Baby Boomers Retirement in Oil and Gas

Challenges of Knowledge Transfer for Organizational Competitive Advantage

Muhammad Saleem Sumbal, Eric Tsui and W. B. Lee

Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Kowloon, Hong Kong

Keywords: Baby Boomers, Knowledge Transfer, Competitive Advantage.

Abstract: The current paper presents an overview of the baby booming phenomena and its implications on the

knowledge management capabilities and competitive advantage of the organizations. Further it focuses on

the baby boomer crisis in oil and gas sector and proposes a framework to investigate the knowledge transfer

trends from baby boomers and its impact on organizational competitive advantage and knowledge

management.

1 INTRODUCTION

Oil and gas industry is one of the most complex,

most important and one of the world's largest

industry among the global industries. Due to

changing economic and global conditions and

searching for oil and gas at remote locations, there

has been an increasing number of challenges in the

oil and gas industry regarding the aging workforce

of the industry and problems in attracting new talent.

In order to handle these challenges, effective

knowledge management is a key to success covering

knowledge production, transformation and

distribution. As older employees leave an

organization, they take along with them a wealth of

experience accumulated over years. The knowledge

of these workers need to be captured before they

walk out of the door so that the new and

inexperienced employees could benefit from this

knowledge and learn the techniques and ideas which

they are unable to learn from the manuals and

regular training. Ultimately good knowledge

management will eventually help organizations in

gaining competitive advantage. Technology and

culture play a key role in capturing of such

knowledge and work as enablers of knowledge

management. This paper provides a framework to be

used for an

empirical investigation of role of baby

boomers in successful knowledge management

implementation and the inter relationship of

technology & culture, competitive advantage and

baby boomers. This study aims at filling the gap in

previous literature regarding the inter relationship

between competitive advantage, knowledge

management and critical role of baby boomers in oil

and gas sector.

2 LITERATURE REVIEW

In this section a detailed literature review about the

baby boomers, knowledge management and

competitive advantage will be presented.

2.1 Baby Boomers, Source of

Knowledge and Huge Player in

Success of Organization

When a worker leaves, it is not just a long time

employee of the organization leaving but years of

experience and knowledge is flowing out of the

organization. Although managers fear losing their

competent and experienced employees but still

people are being fired and they getting retired and

most of time organizations don't realize they are

losing valuable source of knowledge because of the

culture prevailing in that specific organization. The

workforce in today's economy can be divided into

three groups. These are X generations, Y

Generations and Baby Boomers. Baby boomers is a

term used to name the employees who were born

between 1945 and 1964 (Yu and Miller, 2005).

Generation X comprise of people born between 1965

to 1980 and generation Y are the young ones born

after 1980 (Kyles, 2005). Thus study is focusing on

baby boomers who have reached the retirement age

168

Sumbal, M., Tsui, E. and Lee, W..

Baby Boomers Retirement in Oil and Gas - Challenges of Knowledge Transfer for Organizational Competitive Advantage.

In Proceedings of the 7th International Joint Conference on Knowledge Discovery, Knowledge Engineering and Knowledge Management (IC3K 2015) - Volume 3: KMIS, pages 168-173

ISBN: 978-989-758-158-8

now and have been part of the organizations around

the world for past 25 to 30 years

Older employees are good at doing good and

quality work, they tend to be more reliable, better

reading and communication practices and finally,

have good performance records and experience. In

2005, Tower Perrins issued a report in which

researchers interviewed 10 major US employers and

they were of the view that workers aged 50 above

brought huge success and value to the company

because of their experience, maturity and positive

attitude (US, 2005). Moreover older employees put a

lot of efforts in terms of time and hard work to make

business succeed like as (Ball, 2011) mentions that

top sales people used to play golf all day with their

clients and had longer meetings if needed and this

was the way to grow the businesses and what clients

expected from you. This in turn helped organization

flourish and gain competitive advantage over

competitors. Thus boomers are a huge asset and they

possess a lot of experience, good reputation and

deep insight of the company developed over a long

period of time, which new employees lack and can't

replicate (Lesser and Rivera, 2006). Thus

organizations need to effectively work on capturing

knowledge of these baby boomers to avoid valuable

knowledge loss (Glick, 2007).

2.2 Organizational Awareness of Baby

Booming Phenomena

Companies are trying to handle this baby booming

phenomena, some have succeeded while others have

failed. Failure is due to the attitude of executives and

top management and, technology, budget shortfalls

etc while success is due to timely realization of the

aging workforce and taking adequate measures to

secure knowledge (Ball, 2011). For the success of

the organization, knowledge management is an

important challenge, and the most important

knowledge source is the knowledge of the

individuals in the organization (Gretsch et al., 2012).

The common errors which make knowledge

management implementation unsuccessful are; not

able to understand what knowledge is, give less

attention to the role and importance of tacit

knowledge and focus on past and present only, not

the future (Fahey and Prusak, 1998).

In certain industries like manufacturing and oil

and gas, the issue of boomers retirement is more

serious as new generations aren't stepping up to join

these industries as many of them don't want to be

away from home and work in harsh environments in

case of oil and gas (Ball, 2011) and others don't want

to work in dangerous and dirty factories even though

they can make good money (Eisen, 2003).

According to McKenna et al., (2006), the shortage of

technical people due to graying of baby boomers

will have huge impact on oil and gas industry as

more than 50 % of employees in oil and gas

companies and contractors will be retiring in the

next five to ten years thus raising concerns about

success of new projects. Overall, there will be 76

million baby boomers retiring next ten years

according to Forrester research (Lesser and Rivera,

2006) and the younger employees to replace them

are only 46 million.

According to Gould et al., (2007), oil and gas

industry is facing baby boomer crisis mainly because

of its cyclic nature. More people are recruited and

additional skilled workers are employed as the oil

prices go high which favours increase in cost

effective exploration and production and drilling

projects and people stay as workforce is required.

When the prices fall, it reduces the exploration and

production and thus less work force is required and

employees contracts are not extended. As the

employees cannot wait for the next project, they go

for other opportunities and jobs available

. Inkpen

and Moffett (2011) discuss the major reason for

failure of oil and gas industry in retaining new

talent. These include a bad perception of oil and gas

industry, shortage of engineering graduates, project

base work in oil and gas causing job insecurity,

harsh environments and far off work places away

from home and no formal career path development.

Organization are concerned about knowledge

transfer from old to young but still there are barriers

like from where to start and how, confusion of

knowledge transfer with information exchange, lack

of incentives to employees for knowledge sharing,

lack of time and organizations' lack of knowledge

about the work force (Piktialis and Greenes, 2008).

In terms of competitive advantage, intangible assets

are the most important or firms and the most

important of these are the accumulated learning and

experience of the people (Bateman and Snell, 2002)

as well as the knowledge of the employees which

can bring value to the organizations (Marr et al.,

2003; Walters et al., 2002) and baby boomers are a

very wealthy source of this knowledge

2.3 Baby Boomers, Knowledge

Management and Competitive

Advantage

Knowledge is everywhere in organizations in

various forms (Ball, 2011) and it is the true

Baby Boomers Retirement in Oil and Gas - Challenges of Knowledge Transfer for Organizational Competitive Advantage

169

knowledge that makes organizations work and

succeed (Davenport and Prusak, 1998). The best

way for knowledge transfer through the bright and

experienced people in the organizations (Davenport

and Prusak, 1998). Same was agreed by Holtshouse

(1998) that according to many business leaders and

scholars face to face interaction is best for sharing

tacit knowledge. Cultural knowledge is important as

it determines how you navigate and interact with

others in an organization. Without knowing the

culture, it is hard to be part of the organization. It is

critical to understand what type of knowledge exists

in the organization (Ball, 2011). McNichols (2010)

on her research of knowledge transfer between

Boomers and Gen X states that young workers

wanted to learn the tacit knowledge by sitting and

having face to face conversations with them.

Moreover her research revealed that top

management plays a key role in fostering a

conducive learning environment based on trust,

relationships with IT as an enabler (McNichols,

2010; Stevens, 2010).

Knowledge management and competitive

advantage are strongly linked to each other and it is

very obvious that organizations can gain competitive

advantage through effective use of knowledge

management (Grant, 1991; 1996; James, 2005). As

knowledge bring competitive advantage, so does the

management of knowledge and it involves the

building, linking and bonding of the human capital

(Bartlett and Ghoshal, 2013). First efforts need to be

made in developing individuals with specialized

knowledge, the linking them through social

networks using IT infrastructure to enable

knowledge sharing and finally developing relations

of trust and bonding for employees to stay and not

leave the company with their valuable knowledge.

When there is need to transfer and share

knowledge from the experts to employees,

organizations that have clear understanding of their

knowledge capabilities will be successful (Snyder et

al., 2000). Moreover every generation has its own

style of communicating and understanding things

using different aids. So new generations might not

learn in the same way and time and ways required

for understanding might be different. It will

definitely take time. Wagner (2009) is also of the

same view that methods for knowledge transfer

might vary considering how the new generations

learn.

In 2011, third Oil and gas Industry collaboration

survey sponsored by Microsoft was conducted to

have an insight of the emerging trends in companies.

The pie charts (fig. 1) shows that there are more than

40 percent people older than 50 years and 66 %

older than 40 years which shows evidence of aging

workforce. The managers, engineers, scientists,

executives all were aware of the greying of baby

boomer and possible loss of knowledge. However,

regarding the retention of knowledge, only 31

percent were of the view that technology driven

access to people and information will somewhat

reduce the impact of talent scarcity. This survey also

showed awareness of the companies about measures

being taken to capture knowledge using blogs, wikis,

social networking, messaging etc. Also only 40

percent of the companies were taking measures to

capture knowledge and somewhat prepared and rest

of the companies were either unprepared or don' feel

the need (Ball, 2011).

There are three main components of knowledge

management; Humans, organization and technology

(Reinmann-Rothmeier et al., 2000). Information and

communication technology plays an important role

in knowledge management as KM is defined as a

process which makes organizations to create, refine,

store and share knowledge through this ICT system

(Zack, 1999). Developments in technology and

communication have also lead to the development of

knowledge management and thus organizations can

create, store and disseminate knowledge with much

ease using the advanced technology which

eventually helps organizations in sustainable

competitive advantage (Adams and Lamont, 2003;

Bhatt, 2001; du Plessis, 2005; Malhotra, 2004; Tsui

and Malhotra, 2005). Moreover organizations

comprise of individuals with unique characteristic

and values that contribute towards an organizational

culture (Davenport and Prusak, 1998). David and

Fahey (2000) explain four ways in which culture

influences knowledge creation, disseminations and

sharing. First about identification of knowledge,

second about managing knowledge, third social

interactions for sharing knowledge and finally

shaping the ways to facilitate new knowledge.

Culture of trust and confidence is highly important

for efficient knowledge transfer (McDermott and

O'dell, 2001). Albert and Picq (2004) worked on

knowledge based organizations: perspective in

Francisco Bay area companies. They collected data

through interviews from 50 HR executives,

consultants and staff working for 20 companies.

Their findings revealed that culture and other

supportive infrastructure are important for the

successful implementation of knowledge based

programs. Park et al., (2004) distributed 212

knowledge management technology profile (KMTP)

survey instruments and 1,060 organizational cultural

profile (OCP) survey instruments across 44

organizations. The results suggest sufficient

KMIS 2015 - 7th International Conference on Knowledge Management and Information Sharing

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evidence to establish correlation between specific

cultural attributes and successful implementation of

knowledge management technology and knowledge

sharing. Continuous learning is highly valued when

there is openness and climate of trust in

organizations (Olla et al., 2006). Employees

collaboration and interaction are key for transfer of

tacit knowledge and conversion of tacit knowledge

tom explicit knowledge at organizational level

(Nonaka and Takeuchi, 1995) and is favoured by a

culture of knowledge sharing and integration from

individual at multiple levels within organizations

(Davenport and Prusak, 1998).

Figure 1: Aging workforce in Oil and gas industry

(Source: Microsoft Accenture Oil and Gas survey 2011).

Thus from previous research as discussed above

it is obvious that baby boomers are raising concerns

regarding loss of experienced staff in oil and gas

companies. It will eventually effect the success of

mega projects where the technical and experienced

skills are essential especially when talent pool is not

being replenished. The old employees are key to the

success of companies because of the wealth of

knowledge they have accumulated over time and

helped companies in achieving success and gaining

competitive advantage. The role of technology is

also important to capture the knowledge from the

boomers and make it available to other employees

3 KNOWLEDGE GAP AND

PROPOSED FRAMEWORK

From previous literature review it is evident that a

lot of research work has been done in areas of

competitive advantage, baby boomers, knowledge

management, culture and IT as enablers but no study

up to the knowledge of the authors has worked on

the linkage of these factors and most specifically

performing an empirical investigation on their

relationship with each other. Moreover there are few

studies found about baby boomers in oil and gas

companies in relation to the competitive advantage

and knowledge management capabilities. A few

studies so far found have investigated the effect of

knowledge management process capabilities,

competitive advantage and IT and culture in SMEs

(Nguyen et al., 2008; Nguyen et al., 2008),

manufacturing industry (Chuang, 2004) and these

studies are based on the resource based view of the

firms.

This study involves one major phenomena

predominantly the baby boomers and its relationship

with knowledge management, competitive

advantage, IT and culture. The focus is on oil and

gas specifically as from previous discussion it is

evident that oil and gas industry is the most effected

one from baby boomers and also it is not being able

to replenish the talent. Thus this empirical

investigation will provide an insight to the

managers, executive and people linked to the oil and

gas industry about the major technological, cultural,

personal, organizational and managerial barriers in

transferring of knowledge from baby boomers to

younger generations. The role of technology and

culture will play a role and is worth including as oil

and gas industry involves sharing of knowledge

across different geographical locations and people

from different backgrounds and nationalities

dispersed at different place. So it will be worth

investigating how the technology and culture

influence the knowledge transfer from baby boomers

to the employees of different backgrounds and in

different locations. Also as previously discussed, the

ways different generations want to learn are different

and thus it would be interesting to investigate the

issues of learning and methodologies adopted at

different levels for facilitating efficient knowledge

transfer and sharing. The literature also gives

evidence that knowledge of baby boomers is also

directly related to the competitive advantage of the

companies because of their commitment, reliability,

experience and loyalty to the organizations. Based

on the previous literature review, the conceptual

framework formulated is shown in figure 2. The

solid lines show the direct relationship of the

variable with each other while the dotted line shows

the indirect relationship with the variables. The main

questions that will be focused are

1) When there are cultural differences, Boomers

might have to share knowledge with people from

different backgrounds, countries and generations

and thus boomers may face a cultural double -

whammy?

2) Are the ways of sharing knowledge and

Baby Boomers Retirement in Oil and Gas - Challenges of Knowledge Transfer for Organizational Competitive Advantage

171

communication of baby boomers is easier to

understand by younger generations and helping

in overall productivity and knowledge

management capabilities of organizations for

sustainable competitive advantage?

3) Is the prevailing culture and technology

infrastructure sufficient for efficient knowledge

transfer to younger generations and boomers

themselves are comfortable with it?

4 CONCLUSION

The current framework integrates the various factors

in order to investigate the trends of knowledge

transfer from aging workforce to younger

generations and its relationship with overall

organizational effectiveness in terms of competitive

advantage. The future directions will involve

application of this framework and validation of the

relationships among the different variables

Figure 2: Theoretical Framework for investigating the

knowledge transfer trends and impact on organizational

effectiveness.

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