LEADERSHIP IMPACT ON TURNOVER AMONG POWER ENGINEERS IN THE OIL SANDS OF ALBERTA By Chitram Lutchman A Dissertation Presented in Partial Fulfillment Of the Requirements for the Degree DOCTOR OF BUSINESS
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LEADERSHIP IMPACT ON TURNOVER AMONG POWER ENGINEERS IN THE OIL SANDS OF ALBERTA By Chitram Lutchman A Dissertation Presented in Partial Fulfillment Of the Requirements for the Degree DOCTOR OF BUSINESS ADMINISTRATION UNIVERSITY OF PHOENIX June 2008 Copyright 200 b All rights reserved 2009 June 2008 by Chitram, Lutchman ALL RIGHTS RESERVED ABSTRACT The current study was intended to address the knowledge gap about leadership impact on turnover among power engineers employed by oil and gas producers in the Oil Sands of Fort McMurray, Northern Alberta. The purpose of the current study was to determine possible relationships between intent to turnover by power engineers and leadership factors. The leadership factors refer to the independent variables (a) access to training opportunities, (b) perceived involvement in workplace decisions, (c) work and life balance, (d) perceived co-worker support and (e) perceived support from supervisor (i.e., leaders). Knowledge derived may provide organizations opportunities to preferentially allocate resources to addressing these relationships. The research methodology used in the current study to determine the degree of relationships was a non-experimental, quantitative, explanatory correlation design. Findings of the current study confirmed that weak relationships existed between (a) access to training opportunities and (b) perceived support from supervisor / leaders with intent to turnover. To the extent that findings can be generalized to other employers in the Oil Sands of Alberta, the current study may provide opportunities for mitigating turnover through proactive measures for addressing these relationships by preferential allocation of resources. By doing so, employers could reduce spending directed toward retention of power engineers in the region. The current study recommended a root cause analysis be undertaken to understand leadership impacted turnover at its base. Another recommendation was to repeat the current study for individual organizations and for other similarly affected groups within these organizations. A final recommendation was to investigate the relationship between organizational other non-leadership factors related to turnover. iv DEDICATION The current research study is dedicated part to my family, my parents and to the late Dr. Wesley Combs. These people have all influenced my aspiration for higher education and in one way or the other have contributed to the successes of the current study. My family, my parents and Dr. Combs have inspired me to strive for excellence in the workplace. Dr. Combs filled the role of a mentor at an early stage in my career development. Through his mentoring and demonstrated behaviors of strong corporate ethics and values, my parentally instilled values and continuous support and encouragement from Sita, I also have developed strong business ethics and values. The early values instilled in me by my parents have been fuelled through the efforts of Sita, Kevan, Megan and Alexa and the demonstrated behaviors of Dr. Combs. Through their efforts, I have developed a greater appreciation for the less fortunate and I have been able to enhance my behaviors to have greater empathy for my fellow workers and toward those I may be fortunate to lead. To my very good friend and mentor, thank you for the opportunity to learn from one of god s best shepherds. v ACKNOWLEDGMENTS Without the help, support, sacrifices and encouragement of my wife Sita and children Kevan, Megan and Alexa, this journey would not have been completed. With great and incomparable pleasure therefore, I acknowledge the contributions of my family. A special thank you to Sita for fuelling my thirst for knowledge, making the sacrifices necessary to allow me to continue to forge ahead academically and for keeping me forever motivated. You are my sunshine and I love you dearly. My most sincere thanks to my mentor, Dr. Rhonda Waters, for the guidance, encouragement and motivation she provided during my academic journey. Sincere thanks also to my committee members Dr. Cheryl Allison and Dr. Ronald Heuss for their guidance and encouragement. Special thanks to Dr. Ted Sun, Dr. Louise Underdahl, Dr. Shane Desselle and Dr. Stephen Brand for their specialized and valued contributions, without whom my academic journey would have been much more difficult. Sincere thanks also to Mr. Neil Camarta, Senior Vice President, Oil Sands, Petro- Canada and Mr. Tom Diamond, Director Human Resources, Oil Sands Petro-Canada who were both instrumental in encouraging the participation of other employers in the current research study. The contributions of my classmates, many faculty members and especially my learning team members throughout this learning process cannot be underscored and I must acknowledge their support, help and sacrifices. Finally, I would like to extend a special thank you to my parents Maywalal and Lhilie Lutchman and my brothers and sisters for their contributions to my foundational development and for the many sacrifices they made in my childhood years and to the Kissoon family for their continuous motivational support and encouragement. vi TABLE OF CONTENTS LIST OF TABLES... x LIST OF FIGURES...xi CHAPTER 1: INTRODUCTION... 1 Statement of the Problem... 3 Background of the Problem... 4 Purpose of the Study... 8 Significance of the Problem... 9 Significance of the Study to Leadership Nature of the Study Research Questions Hypotheses Theoretical Framework Definition of Terms Assumptions Limitations Delimitations Summary CHAPTER 2: LITERATURE REVIEW Documentation Literature Review Employee Turnover Employee Motivation... 46 vii Employee Training and Development Involvement and Participation in Workplace Decisions Employee Workload and Work and Life Balance Insufficient and Inexperienced Workers Coworker Support and Team Building Supervisor/Leader Support Conclusion Summary CHAPTER 3: METHOD Research Method Appropriateness of Design Research Questions Population Informed Consent Sampling Frame Confidentiality Geographic Location Survey Instrument Data Collection Validity and Reliability Data Analysis Descriptive Analysis Correlation Analysis... 79 viii Summary CHAPTER 4: RESULTS Demographic Data Statistical Analysis Research Question Research Question Research Question Research Question Research Question Figure 9 shows the projected turnover frequency of power engineers who participated in the study Validity and Reliability of Survey Instrument Descriptive Statistics of Sample Summary CHAPTER 5: SUMMARY AND RECOMMENDATIONS Problem Statement Purpose Statement Research Methodology Limitations of the Study Research Questions Research Questions Conclusions Conclusions Drawn from the Hypotheses ix Hypothesis Hypothesis Hypothesis Hypothesis Hypothesis Implications of Findings Recommendations REFERENCES APPENDIX A: INITIAL POWER ENGINEERS SAMPLE APPENDIX B: INFORMED CONSENT AND PERMISSION TO SURVEY POWER ENGINEERS BY OIL AND GAS EMPLOYERS APPENDIX C: INFORMED CONSENT FORM TO RESPONDENTS APPENDIX D: PERMISSION TO MODIFY AND USE SURVEY INSTRUMENT APPENDIX E: SURVEY INSTRUMENT APPENDIX F: LETTER OF WITHDRAWAL x LIST OF TABLES Table 1 Factors Influencing Worker Turnover Table 2 Correlation between Dependent and Independent Variables Table 3 Correlation between Dependent and Independent Variables Table 4 Underlying Training Measures Correlated to Intent to Turnover Table 5 Underlying Supervisor (i.e. Leader) Support Measures Correlated to Intent to Turnover Table 6 Multiple Regressions of Linear and Quadratic Components of Intent to Turnover onto Supervisor (i.e. leader) Support Table 7 Findings of the Current Study Relating to Research Questions Table 8 Correlation Coefficient (r .7) Confirming Validity of Survey Instrument in Test/Retest Analysis Table 9 Cronbach s Alpha for Independent Variable of the Survey Instrument Table 10 Descriptive Statistics of Sample xi LIST OF FIGURES Figure 1. Percentage change in employment: Canada, Alberta, Saskatchewan and British Columbia ( ) Figure 2. Employment growth rate in forestry, fishing, mining, oil and gas industry relative to all industries ( ) Figure 3. Research map identifying key steps of study Figure 4. Gender distribution of sample power engineers Figure 5. Residence distribution for power engineers Figure 6. Age profile of respondent power engineers Figure 7. Employment tenure of power engineers with current employer Figure 8. Class of license held by power engineers Figure 9. Turnover frequency and cumulative turnover as a percentage of n = Figure 10. Overtime worked per annum frequency distribution Figure 11. Overtime refused per annum frequency distribution 1 CHAPTER 1: INTRODUCTION Hibbert (2007) advised that the Oil Sands of Alberta holds an untapped reserve of 1.7 trillion barrels of bituminous unconventional hydrocarbons that can be available for augmenting North America s fossil fuels demands. According to Sanford (2005), the same reserve ranges from 1.7 to 2.5 trillion barrels. Unlike conventional crude oils, the bituminous product is more difficult to extract since it is trapped in sand and clay, which also make it more costly to extract (Hibbert, 2007). The prevailing business environment characterized by high and growing prices for crude oil create an economically attractive climate for investments in the Oil Sands (Economist, 2007). Carter (2007) advised that capital cost projections for construction announced oil sands projects from 2006 to 2015 will total $110 billion (p. 69). To support investment levels in the region, Williams (2007) pointed out that employers have focused employment strategies to include women, students, and aborigines to meet current and future employment shortfalls. According to Williams, with the projected growth in the Oil Sands, Alberta is likely to experience a workforce shortfall totaling 350,000 by 2025 (p. 3). The Economist Intelligence Unit Limited (2007) advised of steadily declining unemployment rates in Canada referencing unemployment rates of 7.7% in 2002 and 6.3% in 2006 respectively. Coupled with a declining unemployment rate across Canada and the projected worker shortfalls in the province of Alberta, employers in the Oil Sands of Alberta are exploring various incentive strategies to improve retention of its workforce and support growth aspirations (Suncor Energy Inc., 2005; Syncrude Canada Ltd., 2006a). 2 Major employers in the Oil Sands of Fort McMurray (e.g., Shell Canada and Suncor Inc.) have planned recruitment of up to 700 (Lustgarten, 2005) and 500 (Suncor Energy Inc., 2005) respectively on an annual basis to cover workforce turnover. According to Lustgarten, these estimates do not take into consideration labor requirements for planned expansion projects in the region with projected needs of more than 30,000 employees. Chapter 1 addresses the issue of the lack of knowledge about relationships between leadership and turnover among power engineers employed by oil and gas producers in Fort McMurray, Northern Alberta. The oil and gas industry in Fort McMurray is experiencing high growth rates in response to a favorable business environment driven by high oil prices. Alberta Human Resources (2006a) advised that strong economic growth in Alberta has led shortfalls in many occupational groups and intense competition for skilled labor. Alberta Human Resources further indicated that an aging workforce and a growing number of retirees aggravated the problem and further burdened the already dwindling supply of competent and capable personnel in the field available to the region. Alberta Human Resources reported that, in 2005, unemployment among Canadian provinces and territories was the lowest in Alberta with 3.9%, at the same time, Alberta also had a participation rate of 73.5%; the highest in the country. The combined influence of labor shortages and high turnover has adverse implications for the growth of the oil and gas industry in Alberta and the high growth area of Fort McMurray. According to the Alberta Economic Development Authority (2004), fallout from the high workforce demand in Fort McMurray is lower productivity from the employment of less skilled workers. Alberta Economic Development Authority 3 pointed to % cost/schedule overruns (p. 36) for large development projects across Canada with an underlying theme of skilled worker shortages, sub standard productivity and high worker turnover. Businesses in the United States experience annual turnover ranging from 25 to 30% (Hall, 2005). Turnover replacement cost for hourly workers and leaders can be as high as and their salary and benefits respectively (Hall, 2005). The current non-experimental, quantitative, explanatory correlation study was designed to examine relationships between intent to turnover among power engineers and various leadership behaviors. The focus was on the relationship between intent to turnover among power engineers and access to training opportunities, perceived involvement in workplace decisions, work and life balance, perceived coworker support, and perceived support from supervisors (i.e., leaders). A non-experimental, quantitative, explanatory correlation design was selected to determine the degree of relationships between dependent and independent variables. Statement of the Problem The lack of knowledge about the relationships between leadership behaviors and turnover among power engineers employed by oil and gas producers in the Oil Sands of Fort McMurray, Northern Alberta, adversely affects employers. Turnover among skilled workers in the Oil Sands of Fort McMurray has adverse effects on employers. The knowledge gap concerning leadership factors leading to turnover among power engineers and other skilled workers in the Oil Sands of Fort McMurray has led to increasing costs associated with retention, hiring, and relocation since employers widen their search areas for qualified and experienced workers (Alberta Economic Development Authority, 2004). 4 Lustgarten (2005) advised that organizations in the Oil Sands have extended their search globally to satisfy the growing needs for qualified and competent workers to meet their growing demands. Brown (2003) advised of an organizational turnover rate of 4.5% for Suncor Energy Inc., the Oil Sands oil producer. McKinnon (2006) indicated that Syncrude Canada Ltd. proposed to increase the annual salaries of its 4300 employees by $20,000 to reverse the turnover trend that reached 5% in Such organizational responses represent surface level analyses and do not address the root cause of the problem of turnover (Sun, 2007). According to McKinnon, Syncrude Canada Ltd. proposed spending an additional $217 million to retain workers (p. B5), for a period of 3 years. The chief executive officer (CEO) of Syncrude defended the decision on the basis of developing employee loyalty and encouraging long-term careers with the organization. Mandel (2007) reported a 100% higher labor cost from turnover. Alberta Economic Development Authority (2004) alluded to % capital expenditure overruns, schedule delays, and weaker worker productivity as potential outcomes from turnover. In the current non-experimental, quantitative, explanatory correlation study, the focus was on determining the degree of relationship between power engineers intent to turnover and leadership-related behaviors among power engineers employed in the region. Background of the Problem Turnover is of greater concern to the industry since power engineers are among the trade personnel required for sustaining new and expansion projects planned for the Oil Sands. The Athabasca Regional Issues Working Group (2005) projected a 60% 5 growth in skilled trade workers from 2006 to The Athabasca Regional Issues Working Group advised that, for each job created in Fort McMurray, three jobs are generated across major cities in Alberta. With Alberta s employment statistics pointing to the lowest unemployment rates and the highest employment and labor participation rates in Canada (Alberta Human Resources and Employment, 2006), replacement workers availability from within the province becomes increasingly difficult. Managing and controlling worker turnover among power engineers is essential for sustained and costeffective growth of the industry. High labor turnover among trade workers in the Oil Sands of Fort McMurray in Northern Alberta is causing both cost and schedule overruns for the oil and gas industry (Alberta Economic Development Authority, 2004). Since the late 1990s, the Oil Sands of Fort McMurray have experienced strong growth that has led to the rapid expansion of multibillion dollar Greenfield and Brownfield projects (Economist, 2005; Fayek, Revay, Rowan, & Mousseau, 2006). Growth is driven by a strong business environment for crude oil resources (Economist, 2005). Compounding the problem, Mandel (2007) pointed to disturbing statistics suggesting that apprentice (i.e., inexperienced) welders in Fort McMurray earned more than twice that of journeymen (i.e., experienced) welders in Toronto. Similar trends exist among many trade groups including power engineers. Fayek et al. (2006) maintained that setting up Oil Sands projects was capital and labor intensive (p. 16). Worker turnover in the Oil Sands remote business environment has an enormous impact on the business, particularly as it relates to schedule and cost controls. Spending in the Oil Sands of Northern Alberta during the period between 1994 and 2004 was $51.4 billion Fayek et al., (2006). Increasing labor costs in the Oil Sands 6 with increasing project size and that project performance was affected by available skilled worker and supervision (Fayek et al., 2006). Worker turnover can adversely impact any project. Concerns are particularly high in the Oil Sands where peak demand for skilled labor should occur in 2008 and 2009 (Fayek et al., 2006). Historically, the absence of key skilled trade personnel, and by extension power engineers, leads to project schedule slippage and reduced labor productivity (Fayek et al., 2006). Lavelle (2003) advised that the increasing costs of Oil Sands projects are related to labor issues since it takes lots of good, trained workers to build and operate an oil sands site ( 10). According to Lavelle, Firms are competing desperately for skilled laborers from the relatively limited pool of hearty souls who populate, or are willing to relocate to, a remote locale with severe winters. The dearth of good help means good pay. Average family income here is $60,000, about $15,000 higher than in the rest of the province, with 40 percent of households making more than $74,000. Shell Canada opened its Athabasca Oil Sands Project in June at a cost of $4.2 billion, 50 percent over budget, mostly because of increased labor costs. Likewise, a $2.5 billion Suncor expansion completed in 2002 came in 70 percent over budget. In January, Calgary-based TrueNorth, owned by Wichita, Kan.-based Koch Industries, abandoned a planned $2.3 billion enterprise; it blamed the future costs of meeting the Kyoto Protocol, but labor costs actually had already caused a $650 million overrun. ( 10) Variables influencing labor costs in the Oil Sands provide concerns for organizations seeking to start up and expand operations (Lavelle, 2003). Worker turnover is a variable 7 that has been and continues to be of concern to organizations operating in the Oil Sands of Alberta. Shaw, Gupta, and Delery (2005) pointed to a negative relationship between work force performance levels from turnover. Having repeated their findings in 2005 with stronger relationships between turnover and performance, Shaw et al. maintained there were related financial consequences from turnover. Phani (2006) and Price, Kiekbusch, and Theis (2007) reiterated the cost and performance issues related to worker turnover in different industries. The increased potential for turnover from poor workforce per
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