Frontier Markets: Local Workforce as a Strategic Asset for Energy Companies

For oil companies, growth now depends on the ability to exploit deposits in frontier markets. To achieve this, Accenture believes that excellence in developing a local workforce is vital.

In today's increasingly competitive energy industry, oil and gas companies are constantly looking for ways to grow. This often means working in developing markets—also called "frontier" markets—which offer opportunities for economic growth via access to significant energy reserves. Frontier markets include West Africa, Russia, the Caspian Sea and Southeast Asia. The rewards of the frontier markets are not reaped without overcoming several obstacles. Frontier markets are often located in remote regions with limited technologies and infrastructures and are typically characterized by complex government regulations. Furthermore, the local workforce does not usually have the technical capabilities and management skills required to operate, support and supply today's sophisticated and complex oil industry.

The ability of energy companies to address local workforce challenges is emerging as a key determinant of success or failure in frontier markets and high-performance companies are realizing that new approaches are necessary to achieving success. The former reliance on expatriate workforces is waning as they become too expensive and skilled resources become unwilling to relocate to frontier territories.

Leaders are now focusing on developing workforces. Accenture has found that this is far from simple altruism—it is good business. Development and use of local suppliers of goods and services contribute to lower operating costs. Investment in local businesses and communities builds goodwill with the host-country government and is often rewarded with a decrease in taxes. With the right approach, energy companies can create high-performance workforces in frontier markets—workforces that can compete locally, regionally and globally and enable growth and success. The ability to excel in managing global and frontier operations is now a criterion in evaluating organization management and governance success. This is demonstrated by the way in which the Dow Jones Sustainability Index, which tracks leaders in sustainable development across industries, outperformed the Dow Jones Global Index.

Effective transformation of a local workforce requires a comprehensive approach that also addresses the larger context in which the workforce operates.

Our workforce transformation approach has three elements:

• Developing the local workforce. Companies working in frontier markets must transform the local workforce to support operations, achieve growth objectives and meet country requirements for local content.
• Leveraging the global workforce. Accenture has found that an energy company's global workforce can also play a vital role in the transformation and ongoing success of a local workforce.
• Developing sustainable local business. Sustaining local businesses and strengthening the local workforce go hand in hand; an effective workforce is essentially a prerequisite for long-term results.