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Employee management essential to endure the commodity downturn

South Africa’s mining sector is reeling from declining commodity prices and increasing operating costs, which are forcing many organisations to re-examine their operating models, focus on employee management and cut back on expansion plans.

Anglo American and Lonmin revealed plans in July to cut 14 000 and 6 000 jobs respectively. The world’s largest platinum producer, Anglo American Platinum released a statement in June that it planned to cut 420 managerial jobs due to the tough conditions and then in July said it was postponing growth projects in order to cut spending.

Like other major platinum miners, it also had to endure a debilitating five-month strike last year. Meanwhile, major steel player Evraz has announced it is halting steel production and cutting staff due to various business pressures that include cheap imports from China.

Rhyno Jacobs (Associate Director, Deloitte Consulting, Strategy and Innovation) says while there is no silver bullet to fix the challenges in the sector, mining companies should start by focusing on improving their workforce engagement and performance management processes in order to increase productivity and revenue.

“It is time to go back to basics. There is no need to reinvent the wheel. What is required is for leadership to do the basic things very well. “The initial focus should be on far better communication and improved performance management,” he says.

The primary source of communication and information should come directly from a company’s leaders and not via the union as is currently the case in many instances. “Mining is a people business and is about relationships and accountability.”

“Trust will only develop through transparency and regular engagement. Winning back the hearts and minds of people is what is needed. At the moment, it seems like unions are the primary source of information – companies need to realise that a more engaged workforce will result in improved performance and better relationships all round.”

According to Deloitte, what may be viewed as a “soft” issue – people management – is increasingly becoming a core management issue.

The 2014 platinum wage strike was the longest strike in South Africa’s history – according to reports the five-month-long strike saw Impala Platinum, Amplats and Lonmin suffer a total revenue loss of about R24.1 billion with a loss of R10.6 billion in wages for the workers.

“It is evident that neither party benefited from these unfortunate events. The strike was negative for workers and companies alike. The fact that mining is a people business makes it even more paramount that action is taken proactively ahead of events that are so damaging.”

“If companies get basic people engagement and performance management right, the overall business impact would be much less when major events like these arise. What should be top of mind is that there are dire consequences if poor performance exist due to a lack of leadership, lack of daily monitoring, or inadequate feedback or failure to address deviations on a short interval basis.”

While operational excellence involves a number of layers that include things like, maintenance and asset management, management control systems, safety etc. ; people, performance and culture cannot be neglected and in fact forms the backbone of any efficiency improvement solution.

“Employing strategies to improve operational excellence involves a number of facets – but the end goal is to help forge a management team that can operationalise business strategy, implement change in processes and systems and maximise shareholder value over the life of the asset,” says Jan-Adriaan du Plessis (Senior Manager, Deloitte Consulting, Strategy and Innovation).

While Deloitte is seeing an increase in demand for advisory services related to improving operational excellence in mining – and has noted significant successes at the mines which have made the decision to make real change – not enough is being done across the broader economy.

“A performance culture in a business can only be established if employees support the notion, but it is the managers of the business who need to strategise, give clarity and actively drive and sustain a culture of performance within the business,” says Luniel Botes (Manager, Deloitte Consulting, Human Capital).

Communication is critical in the performance and engagement process and should be seen as a continuous process of two-way engagement rather than a number of sporadic interventions. “Managemet must establish platforms where they can communicate directly to employees and receive immediate feedback instead of relying on other platforms or forums to communicate on their behalf,” says Luniel.

“A company becomes a lot more productive when there is two-way communication that is part of the culture of the business. You can’t have a system that only allows for knee-jerk communication interventions every few months,” says Thami Mzolo (Manager, Deloitte Consulting, Strategy and Innovation).

“Mangers need to be given the tools,  and their capability developed to manage the performance of their people and to engage with employees more effectively. There is a direct correlation between a manager’s ability to engage with his/her people and the breakdown in the employer/employee relationship we see too often in the South African Mining Industry” says Henry Kemp (Senior Manager, Deloitte Consulting, Human Capital).

The effective execution of personal development plans are necessary across the organisation to sustain the skills and capability that will facilitate ongoing engagement and performance and bring about the longer term changes that could close the existing gaps between managers and workers.

“Performance discussions should form part of the daily management practices and focus on continual development, as opposed to infrequent assessment interventions that occur on an annual basis. Team meetings (as well as individual discussions) should happen regularly where performance is discussed and deviations addressed.

When leaders have regular short interval performance discussions with their people and poor performers are individually developed, results will improve and workers will be more engaged,” says Frik Snyman (Senior Manager, Deloitte Consulting, Human Capital).

According to Deloitte, each organisation needs to create, understand and sustain a working environment and culture in which individuals know exactly what is required of them, are being these measured on a daily basis and are supported by continuous communication and engagement.

Performance measurement has to be line of sight. Many companies do a good job up to a middle management level but it tends to be too generic at more senior levels of the organisation. Performance measures at a senior level should be aligned to strategic business objectives and cascade down to middle management.

Essentially it means everyone – including management – must be held accountable for their actions and if they don’t perform there must be consequences. “This requires management to be proactive in the way they measure performance, communicate results and address deviations,” says Frik.

The bottom line is that a key driver of a world class operation is a capable, measured, supported, engaged and motivated workforce.

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