Aberdeen Insights

No Time for Going Dark

by David Webster

The headlines this week were stark, even fearful: “Plunging prices could force a third of U.S. oil firms into bankruptcy” read the Wall Street Journal. History seemed to be repeating itself as my thoughts returned to Houston in the 1980s when I was just getting started with my career and young family; I pondered the years-long effects extended low oil and gas prices can have on people, companies, other industries (like banking) and entire regions of the country.

We know, of course, that the oil industry’s current circumstances will eventually improve. That knowledge is not very comforting to anyone affected directly by this storm.

Those who have the previous oil price shocks seared into our minds learned a thing or two from the experience and want to do everything in our power to steer our companies and clients away from the pitfalls of operating in very lean times. The companies who have those collective memories embedded in them will likely survive if they have protected themselves with fortress balance sheets and well-maintained corporate cultures. The survivors – both people and companies – are also likely to have the trait of seeing opportunity where others see only doom.

Dallas billionaire Kelcy Warren, founder and chairman of Energy Transfer Partners, has just such a philosophy. ETP is slated to be the largest midstream company in the United States when it acquires Williams Company, but traces its success back to acquiring key assets from defunct Enron. Warren said in a recent interview with the Dallas Morning News, “The fear of failure is a very real thing, and it’s something that never leaves my brain. But when you let it control your guidance that’s when you cease to be good at what you do. We are driven here by growth and being smart about that growth, not getting over-leveraged. I’ll get hated for this, but with the price of crude plummeting, that’s a great thing. You really make money during the dark times when other people are struggling.”

A key aspect of surviving for the long-haul is to ensure stakeholders are informed and involved. Many companies “hunker down” when in fact they should double their efforts to communicate, both inside and outside of the company. Communicating now can have tremendous positive effects for your company’s future.

The survivors – both people and companies – are also likely to have the trait of seeing opportunity where others see only doom.

Having A Plan

All companies should lay out a strategic plan for communicating during this period, spelling out who you need to communicate with, how often and the tools you will use. This plan should have the attention of everyone on the senior team. There are numerous new communication channels that can be used to keep your stakeholders informed and aware. These tools – such as social media – are low cost and well suited for managing in a rapidly changing environment. Ensure that whatever you communicate is clear, straightforward, and consistent to the various stakeholders.

Internally, keeping your people informed is vital, not only for morale and efficiency, but for ensuring those who interact with front line employees are properly informed and not left to their own assumptions. Share information with employees frequently and equip them for discussions with vendors or others outside of the company who have a vested interest in how your company manages through the rough patch. Employees will embrace this responsibility and protect the company’s reputation if you will involve them. Set up feedback mechanisms so you can proactively manage issues before they become problems. This is particularly important where vendors are concerned; their businesses may be stressed as well, and knowing their circumstances might help avoid a crisis that could affect you.

Externally, you also need a plan to keep local communities apprised and informed through regular contact with key leaders and influencers. These stakeholders may only be aware peripherally and not recognize the implications of the downturn on their communities unless you talk to them regularly. While trade organizations can help, nothing beats a face-to-face visit to tell civic leaders or an elected representative how things are and what they might expect. Keep your presence at the state capital and Congressional district offices active. Staying communicative now while things are difficult will have long-term benefits for your company’s reputation and better secure your license to operate.

The advice to communicate is easy to shrug off as unnecessary, particularly in a resource-shy environment.  However, those who wish to take advantage of the opportunities ahead will do well to put some effort into something that costs so little but can have such as positive impact on your business.

This opinion piece appeared previously as an editorial for The Stream.