Christmas Greetings from Swann

Christmas is upon us in a year that started on a high and is ending with a serious reality check. None of us will be immune from the downturn but holding one’s nerve and staying focused on core business will be key for leaders to ensure that their businesses maximise the chances of surviving the turmoil.

In our networking within the industry, we hear of Boards and remuneration committees discussing the impact of the downturn on the retention of key talent. There is general comfort in the view “who would leave the relative comfort of their    current company and risk a new and unfamiliar employer”. It’s an insular observation.

There are many bright capable executives leading companies, but few who have been tested in the fire of a serious downturn.   Consequently, forward looking Boards are actively seeking new leaders who can manage in these difficult circumstances. These Boards are not afraid to change their management teams if it improves the prospects of survival.  It’s simply good governance.

“Knowledge Application” will become a key competency. Being bright, knowledgeable and charismatic will not suffice. Whilst the aforementioned will be an absolute prerequisite to managing the complexity, ambiguity and risk issues that companies will face, the ability to apply “thinking” or “knowledge application” will be essential for some organisations, especially those requiring a radical approach to survival.

In short, key executives will need to be highly effective thinkers. Many Boards are already recognising the need to search the globe for such executives. For those that aren’t, the old phrase of “lock up your valuables” comes to mind. Good governance and duty to shareholders on this matter should be at the forefront of every CEO’s and Board member’s thinking.

From Swann, we thank you all for your support over the past 12 months and trust that the ideas conveyed herein have been useful and provoked further thought. Early in the New Year I expect to announce the launch of our new website and hope that this is also of interest to our readers

Christmas greetings and a safe and prosperous New Year to all.

John Murray
Managing Director

The CEO’s New Year’s Wish List

Spare a thought for the mining company CEO who a few short months ago was looking at high metals and minerals prices and funding aplenty – how quickly things change! One thing that was not available in any quantity however, was the skilled people necessary to run operations. Today, executives could be forgiven for thinking that that problem has gone away and that plenty of human capital will be available in the downturn.

The holiday season approaches and corporate leaders, having taken the necessary immediate steps to protect cash, pay down debt and trim operations, will be using the break to look at ways to turn these troubled times to their advantage. A major opportunity will be talent – finding, attracting, and retaining the key skills that will return their business to profitability, fast. This crisis will pass and the developing world will continue to need infrastructure and to house its populations. The demand for metal will return and there will remain more unfilled jobs than there are skilled personnel to fill them.

Reluctant to call it a list of New Year’s resolutions (as traditionally resolutions don’t survive to see February), to help the process we have taken the liberty of putting together a CEO’s New Year “To Do” list.

TO DO

1. Operating controls; top of the list will remain the tight control of operations, protection of cash and cutting back unnecessary staff. In the rush to reduce cost, however, ensure that high potential individuals and those with key skills are identified and locked in to the organization

2. Add key talent; individuals that the organization couldn't afford or that we couldn’t attract only a few months ago now need to be tracked down and secured. “In the money” options are no longer a barrier and what better sign of confidence in our prospects as an organization than hiring for the upturn (Buffet buys equities counter cyclically for long term value - we should be able to do that with people)

3. Develop a new reward plan; do our retention devices still work? We need to make sure that there is enough long term value in place to retain our top people. Note that we may also need a lid to avoid excessive payout when the market takes off again.

4.  Employment brand; what is ours? Are we positioned to meet the needs of the new generation coming into the market place? We have not addressed the Integration of gen x/y; we continue to have a terms and conditions package aimed at baby boomers. Fewer younger people are willing to relocate. Do we want to retain older managers? What message is our brand sending, do we walk the talk, are our incentives and people programs aligned with our values and mission?

5. Governance; For the past year investors and the board have pointed out that people represent a significant execution risk (e.g. not having or being able to attract the right skills means budget and timelines are not being met). Do our career plans develop our people fast enough, do our promotion and grade systems support rapid development, do we know what our inventory is, and do we know how mobile our people are? 

6. Talent Management; who should have the responsibility for leading these strategies; a timely opportunity for the HR team to make a strategic contribution. If they can start pressing their ideas in language that the rest of the leadership team can understand this could be a unique opportunity to add a meaningful people component to our business plan.

7.  Acquisitions; the time will come when it makes sense to add additional businesses and/or select properties. We should ensure that we complete a soft due diligence and full talent audit well in advance to ensure that we acquire and are able to retain the human capital assets that do not  appear on the balance sheet.

Paul Pittman
Managing Director,
Swann Americas and Swann Consulting 

 

China Mining 2008 – The Industry’s First Post-Crisis Gathering

China Mining 2008 in November saw more than 3000 industry participants attend the Beijing International Convention Centre. As the first of the Big Four major international mining community events since the economic gloom turned into the global crisis of  today, it provided a unique opportunity to gauge the industry’s mood.

Firstly, there was a breadth in the ranks of participates that China Mining has not enjoyed in its previous nine conferences. This Tenth China Mining attracted the usual strong representation from China, of course, as well as Canadian and Australian delegations. This is par for the course, but it was also notable for the significant gathering of delegates from Africa, particularly South Africa, and Russia. For example, the South African Minister for Mines Minerals and Energy  Ms Buyelwa Sonjica, was active in events leading up to the conference as well as being a presenter on the first day, along with Chile’s Minister of Mines, Mr Santiago Gonzalez Larrain, and other high ranking officials.

Perhaps this wider attendance was a reflection of earlier planning, made in brighter days. However, the fact that such a broad cross section of the industry came to Beijing for this event, was significant and an opportunity for Swann and other industry participants to get a good feel for the industry’s pulse.

Naturally, Swann Global’s interest has been on the effect that the economic shift has had on the global talent stretch. For the past years the ‘war for talent’ cry has been ringing in all corners of the world. At China Mining, Swann released the brief summary of its 2008 Salary Survey of the industry in China. The early findings had been the observation of continued tightening of talent supply and the consequent increasing compensation rates across the board. 

This survey’s data collection was completed in August when the talent  situation was getting tighter and compensation rates were rising. Furthermore, in the search for executive talent in China, international firms were turning more and more to local Chinese professionals. The graphs below, from the survey, show their sizable representation in the executive ranks in China, and dominant position in the senior ranks.

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This development of Chinese talent to step up to executive roles was a strong indicator of the industry’s positive response to the global talent shortage. Swann also saw this as not only a plus for the Chinese market, but for global application.

From the first hours of delegates arrival in Beijing it was apparent that there was numbness in the industry. The change in the global economic mood had been so rapid and unexpected that there had been little opportunity for a collective check on the effect that this crisis was to have. Clearly the contagion was being felt universally, but what was to be the effect on the industry in the short and medium terms?

From the Swann sponsored CEO Cocktail Party on the night before the conference officially opened, the address by Ms Sonjica summed up the sombre sentiment amongst the 300 gathered.

This mood prevailed throughout the conference which as usual includedformal presentations covering the complete spectrum of the industry and dinner engagements each evening. The conference coffee shop did a roaring trade as many delegates gathered for less formal discussions. No one had really come prepared to address this immediate gloom and the shadow it cast remained. For Swann’s part, there was a breakfast address on “Winning the War for Talent”. Had we come prepared for the boom, rather than the bust too? Nonetheless, the topic drew a good crowd and the interest in the talent issue was clearly strong.

Perhaps, surprisingly, the subsequent discussion that followed the address was robust around the continuing need for sourcing high calibre people. Swann Global’s Managing Director for the America’s Paul Pittman and his ‘Talent Pipeline’ graphic drew spirited discussion. There was a sentiment that this current economic environment was going to be a ‘survival of the fittest’ and companies needed to prepare for the battles ahead. This meant not only having first class  projects, cash to fund them, markets and prices to sustain them, but, very critically, the right people to pull it all off.

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One comment to Swann was that these were not going to be times when they would have little need for a headhunter. Rather, search firms would be very busy as companies prepared to reassess their talent inventory and take advantage of the opportunity to attract specific people for whom there had been an ongoing watch. In other words, this uncertainty presented an opportunity for strategic talent strikes. This suggestion added a new dimension to the ‘Talent Pipeline’.

In many ways, this is similar to the  opportunity seen by healthier companies who are seeing this downturn as an opportunity to acquire world class projects that have been ‘off limits’ until now.

Whilst there were notable successes at China Mining 2008 with companiescompleting financing deals and conducting productive negotiations, the uncertain future perplexed many participants. As an indicator, the Gala  Dinner seemed to be less well attended than previous years and the crowd less buoyant with champagne and Chinese maotai toasts certainly more subdued.

The conferences will continue, of course. By the time this goes to press, Swann Global will have attended London’s Mines and Money. The mood there will perhaps have added another dimension to the story. And as 2009 unfolds, the face of the mining industry will be very different from the days of the big boom that is now  history. But tough times call for executives of special quality and Swann knows that these people are there in number in the global mining industry. Be it the mature markets of the Americas, Australia, and southern Africa, emerging markets of Asia, Brazil, Russia, or even the more challenging markets in Africa, there are people of exceptional talent worldwide.

Peter Arkell
Managing 
Director, China