Critical tools for tough times

There are a few critical tools oil and gas companies must use to survive and thrive past the current and unprecedented economic conditions. Primary among these is sustaining investment in training and development. Many companies today are continuing to do so even when instincts honed in the past dictate otherwise. Why?

First, even with recession, in the next five to 10 years many skilled and experienced oil and gas professionals will retire. Assuring leadership succession in the face of this exit of knowledge and talent is among the industry's top challenges. In addition, aging infrastructure, price volatility, increasing mergers and acquisitions, escalating costs and diminishing reserves all combine with shifting global political landscapes to raise the standards for effective leadership. Finally, investments in training communicate value to employees that firms wish to retain when mobility becomes easier in a strengthening economy.

Investing in current talent is an important tool for forward thinking firms that wish to position themselves ahead of the competition when business conditions rebound. Here are five more.

Attract the best employees. This economic downturn is unleashing legions of qualified and experienced people into the job market. Shrewd companies, acting countercyclically, can select and choose the best talent from a deep reservoir of manpower.

Plan for debt coming due. Avoid becoming a victim of the credit freeze by reviewing long-term debt, loan covenants and any major interest payments coming due in the next 12-18 months. Plan to refinance debt with the assumption that it will be difficult to extend current terms. Inform existing shareholders if a debt for equity exchange is planned so that major financial stakeholders can be prepared for future possible dilution.

Keep your customers without discounting. Customers are stretched, and competitors may be cutting prices to stay in business. To avoid destroying hard-earned brand equity, reposition your product or service around its distinctive attributes. Offer your best customers longer payment terms. Try short-term promotions that attempt to reel in new customers. Large firms should visit their customers and work with them to design more customized solutions.

Look out for problems in your supply chain. Be prepared for possible disruptions occurring from financial and labor issues impacting suppliers who may be in dire financial straits. Look to alternative suppliers for off-the-shelf needs just in case. On core products and technologies, work with suppliers to share costs and risks. The upside is that both will profit handsomely when the economy recovers.

Prepare for new types of competitors with the upturn. It may feel tight now, but the heat will really be on if you are unprepared for a whole new wave of competitors in the future. This is a good time to look for strategic alliances that provide an advantage over a potential future rival. Recessions are breeding grounds for innovative technologies, so don't slam the door shut on new ideas.

Using these tools, this downturn can be an opportunity to re-evaluate and redefine your position over the next five years. Chances are someone else-your next newest competitor-is already doing so and targeting your customers.

Frank R. Lloyd, PhD, is Associate Dean of Executive Education for the Cox School of Business at Southern Methodist University.He is responsible for programs for executives, managers and working professionals.He joined SMU from the Thunderbird School of Global Management where he served as Vice President of Executive Education.Prior to that, Dr. Lloyd was a human resources management executive with General Motors.