Ready for the Big Time

By Bridget Testa

Jun. 16, 2006

Like many other companies in the oil industry, Houston-based National Oilwell Varco is enjoying today’s boom times.

    Back in the 1980s and 1990s, things were different. The notoriously cyclical industry was in a veritable depression. More people were laid off in the oil business during the ’80s than in the auto and steel industries combined. First to go were the youngest and least experienced. NOV not only laid off people in the ’80s, but also did almost no hiring in the ’90s. From 1996 to 1999, the company, then known as National Oilwell, added a net total of 1,390 people to its workforce. By contrast, the company, which became National Oilwell Varco in 2005 following a merger, hired 1,770 employees in the first quarter of 2006 alone.

    In 2003, NOV chief executive and chairman Pete Miller realized that the entire senior management of the oil equipment manufacturing and services firm was made up of baby boomers. In the face of a certain wave of top-level retirement during the next decade, Miller decided it was time to start hiring again. He didn’t want to just hire technical staff; he wanted to hire the next generation of company leaders.

    Miller turned to Jerry Gauche, senior vice president of sales and marketing, and Thomas Bowden, director of employee development, who consulted with others in the company. When Gauche and Bowden went back to Miller, they proposed the “Next Generation” plan.

    After a strenuous recruiting and interviewing process encompassing colleges and universities across the country, NOV would select the crème de la crème to work for the company as Next Gen candidates. In their first year, candidates would rotate through a series of four three-month assignments in different business units to get an intensive education in NOV’s operations.

    And here is where the process gets interesting. At the end of that year, business units would compete for candidates in a process based on the National Football League draft. Gauche was inspired by the book Patriot Reign—about Super Bowl champions the New England Patriots and head coach Bill Belichick—which he was reading when Miller tapped him for ideas about improving NOV’s recruiting process.

    Today, two rounds of NOV’s Next Gen candidates are in permanent jobs, the third round will soon be drafted, the fourth round is in the midst of rotations, and the fifth-round rotations are set to start next month. The future of NOV is riding on the Next Gen program’s success.

Reaching out for recruits
    To find the leaders he wanted, Miller mandated for the first round of the Next Gen program that NOV’s recruiters look beyond the usual “oil patch” states like Texas, Oklahoma and Louisiana.

    “We wanted to get people from other geographic areas,” he says.

    Because of the global nature of oil, Miller also wanted foreign candidates, particularly those studying at American schools because those students tend to have better proficiency in English. Miller had no desire to recruit from other companies.

    “Why bring someone from another company when I think NOV is the best?” he says. Miller also doesn’t want to bring in people from other companies and give them better opportunities than in-house employees get. “What does that tell the in-house person?” he says.

    Indiana University, the South Dakota School of Mines and the University of Illinois were a few of the schools NOV recruiters visited for the first round of Next Gen candidates. Despite the boom in the oil industry, which has brought on severe talent shortages, the company has had no difficulty finding recruits for it Next Gen program.

    “We targeted business, engineering and liberal arts majors,” says Meredith Winczewski, the original head of the Next Gen program, who is today a project manager for oil rig sales. “We looked for competencies (such as) communications, the ability to deal with ambiguity, perseverance, strategic ability, a drive for results and political savvy. We wanted them to have those qualities so we’d have good leaders.”

Rotating new hires through four different assignments in the first year of employment “is a great talent magnet. It’s why NOV is taking candidates away from the competition.”
–Thomas Bowden,
director of employee development

    Thirty to 40 candidates were selected at each of 10 schools for interviews. That was after an open information session in which attendees were prescreened based on their questions and interest in the company. After the prescreening, chosen candidates were interviewed twice by two different NOV employees, often midlevel managers who’d be the bosses of successful candidates.

    Second-cut recruits were invited to visit NOV in Houston for two days for a nearly constant stream of additional interviews—both formal and informal. The schedule was intense: a wine and cheese reception with NOV managers at the students’ hotel; a dinner with young NOV employees who are mostly from the first two rounds of the program; a breakfast with the company’s senior management; three formal interviews with managers; lunch with current Next Gen candidates (except in the first round, of course); and a factory tour. All of these activities culminated with a dinner with all the group presidents, including Miller if he was available.

    “We get feedback from every NOV employee, manager and tour guide along the way,” Winczewski says.

    NOV spends a little less than $100,000 a year on its Next Gen recruiting efforts. That covers two recruiting rounds per year but excludes salaries, which are paid by the business units where the candidates work.

    Since the Next Gen program started in 2004, all recruits have been viewed as permanent hires from Day 1. Out of all 70 recruits—15 in each of the first three rounds and 25 in the fourth—only six have left the company.

Rotation, times 4
    Rotating through four different assignments in the first year of employment might seem daunting to some college graduates. Not so for NOV’s Next Gen candidates.

    “It’s a great talent magnet,” Bowden says. “It’s why NOV is taking candidates away from the competition.”

    Lisa Nix, who was recruited in the first Next Gen round and is now a forecasting and planning analyst for NOV, agrees that the rotation process was a major draw for her.

    “I didn’t know what I wanted to be when I grew up,” she says. “Lots of people get degrees, but don’t know what (working in that field) is really like. Rotation gave me an opportunity to try out different things before making a final decision.”

    Rotational programs, first tried in the 1950s by General Electric and Bethlehem Steel, yield long-term benefits for both candidate and company, according to recruiting consultant Gerry Crispin, a principal of Kendall Park, New Jersey-based CareerXroads.

    “Companies should expect a return on investment of a close kind of relationship among candidates—a high level of internal networking that leads to more ways for people to get their jobs done,” he says. “People stay much longer, and candidates meet higher standards of performance.”

    Many companies, however, don’t have the discipline to carry through on the rotations.

    “It usually happens in the second rotation that there’s a fit,” Crispin says. “Then the rotation stops with a job offer.”

    Even when completed, how­ever, rotational programs have their downsides. Crispin says they typically require higher upfront investment—including candidate salaries—and extend the period between hiring and productive performance, with no guarantee that the candidate will stay long enough to make the expense worthwhile.

    NOV requires that all Next Gen candidates finish their rotations, even though many managers have tried to short-circuit the process just as Crispin describes. That’s because the program’s participants have proved to be so productive.

“I couldn’t get enthused about the normal placement process, which tends to occur behind closed doors and focuses on immediate openings rather than looking across the entire business to identify needs.”
-Jerry Gaucho, senior vice president of sales and marketing

    “One of the surprises of the program was how quickly the graduates started creating value,” Gauche says. Even so, some rotational managers grasped neither the goals of the Next Gen program nor the caliber of the candidates.

    “Bad rotational managers don’t know how to mentor, set goals or follow up,” says Pat Sullivan, vice president of customer support in NOV’s rig solutions group, which designs, manufactures, sells and services equipment used for drilling, completing and servicing oil and gas wells. “One rotational manager had a candidate digging ditches and filling potholes. Other candidates have done filing.”

    When these situations occur in rig solutions, Sullivan says he tries to discover them as quickly as possible and rectify them. He’ll either move the candidate to another job or replace the offending manager with someone else as a mentor. Sullivan has even taken some managers off the list to have Next Gen candidates rotated to them. But he has also worked within rig solutions to provide more training to the organization.

    “In the first group, my philosophy was ‘training for kids,’ ” he says. “In the second group, I changed my philosophy to giving candidates more challenges and more of a leadership role in solving problems.”

    After four rounds of the Next Gen program, however, most rotational assignments have benefited NOV and the candidates. “Rotation doesn’t niche people into one job,” says Lindsy Williamson, manager of university recruiting and retention. “It lets people find out about different opportunities to see where they fit.”

    On the company side, she says, “rotation helps in communication between business groups. Many people in the company have worked in the same group for their whole career. The rotations provide the Next Gens with the flexibility to bridge gaps between different business groups.”

Draft day
    After the end of their year rotating through the company, Next Gen candidates are hired for permanent jobs via a process modeled on the NFL draft. Gauche liked the idea, and not just because of the book on Belichick and the Patriots.

    “I couldn’t get enthused about the normal placement process, which tends to occur behind closed doors and often focuses on immediate openings rather than looking across the entire business to identify needs,” he says.

    In the NFL, teams with the worst performance for the previous year get first draft picks. At NOV, business units with the worst return on capital in the previous year get the first Next Gen picks.

    NFL teams have directors of player personnel to assess talent needs and create a draft strategy. So does each NOV business unit. Candidates high­light their skills and talents in presentations to executives and managers—NOV’s version of the NFL “combine” where players demonstrate their prowess on the field. NFL teams negotiate and trade draft picks.

    “Leading up to draft day there were negotiations among the business units. … Last-minute deals have occurred occasionally,” Gauche says.

    Choices are finalized the night before draft day. In a breakfast ceremony, Miller, acting as league commissioner, announces the picks in alphabetical order.

    “In the beginning,” Gauche says, “we debated whether to announce the order of the picks, and concluded that having a high-potential individual thinking ‘I was the last person drafted’ wouldn’t be helpful. So we don’t disclose the order in which people were drafted.”

    And then there’s the 9 percent or so that haven’t made it to draft day. Winczewski cites the example of one candidate who just didn’t fit in, wasn’t performing and wasn’t getting along with people. He kept saying he wanted to go to law school, and when he left the company, that’s just what he did.

    “It’s impossible to recruit 100 percent, even with a very detailed interview process,” Winczewski says.

Most rotational assignments have benefited the candidates and NOV. “Rotation doesn’t niche people
into one job. It lets people find out about different opportunities to
see where they fit.”
–Lindsy Williamson, manager of university recruiting and retention.

    For most candidates, however, the draft process is pleasant, if a little stressful.

    “It was a pretty open process, and it was a good method to get in touch with managers throughout the company that might be interested in hiring you,” Nix says. “It gave the draftees a format for getting in touch with all those people. We weren’t left on our own.”

    Gauche considers draft day a strategic success too.

    “As a result of this process, we have job fits that are better for the candidates, and in which they will create greater value for the company than in the traditional process,” he says. “Plus, it’s fun.”

Final score
    Although the Next Gen program is just two years old, early results are promising. So far, the retention rate is 91 percent, and managers who were originally skeptics are now lining up to hire candidates for rotations.

    As for those candidates, they’re learning the leadership skills Miller envisioned. Not only do they see firsthand how business units affect one another, but they are also developing invaluable networks of relationships.

    “(The Next Gen program) gives you several years of experience in one short period,” Nix says.

    Gauche, who brought the draft model to NOV, is happy with how things are going. But as in football, past successes don’t guarantee future wins. And NOV knows how it will proceed.

    “We’ll keep experimenting,” he says.

Workforce Management, June 12, 2006, p. 1, 24-31Subscribe Now!

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