting and retaining talent in an environment where traditional energy companies are under intense negative public pressures.30 Global Energy Perspective 2022,McKinsey,April 26,2022.44The State of Energy Organizations 2024We inte

291、rviewed 15 C-suite executives across organizations in the energy sector to gain their perspectives on the critical leadership capabilities required to succeed in this new energy era.31 The interviews were complemented by a global survey of more than 140 senior industry leaders.The survey asked leade

292、rs to identify and rate the importance of different leadership capabilities against the backdrop of the current macroenvironment,and to offer their perception on how leaders in their organizations are currently performing across these capabilities.Finally,we layered in data from our extensive body o

293、f leadership research and decades of experience helping organizations with their leadership transformations.Based on our experience and research,we defined five key roles that leaders typically perform,from setting focus and direction to showing up as a leader,and identified two broad categories of

294、leadership qualities and mindsets,which we have called“traditional”and“emerging”(Exhibit 11).Exhibit 11Traditional and emerging leadership capabilities can be applied across five key roles.roles.McKinsey&CompanySetting focus and directionDesigning how value is createdOrganizing how people work toget

295、her Getting work done Showing up as a leaderTraditionalExecutive:ensure profts are predictably delivered to shareholders,through stable performance and efective risk managementPlanner:focus on beating known competitors to capture increased share of existing valueDirector:develop defned organizationa

296、l structures with clear roles,responsibilities,and authoritiesController:operate through detailed analysis,planning,and control to deliver outcomes and minimize variancesExpectation-setter:lead with focus on settingclear professional expectationsfor subordinates and managing for defned deliveryEmerg

297、ingVisionary:engage people with a compelling purpose to deliver impact and value to customers and all other stakeholders Architect:focus on working with customers and broader stakeholders to generate new value through reimagining and disrupting industry normsCatalyst:develop empowered teams and cros

298、s-unit networks,encouraging transparency,collaboration,and inclusiveness across the organization and externallyCoach:operate through short cycles of rapid decisions,experimentation,and learning to respond to new challenges and uncover new opportunitiesAuthentic leader:lead with authenticity and open

299、ness,encouraging personal well-being,creativity,and autonomy31 McKinsey global survey of senior industry leaders.45The State of Energy Organizations 2024The survey results illustrate a high level of agreement from respondents on the importance of emerging leadership qualities and mindsets to succeed

300、 in the new energy environment,while reiterating the ongoing relevance of traditional qualities(Exhibit 12).We observed a larger gap between desired and current levels of competency for emerging leadership qualities and mindsets.This is unsurprising,as successful leaders and executives have practice

301、d and honed the traditional qualities for many years.Exhibit 12There is an increased gap between the desired and current levels of competency for emerging qualities and mindsets.Global survey senior industry leaders;n=petency for emerging qualities and mindsets.McKinsey&CompanyCompetencyCurrent leve

302、lDesired level25th27th percentile rangeSize of gapMedium gap(0.5,1.0)Small gap($10 billionDeal sizeGlobal total upstream transaction value by deal size,1$billion1Includes global upstream transactions involving 100 percent ownership stake.Includes only exploration and production company transactions;

303、excludes oil feld service and equipment,drilling,midstream,or downstream transactions.Data as of January 2023.Source:Capital IQ$1 billion accounted for the largest portion of transaction value since 2016.McKinsey&CompanyTaking a closer look,most deals greater than$1 billion in size havent created va

304、luebut the best deals have created outsized returns for their shareholders (Exhibit 19).48 48 McKinseys Merger Integration Practice analyzes value creation through M&A deals across sectors using the metric of excess total return to shareholders.67The State of Energy Organizations 2024Exhibit 19Estab

305、lishing a plan for capturing synergies can ensure a deal creates value,which most transactions fail to do.4020606040200Top quartile of deals created 60%of M&A valueUpstream acquisitions with value of more than$1 billion,ranked in order of value creation50%of deals lost value for shareholdersExcess T

306、RS by deal from 2011 to present,1%1Analysis of excess total returns to shareholders(TRS)post-deal,based on trend versus index.Includes 71 upstream E&P transactions(excludes OFSE,midstream,other upstream subsectors)worldwide with value of more than$1 billion and 100 percent change in ownership.Calcul

307、ated as the post-transaction diference between buyer share-price performance and S&P 500 oil and gas index over a period of 2 years.2The top 25 percent of deals created$44 billion of excess returns to shareholders in 2 years,out of net$75 billion created in the data set of$269 billion of transaction

308、s.Source:Capital IQ;McKinsey M&A Insightswhich most transactions fail to do.McKinsey&CompanyWhat could be the make-or-break factor determining deal success?Multiple components are at play,such as predeal diligence,asset-performance uncertainties,outlooks for oil and gas prices,and transaction manage

309、ment.49 But in all cases,the ability to accrue differentiated value creation is a key factor determining merger success and may determine the winners in the next cycle.One plus one equals three:Maximize value by moving beyond G&AAll too often,upstream deals have limited their synergy goals to the lo

310、w-hanging fruit of G&A reductions.Our experience shows,however,that operational synergies are almost always larger than G&A savingsoften by a factor of three or more.49 Jeremy Brown,Tom Grace,and Zach Kimball,“The dos and donts of M&A in shale,”McKinsey,November 2,2020;Pat Graham,Maximillian Mahring

311、er,and Andy Thain,“Ten principles for successful oil and gas operator transitions,”McKinsey,January 31,2020;Global oil supply-and-demand outlook to 2040,McKinsey,February 26,2021.68The State of Energy Organizations 202450 McKinsey analysis based on synergy planning processes used during recent clien

312、t work in M&A.The most successful mergers are usually those that adopt a transformative approach to value capture,systematically pursuing synergies across financial categories and functions,including operations.Upstream companies can open the aperture across revenue and production,operating costs,an

313、d capital efficiency in addition to G&A,using the merger as a“moment in time”to catalyze performance improvement across both entities.Pursuing operational and production synergies with rigor equal to(or greater than)G&A cost synergies also has an important change-management dynamic.While reducing he

314、adcount and other expenses is usually viewed as a necessary evil that often generates negative emotion,developing additional revenue through operational excellence can drive energy and excitement and offer teams a point of pride to rally around.Operational synergies have the added benefit of being a

315、 buffer in case G&A synergies are harder to obtain than expected.Our work has highlighted that successful mergers approach operational synergies from three main angles(Exhibit 20).50 Exhibit 20Successful M&A drives operational synergy in three levels of ambition.Synergy examples by functionDirect op

316、erational synergyLeverage operating proximity or size-and-scale,or both,to drive efcienciesAccelerate best inventory across combined portfolioCombine and optimize well surveillance,workover campaigns,and water managementIncrease equipment and infrastructure sharing across more rigs and fracking spre

317、adsInstitute integrated contracts with larger volume and lower unit costsBest-of-the-bestCombine capabilities and data to scale opportunities across larger portfolioOptimize timing and orientation of stacked-pay development based on total program net present value(NPV)Maximize uptime of wells or fac

318、ilities based on combined data and learnings,including design and vendorStandardize execution based on combined data and expertise,accelerating spud-to-sales and minimizing costLeverage combined data and expertise to simplify designs and build supply chain resiliencyNew opportunitiesCapture the uniq

319、ue moment of the merger to catalyze step change in performanceEmbed fracking-interference mitigation into combined development plans with supporting data collectionExpand digital capabilities in surveillance and pilot new artifcial lift technologiesIncrease piloting of new techniques,as a smaller sh

320、are of larger total D&C budgetEmpower and integrate procurement teams to proactively combat infationary pressuresDevelopment planningProduction operationsDrilling and completion(D&C)Supply chain and procurementLevel of synergy ambitionSuccessful M&A drives operational synergy in three levels of ambi

321、tion.McKinsey&Company69The State of Energy Organizations 2024Leading companies often ask the following questions when considering M&A:1.What are the direct operational synergies to be extracted,either from an overlap(or adjacency in footprint)or from an expanded size and scale?2.How can we leverage

322、the best-of-the-best capabilities from each organization,using both data and capabilities to scale opportunities across portfolios?3.How can new opportunities be catalyzed in this unique moment to realize step changes in performance?Firms that strive to become world-class serial dealmakers may engin

323、eer answers to these questions into a repeatable“deal machine,”which they continually improve while proactively strengthening the muscle memory of how to run it.Publicly announce synergy goalsTo announce,or not to announce,that is the question.Once synergies have been planned and targeted,they can b

324、e announcedinternally or externally.At a minimum,targets,or goals,can be clearly communicated internally,with discreet goals set for each part of the combined business.This mobilizes the entire organization to drive performance,while offering a clear rationale for decision makers to anchor the many

325、tough calls that will likely be required during the integration process.But announcing targets externally can increase the chance that deals create value(Exhibit 21).While there is a negligible link between communicating additional information about the deal and the initial market reaction,announcin

326、g cost-synergy expectations may be tied to significant long-term outperformance over peers.Our analysis of 776 deals across sectors showed that companies that announced synergy targets outperformed those that did not by an incremental 7 percent TRS over a median of two years.Companies that announced

327、 synergy targets outperformed those that did not by an incremental 7 percent TRS over a median of two years.70The State of Energy Organizations 2024Exhibit 21Deals that announce synergies tend to outperform those that dont.AnnouncedsynergiesDidnt announce synergiesAnnouncedsynergiesDidnt announce sy

328、nergies2.25.30.70.6Initial market reaction,1;2%improvement above peer indexMedian two-year excess TRS,3%improvement above peer index1Excludes nonstrategic deals(for example,acquirer is a real estate investment trust or investment bank).Includes transactions of companies acquired with a market cap re

329、presenting 30 to 500 percent of the acquiring company market cap,and a total acquired market cap larger than$500 million,for announced and completed deals between 2010 and 2019.2Median acquirer short-term TRS in excess of industry sector TRS(MSCI)for 2 days predeal versus 2 days post deal.n=973.3Two

330、-year excess TRS involves the median acquirer long-term TRS in excess of industry sector TRS(MSCI)for 1 month predeal versus 2 years post deal.n=776.Source:Synergy LabPublicly announcing targets can contribute to putting healthy pressure on the executives and support teams who will have their compen

331、sation linked to meeting targets.As the onus is on the company to deliver,this can encourage executive teams to tackle the difficult decisions included in initial synergy estimates instead of opting for an easier route.To ensure delivery,publicly announced targets are typically supported by internal

332、 targets that are up to 200 percent higher,even in the case of value leakage.51 Public announcements also allow investors to understand where the synergies are coming from,instead of the deal being a black box.51 McKinsey analysis based on synergy planning processes used during recent client work in

333、 M&A.71The State of Energy Organizations 2024After the deal,some organizations may be tempted to adjust the synergy goals used in approval to better match the actual delivery.To counter this behavior,top CEOs may require their teams to place a record of synergy objectives in a figurative time-locked safe with the initial opening set for the first executive lookback on deal success.There will likel