February 2021

Trends and Resources

Business Trends: Are chemical companies ready for the future of work?

The COVID-19 pandemic has caused significant, short-term disruption to the chemical industry, potentially leading to long-term impacts.

Dickson, D., Deloitte Services

The COVID-19 pandemic has caused significant, short-term disruption to the chemical industry, potentially leading to long-term impacts. Employment in the chemical industry was also significantly impacted by the COVID-led slowdown. Based on statistics from the U.S. Bureau of Labor, between December 2019 and December 2020, the chemicals industry experienced job cuts of nearly 17,500, or 2.1% of the entire workforce. During this period, the industry lost 37,700 production jobs but added 20,200 non-production jobs, including researchers and scientists.

Furthermore, the drop in oil prices threatened to erode the cost advantage of U.S. petrochemical producers who use cheap and abundant NGLs as feedstock. With the dual effects of cheaper naphtha and lower international natural gas prices, production economics continue to support ethane-based crackers in the U.S., keeping them competitive vs. their European and Asian rivals. However, this advantage could be threatened by an unexpected and sustained surge in natural gas prices due to factors such as supply and demand imbalance and a significant and persistent decline in oil prices. Timelines for several U.S.-based petrochemical projects have been affected as companies reevaluate end-market demand.

The pandemic and market volatility have helped to accelerate some workforce trends already underway, such as the adoption of automation, digitization and more remote work, creating greater demand for workers to fill jobs in key areas, such as data analytics and cybersecurity. For example, there is growing demand for employees with research and development (R&D) experience, such as scientists and engineers and areas that help drive sustainability; however, one of the primary challenges for the chemical and refining industries is recruiting enough employees with these critical skills. In addition, the chemicals industry workforce is aging, with as many as 40% of industry workers eligible to retire in the next five years, according to the U.S. Bureau of Labor Statistics.

A further challenge is that existing employees with digital skills are at risk of migrating to other industries, such as technology and pharmaceuticals, where the prospects of career growth may seem to be brighter. The downturn also seems to be having a knock-on effect on a few fast-growing specialty chemicals businesses that compete with relatively stable businesses—such as life sciences—in sourcing talent in the growing material informatics and advanced materials sciences space. We examine these trends using the framework of work, workforce and workplace:

  • Work. The nature of work and job roles are changing. The need for continuous improvements in production processes is driving changes in the talent landscape, including shifts in job roles. More than 40% of employees have R&D and technical servicing experience. Scientists and engineers compose about 10% of the industry workforce. The share of jobs with analytical, information technology and technical competencies is growing.
  • Workforce. While automation and the use of advanced digital technologies are driving productivity, they are also leading to changes in workforce composition, increasing the need for a workforce with more advanced chemical engineering, data science and digital skills. Digitalizing operations or announcing net-zero long-term plans could boost interest by new graduates. Transformative work, well-defined career paths and agile working models could be critical to allowing chemical companies to attract new workers and to leverage and disseminate the knowledge of tenured employees.
  • Workplace. A dramatic change is occurring in the chemical industry workplace largely due to two key factors: globalization and interconnectivity. Globalization is the ability to manufacture and distribute chemical products across the world in a well-controlled manner through enterprise software and enabled systems. Interconnectivity is the ability to access, interact with and work with a skilled workforce around the world. Moreover, the COVID-19 pandemic is forcing companies to change how and where employees work. Many organizations have already adjusted to working remotely and have restructured their infrastructure to support work-from-home capabilities for their employees. In terms of innovation, value is migrating from the traditional R&D departments of chemical companies to material informatics platforms. Until recently, the process of discovering and developing new chemicals has remained primarily lab based. Many new companies that lie at the intersection of material science and computer science (i.e., material informatics) are reimagining their R&D departments towards open digital platforms.

Today’s changed environment has given chemical companies the much-needed “why” to transform themselves and find new ways to reclaim their earlier appeal. How can these companies adapt? According to a recent industry workforce report1, there are four levers of transformation that could push companies into the future: energy transition, integrated human-machine collaboration, recoded careers and organizational agility (FIG. 1).

FIG. 1. Chemical companies can use the four levers of transformation to prepare for the future.

These levers may seem difficult at the start, as all initiatives to change an organization or its culture are challenging initially. Once management engages with a transformation and empowers its employees to drive and shape the transformation, the pathway to transformation will likely be widely embraced.

Sustainability

The consequences of the pandemic seem to have reinforced the call for long-term decarbonization and transition to cleaner energy sources.2 The chemical industry and its served end-markets are evolving along with the growing emphasis on sustainability, and new industrial ecosystems (e.g., electric mobility) are emerging. This could create new opportunities for chemical companies to develop advanced material solutions and services to serve unique needs and capture more added value to other industries. This could mean more than $1 T/yr of additional value.3 However, the opportunities arising from a focus on these new areas present a challenge to the industry in terms of hiring new employees with the right technical skill set, as well as imparting these new colleagues with the organization’s institutional knowledge of environment, social and governance (ESG) issues.

Digitalization

The COVID-19 pandemic appears to have brought a greater urgency in accelerating companies’ digitization efforts to unlock new operational gains. Digitally enabled disruptions in major end-markets—such as transportation, computers and electronics, semiconductors, agriculture, and housing and construction—can affect business models across the industry. The chemicals industry workforce is under increased pressure to reduce time to market given the emergence of new entrants, increasing bargaining power of existing downstream players and the power of digital technologies.

Recoded careers

In addition to a renewed focus on attracting skilled new employees, companies should develop the existing workforce. For example, some companies are enabling scrum teams of data engineers, data scientists and technical experts to work together to solve internal and customer problems.4 They can also transform typical hierarchical structures with cyber-physical collaboration—such as reimagined collaborations or super teams (humans and intelligent machines working together fruitfully), which could provide transformative insights and solutions.5 Companies can devise unique programs with a broader objective to grow the existing workforce so that they can add value to future business plans. In addition to formal training, companies have been providing diversified exposure to business leaders by moving them to cross-functional roles every few years to enhance their value and competencies.

Perhaps the final challenge is how to engage and retain a tenured workforce. Could the looming brain drain from retiring employees be turned around by building a stronger cross-generational pairing to leverage the knowledge of experienced colleagues? Establishing unique programs (e.g., reverse mentoring) can foster more collaboration and two-way engagement between senior executives and young professionals.

Organizational agility

Organizational agility, driven by its four levers (portfolio, assets, processes and commercial), can help the chemicals industry increase efficiency by building a more flexible asset base relying on more diverse feedstocks managed by increasingly digitalized and automated processes. The industry has an opportunity to cut costs and become more agile by making people, processes and technologies more conducive for the post-COVID future.

On the way to transforming their organizations, leaders may have to constantly probe their plans and course correct to deliver added value. They should continually assess hard or even unfavorable business decisions. Continual self-assessment can go a long way in generating a resilient company. After all, the endgoal in tackling these questions is simple: building a chemical company of the future by making bold choices today for the work of tomorrow; expanding job canvases of the workforce by creating redesigned, cyber-physical teams and fungible roles; and embracing a digital workplace culture that remains open to future innovations.HP

LITERATURE CITED

  1. Dickson, D., et. al., “The future of work in oil, gas and chemicals,” Deloitte Insights, October 2020, online: https://www2.deloitte.com/us/en/insights/industry/oil-and-gas/future-of-work-oil-and-gas-chemicals.html
  2. Dickson, D., et. al., “Oil, gas and the energy transition,” Deloitte Insights, August 2020, online: https://www2.deloitte.com/xe/en/insights/industry/oil-and-gas/oil-gas-energy-sector-disruption.html
  3. Yankovitz, D., et. al., “Digital opportunities for chemical enterprise: Creating lasting value,” Deloitte Insights, 2018, online: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/manufacturing/us-manufacturing-digital-opportunities-for-chemical-enterprises.pdf
  4. Slav, I., “Wanted: Oil workers with more tech, less ‘roughneck’,” Oil Price, December 2019, online: https://oilprice.com/Energy/Energy-General/Wanted-Oil-Workers-With-More-Tech-Less-Roughneck.html
  5. Volini, E., et. al., “Superteams: Putting AI in the group,” Deloitte Insights, May 2020, online: https://www2.deloitte.com/us/en/insights/focus/human-capital-trends/2020/human-ai-collaboration.html
  6. Volini, E., et. al., “A memo to HR: Expand focus and extend influence,” Deloitte Insights, May 2020, online: https://www2.deloitte.com/us/en/insights/focus/human-capital-trends/2020/changing-role-of-human-resources-management.html

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