2025 priorities: Navigating HR challenges in energy and chemicals 

Recent Mercer research, obtained from interviews with senior HR leaders across 23 leading global energy and chemicals companies, highlighted three top business priorities for 2025: cost management, growth and enterprise-wide simplification. These organizational priorities underpin major people-focused risks requiring attention — talent management, HR transformation, and technology implementation and integration. Here, we explore these people risks and offer insights on how HR can navigate the year ahead effectively.

Talent management remains a critical concern for HR leaders, particularly in industries as specialized and competitive as energy and chemicals. Our research shows that talent-related challenges for 2025 center around three main areas: attraction, retention and performance management, career development, and leadership capability.

With a tightening job market and ongoing industry shifts, companies need innovative approaches to talent acquisition. While recruitment efforts have often been reactive, HR leaders are now tasked with aligning talent acquisition strategies more closely with business goals to enhance candidate experience, streamline hiring processes, and establish stronger ties with academic and technical institutions to cultivate a pipeline of skilled workers. Compounding these challenges is the need to appeal to a new generation of workers, who often hold misperceptions about the industry and prioritize companies that reflect their values and ideals.

Performance management is also high on the agenda, with many HR leaders exploring ways to update and optimize their current programs. As energy and chemicals firms aim for flawless execution and growth, performance metrics must reflect this focus, which might mean reevaluating the number and types of performance ratings, ensuring line managers are holding meaningful performance conversations, and recognizing and rewarding employees who make significant contributions.

Our research shows that employees across the value chain are often unclear about their career paths within the organization. Addressing this gap will be essential to enhance employee engagement and to retain critical talent. HR leaders should prioritize building clearer career pathways and robust succession plans to prepare for anticipated retirements, ensuring that institutional knowledge is preserved and passed on to the next generation of leaders.

A recurring theme in our research was the need for agile leadership. Given the global uncertainties affecting energy and chemical companies, leaders must be adept at navigating external challenges while maintaining an agile approach to strategy. Leadership development initiatives that equip managers to lead with resilience and adaptability will be essential for organizations facing frequent pivots in strategy.

As HR moves along the transformation journey to play a more strategic, commercial role within the organization, our research has identified two main priorities: enhancing HR effectiveness and restructuring the HR model.

HR effectiveness isn’t just about doing things right — it’s also about aligning closely with enterprise goals. Many HR leaders are reevaluating their business-partner models to enable HR professionals to contribute more strategically. Upskilling efforts will be required, particularly for HR business partners (HRBPs), who will need the capabilities to advise and support business leaders in meeting strategic objectives. In doing so, HR will evolve from a transactional function to one that drives measurable business impact.

As companies are forced to do more with less, they’re doubling down on the shared services model and pushing even harder for synergies given the unpredictability the industry is facing. This model allows organizations to centralize and standardize HR functions, often driving cost efficiencies and improving service consistency. For many firms, the shift to a shared services model or outsourcing represents a pragmatic response to resource constraints. However, there’s a divide between organizations that favor shared services and those considering outsourcing. Each option offers unique benefits and challenges. Shared services can offer more control, whereas outsourcing can provide flexibility and scalability, particularly for companies with smaller workforces.

The final priority focus area in 2025 for HR leaders we interviewed is technology. As digital transformation moves across industries, HR departments must harness technology to improve efficiency, reduce costs and enable strategic workforce planning. Two main technology challenges identified are effective implementation and the emerging role of artificial intelligence (AI).

For companies that have already invested in new HR technology systems, 2025 will be about maximizing the return on these investments to ensure that systems are fully utilized to support strategic priorities. To this end, HR teams should be prepared to present clear metrics that demonstrate how technology investments are contributing to business outcomes, whether through productivity gains or enhanced employee experience.

While AI holds promise for many HR functions, there is limited consensus at this time on its role within the energy and chemicals sectors. AI can be leveraged to streamline processes like recruitment and performance management, but the industry’s approach to AI adoption remains broadly cautious. Many HR leaders are taking a wait-and-see approach, choosing to learn from the experiences of early adopters before fully committing to AI-driven solutions. However, as AI technology advances, it may soon become a standard tool for organizations looking to maintain a competitive edge in talent management and other core HR functions.

The challenges outlined above set the stage for the 2025 emerging priorities. Based on our research, HR leaders in energy and chemicals should prioritize:

• Building a robust talent pipeline, with an emphasis on succession planning

• Transforming HR operations to provide greater commercial and strategic support to the business

• Maximizing the value of current HR technologies to meet business objectives

As companies strive to balance cost management with organizational effectiveness, HR’s role as a strategic partner will be more critical than ever.

For HR professionals navigating this complex environment, we offer valuable data and insights into the priorities and strategies shaping the future of HR in the energy and chemicals sector.

Between August and October 2024, Mercer’s Energy and Natural Resources practice conducted 23 in-depth interviews — both face-to-face and virtual — with senior HR leaders across the global energy and chemicals value chain.