WA Mining Club holds a St Barbara’s Day Luncheon the first week of December each year, to pay tribute to the patron saint of geology and mining. It’s a chance for members to stop and thank the people dedicated to the mining industry, and celebrate the mineral wealth that underpins the Western Australian economy. It’s also a time to catch up with mates and tell a few jokes in your keynote speech.
Thinking of those less fortunate than ourselves
My instructions for today are simply to provide some sober reflection to mark St Barbara’s Day here in Australia, which approximates to Thanksgiving Day in the USA. A time for quiet reflection on those less fortunate than ourselves. A time to put aside our normal gladiatorial triumphalism and to consider Murphy’s Law which says: “If anything bad could happen, it usually does”.
The title for our discussion today, “Culture eats strategy for breakfast!”, was a throwaway line used by the management guru, Peter Drucker, when he emphasized the importance of corporate culture or corporate character, over our unrelenting focus on strategy. You can get all the strategies right, but unless you get the corporate culture or corporate character right, you will not endure through the many testing periods for which our mining industry has earned a terrifying reputation.
So let’s explore this theme from three separate aspects. Firstly, a personal focus; secondly, a corporate focus and thirdly, the bigger picture. In all three, we run the risk of sidetracking ourselves by focusing on measuring output instead of outcomes. You can think you are doing very well if you measure output and your judgement is often shrouded by over-busyness. However, outcomes, the result of our endeavors, should be our main focus for measurement.
It is easy for me to relate to the personal aspect because when I received the call for this talk I was sitting with my sister on the occasion of it being 50 years since the death of our own father and we were reminiscing about that unexpected event. It was a big loss for me as I had not only lost my father but also my mentor and business partner. Dad had taught me the ‘fine art of doing business” — and it is a fine art, if you’d like to be invited back again.
With my father’s death, Murphy’s Law kicked in with a vengeance.
Back then, in 1966, local bank managers watched for funeral notices and they automatically shut down bank accounts when a signatory died. Unfortunately, we had just sent out 400 cheques to the regular monthly creditors with whom we did business. Over the next few days almost all of them telephoned me to complain about a ‘bouncing cheque’.
However, they all settled down once they understood the circumstances. But it was another month before cheque replacements could be reissued and sent out. It was our good reputation for doing business that enabled us to continue, without any glitches. An example of where culture and character were more powerful than strategy.
That reminded me of another event, around 1999, when I moved from Kalgoorlie to Perth and my co-director, Harry Kitson (who was also largely a mentor to me) suggested that I should contribute $1,000 to a fund being set up to rescue a well-known Perth identity who had got his ‘timing wrong’ and was faced with bankruptcy.
My first reaction was: “Harry, I don’t even know the guy”. Harry’s answer was: “It will pay you to know how business is done in Perth and you never know, it might be you next time!”
That was an interesting experiment and it got this guy ‘over the hump’, because of his culture and character. Now, 16 years later, I’m involved with three similar rescue operations – but how times have changed! Today there is an app for this sort of thing. The app is called GoFundMe.
So, let me report on the success of using this new app.
Of the three, the first one was quite successful in raising $32,000 in about two weeks from hundreds of individuals who had all been helped by this person, over the years. It showed, again, the importance of culture and character and the funds were applied to overcome some family hardships for several creditors.
The second of these three attempts was a complete failure as the group coming together to mastermind the rescue operation all found out, for the first time, that the rescuee was a serial offender who had ‘conned’ all of those in the group with a similar hard-luck story which had involved them previously investing funds with him. They had all assumed that the problem was their own fault for making the investment and never blamed him, but his duplicity became obvious when they sat together around the same table. That guy’s strategy for robbing people had been successful, over the years, but his absolute lack of culture and character drew a blank as he neared the finishing line.
The third such rescue attempt is too early to tell as the operation is just being launched today. Again, it is worthwhile paying attention to such rescue attempts because, as Harry said to me and I’ll now say to you: “It may be your turn next time”.
Let’s now shift our focus to the following situations.
Again, I feel that we spend too much time on strategy and too little on culture and character. Let me give some examples. My own experiences with Croesus Mining and the Mining Hall of Fame will probably suffice.
Croesus Mining was a very successful gold company, a vital part of what Sandra Close, in her wonderful book called The Great Gold Renaissance (the untold story of the modern Australian gold boom, 1982 – 2002).
At one stage Croesus Mining was Australia’s third-largest Australian-based gold company and over 20 years we paid 11 dividends and mined about 25 different deposits. We developed a remarkable culture, so remarkable that larger companies, such as Normandy Mining and even AusIMM themselves, asked us to give presentations so that the larger companies could capture some of the magic of our culture. Croesus Mining later fell over and was resuscitated as Sirius and, in some form, morphed into Independence Group (IGO) and S2 Resources Ltd (S2R), where they are still vigorously and successfully exploring the Polar Bear Peninsular at Norseman, ground which I pegged originally back in 1979.
Let me give you two signals which showed that our corporate culture was coming unstuck. These should have sent alarm rockets up our backsides, but we instead just tried to work our way around what we thought were temporary glitches.
The first was when I arrived at the Croesus Mining Office – Kalgoorlie, one Monday morning, in 1996, I walked into utter pandemonium. I’d just stepped off the plane from Perth and went straight to the office. It appeared that a group of strangers had taken charge and were involved in ‘individual counselling’ for each of our staff members.
My secretary, Alanna, rushed up to me and said: “I’m so glad you are here!” Naturally, I was curious about this panic attack that had overturned a normally productive office. It was explained to me that there had been a suicide at our Binduli mine site. Under the guidelines established in a recently produced Corporate Manual, the preselected outside Crisis Management team of consultants had been called in.They had immediately declared a state of emergency and were giving individual counselling to each of our staff to prevent long-term emotional damage.
It all sounded very serious to me so naturally I asked: “Who committed suicide?” No-one could tell me, so we telephoned the mine site and found that no-one was missing and that there had been no mention of any ‘incident’ at the mine site.
So, amongst all this vigorous counselling we tracked back the source of the original story and found that one of the contractors had made a comment about a suicide that, on further questioning, had involved one of their own people at his own private residence over the weekend and that person had been working for them, at one stage, at our mine site. No-one could tell me the person’s name and it seemed that no-one in our office had actually ever met him.
The team of consultants were summarily dismissed and the corporate manual had a sticker placed on its front cover simply stating: “This manual is not a replacement for common sense”.
The second was detailed in this newspaper article on suicide and gold stealing, eight years later. Once again this should have signalled to us that we had lost our unique corporate culture and character.
Another quick example is the Australian Mining Hall of Fame. During the fund raising and construction phase the incredibly energetic and enthusiastic fund raising team developed a ‘language of leadership’ that enabled this tremendous $25m facility to be built in Kalgoorlie.
There was a real culture in existence during the fundraising and construction phase. However, at the handover, as an operating entity it lost its culture. The facility was handed over to the people of Kalgoorlie and the mining industry but there just didn’t appear to be anyone there to receive it and drive it the way it deserved to be driven.
I had some strong suggestions about what needed to be done – it was similar to enthusiastic geologists making a great discovery but not being able to find any mining engineers to pick up the project and run with it. My strong suggestions were along the lines that if they were not instituted I would resign from the board. And I did and I’ve heard little further from the project, since then, other than that it’s barricaded up and has fallen into serious disrepair.
A sad example of great strategies, numerous business plans being drawn up by leading accounting firms, but without culture and character (which may still come to its rescue at some stage), it will remain an example of what I’m talking about today. There are many people who should be ashamed that they allowed this project to fail, including myself and Neil Warburton in the front row here today.
The larger companies too
Conflicts between culture and strategy are not confined to smaller companies, as BHP-Billiton showed recently when on the same day it was announced that 22 people were charged with murder over the Samarco Mine disaster in Brazil. Five of the charged were current BHP employees.
BHP’s apparent response that day was to announce: BHP-Billiton digs deep to close the gender gap – miner says aim for women to make up half its workforce by 2025 makes commercial sense.
Sending up a politically correct smokescreen like this may have been good PR strategy but it says little of corporate culture. This is very much in line with an invitation I received on November 22, to the CEO Summit 2017.
Their priorities are corporate consciousness, indigenous relations, sustainability, mental health, women and STEM. Not a single mention of how to run a better company or even the importance of creating a profit!
Every day, everywhere, you can see examples of the lack of understanding of corporate culture leading to disastrous outcomes. Two quick examples:
- Two Uber drivers in the UK have triggered a court case which ruled that Uber drivers are employees rather than owner-operators. If there is flow-through from the ruling, it destroys the very culture that has made Uber so successful for passengers and drivers.
- The other case is Cathay Pacific’s cabin crew demanding that the retirement age limit be lifted by ten years. Again, if successful, this could threaten the Cathay Pacific culture as passengers simply prefer to ‘fly with young people’. Whether this is politically correct or not is beside the point. The average working life of a Cathay Pacific flight stewardess is 18 months. They marry the passengers.
How is that for culture and character?
There is some good news, however, and some great examples for us to follow in the corporate world – I’ll mention three in particular. So many of our companies need restructuring and redirection amidst the changing circumstances in which we now find ourselves. There are role models to follow for corporate restructuring.
Example #1 is Charles Copeman and his courage in preventing the labour unions from destroying Robe River Iron in the 1980s. Details can be found on pages 360-361 in Heroic Misadventures (Australia Four Decades – Full Circle). There are role models to follow for corporate restructuring.
Example #2 is Mark Cutifani whose remarkable work with Anglo-American provides an excellent roadmap of how to make some tough decisions and get the job done.
Example #3 is Brian Gilbertson, who you may remember as the architect of the BHP-Billiton merger. Brian’s listed company, Jupiter Mines (of which I am a shareholder), was bringing on a large manganese operation in Africa but the company was going broke. In an attempt to reduce the high overheads, carried by listed companies, Brian Gilbertson did the ‘unthinkable’ – he delisted the company and for the last couple of years it has been operating as an unlisted public company.
Surprise, surprise – it has become profitable and we are about to receive a dividend in February 2017. This suggests to me that there are many Australian-listed mining companies who would operate better and more efficiently in an unlisted form and when they learn to make a profit they can get back on the Australian Stock Exchange.
Now moving onto the third category.
The bigger picture
Over the past 20 years our Mannkal Foundation has developed an outgoing scholarship program where we have sent about 1,000 young Western Australians to internships around the world.
Two points I will mention:
- Paul McCarthy, our CEO, was himself a Mannkal scholar in 2004 before becoming an energy futures expert here and in the UK, after which he returned to Perth to join Minister Mike Nahan’s office for a year before becoming Mannkal’s CEO.
- The word Mannkal, incidentally is a combination of Manners and Kalgoorlie and the original company that launched Croesus Mining, back in 1985, was Mannkal Mining.
So, you might ask, why would we send young people around the world with this scholarship program? Well, a similar opportunity was given to me with the Duke of Edinburgh Study Conference back in 1968 and it made all the difference to my life. Any time I have the opportunity to talk to an extremely successful person I always ask them: “What is the single event that has made you successful?”
They think about it for a while. They never answer that it was the university they went to or their education or the clubs that they belong to. It’s always been that an unexpected event occurred in their life and they seized it as an opportunity and this became something that marked them as being a little different from the beige and boring colleagues who they started leaving behind.
Our Mannkal Foundation has adapted some ideas from the Duke of Edinburgh Study Conference and shared many ideas from economic think tanks from around the world. From these has evolved our own Outgoing Student Program. Our priority mix is about 90 per cent on culture and character-building and 10 per cent on strategies.
Our aim is to introduce these young Mannkal Scholars to the morality of a market-based economy and to question the legitimacy of the existing crony capitalism and political corruption that is so much on display today and including Western Australia.
We show them how to question the fatal conceit of governments who, to make themselves feel important, tell us that they can make better decisions for us than we can make for ourselves. We show them how to avoid today’s obsessions with who the Prime Minister is or who is the President of the United States. We lost our respect and trust in the political process years ago, so it’s time we moved on. If we want a better world, we should start building it ourselves.
Focusing on personal responsibility and rational thinking will help our Mannkal Scholars make better decisions as they reach the peaks of their own careers. How can we help them make better decisions?
By filling in the missing bits of their education not covered by the conventional syllabus, where there is, for example, hardly a mention of the Menzies Government’s credit squeeze of 1960-61. That event was one example of the economy being devastated by inappropriate government policy.
More recently there has been very poor coverage of the Global Financial Crisis of 2008 and beyond. Only when students understand the subtle difference between ‘stimulating an economy’ and ‘destroying an economy’ will they be able to make sensible decisions for themselves. Having said that, we learn much more from our returning Mannkal scholars than they could ever learn from us. If that is not a win-win situation then I don’t know what is.
In conclusion, let me imagine that St Barbara, herself was with us here today and if I asked her what she thought of my ramblings, so far, do you know what I think she would say?
“Well Ron, I think it’s a bit long and boring, so why don’t you just put it into a one-page poem and read it to them, so they can all go home?” So here’s the poem. Are you ready for it?
Character Beats Strategy (Every Time)
Here we go again.
A strategy for this,
a strategy for that.
Most of our ‘thought leaders’,
spend their time,
talking through their hat.
What we really need,
is to focus on
courage, conviction and character.
This gave our Western Civilization
that special edge,
lifting millions to a new level.
The Enlightenment thinking,
Isaac Newton and friends,
blazed the trails.
Before Entitlements and Victimhood
off the rails.
In Canberra, this week,
I was told Canberra
is our National Capital.
“Wrong!” I said.
our Political Capital.
I define Canberra as
200 square kilometres;
surrounded by reality!
Canberra is where they
work hard to
destroy our Triple A Credit Rating.
It’s ‘out there’.
You are the people
working to save it?
You the creators,
will rescue us,
from political seduction.
So, let’s drink a festive toast.
To the explorers, our industry
and our great producers.