The atmosphere in the room was tense. Ted Kimoski, Financial Director for Global Mining, had justfinished his presentation. John Campbell, Managing Director, sat quietly making notes. After a pause,he broke the silence. 'From what you have shown us Ted, it seems that we face the following problems in Australia. Our mines are not competitive. Benchmarked against international best practice orour own mines in Canada, Indonesia, South Africa and the United States, our production costs arethe highest in the world. Our low productivity and high labour costs are killing us. In short, we mustcut our Australian losses and expand elsewhere or make our Australian operations more competitive.'
Kimoski looked directly at Campbell. 'John, that's it in a nutshell. Our Australian operations arebleeding badly. Worse, our financial performance is now affecting the group's overall profitability andability to grow. If we don't do something about Australia soon, we risk being taken over by MegaMining and they certainly will sell off the Australian mines. You are all aware that our share price hasdropped 20 per cent in the past six months and that it is now rumoured in the market that we are apotential takeover target.' Campbell nodded in acknowledgement then turned to face Paul Jaworski,Production Director,'Paul, what do you think?'
'Of course, Ted is right. The point I wish to make is this. If we could achieve 90 per cent of best practice figures for productivity and labour costs, our Australian mines would be among the most profitable in the company. It's basically that simple. Our performance is appalling. The mines are okay. Our problem is people. We have rotten production figures because we don't have labour flexibility. Excessive penalty rates make it uneconomical to operate the mines seven days a week, absenteeism is ridiculously high, our people are not motivated, we constantly face fights with the unions over demarcation, our workers show more loyalty to the unions than they do to us, and the safety record of the Australian mines is the worst in the company. Yet, our pay and conditions of employment are among the best in the industry. Our labour turnover is low - no one ever leaves. It's just that no one works either!'
'I hear you Paul', said Campbell,'but I must admit it sounds like a terrible indictment of our Australian management. Susan, you have been quiet so far, what have you got to say?'
Susan Moffat, HR Director, looked at the faces around the boardroom table. 'It seems to me we have a terrible problem, but it is solvable. In the past, we have been able to ignore much of what is hurting us now because business was so good.The Indonesian mines were not in production and the mines in Chile were suffering from outdated technology. That's all changed. We now have to be competitive or we are going to be run over. What we have to do is get back to basics.We have stated that our corporate mission is to be the fastest-growing, most profitable mining company in the industry.
The company's committed to investing in people, exploration and technology. We want to be the best by constantly seeking improvement and greater teamwork. Yet, we haven't articulated a clear human resource strategy linked to our strategic business objectives. We have management problems and we have industrial relations problems - all are human resources related.The Industrial Union of Mining Workers is strong because we are not doing a good job of managing our people. The union manages our workers, not us. Our managers have abrogated their HR management responsibilities. For heaven's sake, the union tells us who we can hire, if we can use contractors or not, whether we can fire someone. We can't do anything without getting the union's permission.
We say we are an equal employment opportunity employer, but we have to give preference to union workers, we have to promote on seniority and not on ability, and if we have to reduce staff members, it must be done on the basis of "last on, first off". Merit has nothing to do with it. We can't even reward our best workers. Everyone has to be paid the same rates. The goof-offs get exactly the same as the superior performers. Everyone gets an annual across-the-board increase irrespective of their performance and the company's profitability. Our situation in Australia is a joke and as long as it continues, we will never become competitive.'
Campbell paused then said,'Susan is right, we have a business strategy but we don't have a people strategy. This is our last chance to save the Australian operations. Susan, I want you to get together with Paul and Ted and formulate a draft HR strategy for the board's consideration next month.' The three directors nodded their heads in agreement.
1. Identify the key issues evident at Global Mining
2. What HR strategies would you propose to overcome these problems?
3. What problems do you anticipate?
4. How would you manage them?