FINANCIAL TIMES: Failure of strategy dates back 10 years: “Shell's announcement of plans to seek more than 1,000 engineers (report, January 18) generated remarkably little comment. It raises important questions, both for Shell and others.”: “Nobody has yet asked how Shell got into this situation in the first place.” (ShellNews.net) 24 Jan 05

By Kim Warren

Published: January 24 2005

From Dr Kim Warren.

Sir, Shell's announcement of plans to seek more than 1,000 engineers (report, January 18) generated remarkably little comment. It raises important questions, both for Shell and others.

First is the sheer scale of the challenge - this number is 1.5 times the UK's total annual output of graduates in chemical, process and energy engineering. While Shell fishes in a global talent pool, of course, this statistic does highlight the scale of the problem.

Nobody has yet asked how Shell got into this situation in the first place. There is no suggestion that the company has recently been drained of talent. So this failure of strategy did not occur over the last year or two, but goes back a decade or more. Work we have done recently with a leading petrochemicals group shows exactly the same problem - a shortage of key engineers that can be traced back to hiring cuts in the early 1990s.

Your report rightly questions whether the required technical staff exist in the marketplace, even if Shell is determined to find them. It is not the only company in the sector to have under-hired key professionals throughout the early to mid-1990s. Consequently, its competitors are also almost certainly understaffed in exactly these same skills. This is not the end of the story, however. With the entire industry cutting back recruitment, bright teenagers soon got the message that there was no demand for their talents - according the Engineering and Technology Board, UK enrolment in those same degree courses fell from 1,200 in 1992 to just 676 in 2003, with particularly steep declines following hiring cuts in the mid-1990s and 1999-2000. With so little new talent coming through and scarcity in the market (also reported by US sources), expect there to be a war for the talented few experienced engineers currently in the market. Shell will not only have to fight to recruit new talent but will have to pay heavily to secure its existing people.

This is just one symptom of a widespread disease, the obsession with financial controls and efficiency, chasing quarterly earnings to please analysts with scant regard for the future. How many other organisations, we might wonder, are struggling today due to poor human resources strategy going back 5-10 years, and how many have strategic aims for future years that are pure fantasy, given grossly inadequate talent-development and obsessive cost control today?

Kim Warren, Chairman, SDS, London W1W 5BB (Teaching Fellow, London Business School)