“Oil Prices Fall to Six-Year Lows” reads a recent New York Times headline. This recession has reminded the oil and gas sector of the challenges of being in an industry where revenue is directly tied to a commodity. Conventional wisdom dictates that prices will rebound; however, the only thing people seem to be able to agree on is that nobody can predict when that will happen. So what should business owners do in the meantime? Communicate with stakeholders, manage expenses, and be strategic about the changes you make to your company. These are best-in-class practices worth taking on.
Keep in close contact with stakeholdersOil and gas exploration companies are used to fluctuating commodity prices. The questions to answer are, “How long can we continue at this pace?” and “What’s the impact on the organization?” Then communicate that information to important stakeholders, from your professional services team to key employees to the board.
If you’re not communicating, people assume the worst. But if you’re transparent about the company’s current state and forecast for its future, you’re fostering a “we’re in this together” culture, which is the surest path to success.
Manage expenses in line with revenue changesThe first reaction in times of decreasing revenue is to try and slash expenses — with little thought to the long-term impact. Delay core companywide structural changes that may hamper your success when prices rebound as long as possible. Because they will rebound. During the 2008–2009 U.S. recession, so many companies cut critical people — people that were hard to replace when the companies tried to grow again as the recession faded.
Be strategic about the changes you makeWhat is your core business? When times are good, companies often branch out into ancillary services that aren’t part of the core business. When cutting expenses, it may make sense to consider cutting back to that core business level and then operating from that core position of strength. Focus on what you do best, and revisit the other components as appropriate later on. And remember what Rudy Giuliani once said: “Hope is not a strategy.”
Try not to listen to the noiseEvery day, it seems like there’s more bad news, but it’s important not to fixate on the negatives. Instead, assess where you are and try to set a realistic tone for your company. Engage your talent to help come up with solutions. People want to make a difference. It can be easy to say, “If I do this one little thing, it won’t make a difference,” but business is a game of inches. Those little things become the difference between struggling and success.