People optimisation is a functional balancing act

People optimisation is a necessity due to increasing production costs and operating costs, including energy.

Optimisation of human resources is no mere number crunching exercise. In practice, it involves much more than looking at your organisational structure one morning and deciding how many people to reduce among loco drivers, belt attendants and general workers. Several elements have to be considered to optimise organisational structures, while maintaining variables like labour productivity and efficiency. Mining projects and operations are required to improve efficiency, but the number of successful 'efficiency' exercises is small. Several managerial dynamics hamper classic optimisation efforts;

Some operational managers do not understand the intricate process of people optimisation, and merely reduce numbers without applying the principles of organisational design.

Some operational managers do not fully understand the real cost impact of inefficiency.

Some operational managers relentlessly try to justify the number of employees in their divisions.

ome managers calculate the impact of labour cost at lower levels, while the biggest operational expenses are at management levels.

Unions and communities resist staff reduction.

Government pressures employers to create and sustain jobs.

Balance work and management

Mangers use some trends in mining operational functions as justification for larger structures. They are responsible to implement measures in safety, legal appointments, social labour plan requirements, skills training, mining charter clauses and more. While there is some truth in the proliferation of managerial functions, this should not distract attention from the need for optimum efficiency and labour productivity. Managers should find a balance between these two functional extremes.

Pruning and cutting

Optimisation initiatives usually manifest as 'cutting numbers'. A reduction of 5% to 10% is typically envisioned and managers are required to produce a list of names and positions to remove from the structure. Structures are usually pruned randomly and underlying principles are not considered. Technical and operational parameters should be used as a guide on the ideal structure supporting organisational effectiveness and operational efficiency.

Structure v personality cult

Some organisations are designed around individual people. The starting point of a people optimisation process is to review the strategy, and then design of the organisation to ensurethat the structure enables strategy, and does not disable it. Unfortunately, many structures are designed around individuals, and this approach defeats thepurpose of structures. Structures must be sustainable in terms of cost and functionality. The acid test for structural efficiency is whether it improves business efficiencies and support business strategy.

Ingredients and recipe

Optimisation initiatives should contain several elements in critical quantities. Many consultants are asked to perform optimisation projects for mines, usually at enormous cost and unfortunately with limited success. Managers should consider each of these elements, and the methodology of specialist organisational structure consultants, managing the optimisation process, must likewise include each of these elements;

Revise current structures, current strategy, and future strategy. Organisational design must enable organisational strategy.

Evaluate and include environmental factors that could potentially impact the organisation.

Define appropriate staffing principles to establish a staffing model that integrates specific organisational realities.

Translate actual labour cost into financial ratios, such as cost per ton, or income, or loss prevention.

Beware of benchmarking solutions, beloved by most consultants. Agree on benchmarking criteria and select benchmark companies well. Do not benchmark against highest cost producers, nor blindly against lowest cost producers.

Determine a people deployment strategy.

Continuous process

Optimisation is not merely a business imperative during economic slowdown. During 'good times', organisations should implement and maintain a financially robust system. Usually, while margins are high, management take their hands off operational cost containment. Inflated commodity prices and exchange rates offer mining houses increased margins and shifts focus off operational expenses elements, tending to drift businesses towards inefficient structures and practices. Optimisation is not a once of event, but should be a continuous process of departmental and overall efficiency.

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