The Client: ABG(Acacia)
Description: Global Gold Mining Company with 20+ Mining Assets on 4 continents
Case Location: Tanzania
Acacia Mining (formerly African Barrick Gold plc) is a gold mining business operating in Tanzania, with exploration properties in Kenya, Burkina Faso and Mali. It is listed on the London Stock Exchange and the Dar es Salaam Stock Exchange under the ticker ACA, and is a constituent of the FTSE 250 Index. Acacia’s majority shareholder is Barrick Gold, which owns 63.9% of the company.
Acacia Mining operates three mines in northwest Tanzania—Bulyanhulu, Buzwagi and North Mara which were reviewed. One of the assets had considered scaling down operations as it was considered to be nearing the end of its economic life. All assets had high degrees of operational complexity. These included dedicated external community focus, multiple mining techniques, a vast array of non-standardised equipment a high turnover of labour, and a heavy reliance on expat experience.
In general, the current situation of the company in 2013 was described by seekingalfa.com as “on the brink”:
- Drastic decrease in gold prices
- Huge cost of operations
- Non-delivery on operational targets for last 3 years
- Decrease in share price and market capitalisation
- Environmental and Community-related Lawsuits
- Acacia’s majority shareholder (Barrick Gold) desire to sell the ABG(Acacia) asset
- Failed Merger & Acquisition Attempt with the Chinese State Gold Mining Company
- Issues with Trade Unions
- High management turnover
- Projects’ overrun
It was clear to the management and external community that the company was experiencing the issues with organisational effectiveness or it was not organised effectively to deliver various business and functional plans at various planning intervals and the management of the company stipulated one simple question: do we have right people in right roles doing right work and managed in a right manner.
The business review focused on supplying answers to the management’s questions about the key pillars of organisational effectiveness, below are some of the key critiques
- 15 organisational levels instead of optimal 5 organisational levels
- Number of structural gaps and compressions that exceeds the average benchmarking number for such companies
- Absence of standardised role descriptions
- Duplication of accountabilities in a majority of the management roles
- Lack of standardisation in regard to the role titles
- Unclear horizontal working relationships and intensified cross functional conflicts
- The work of some functional systems is performed at significantly low level of complexity when required by new company strategy
- Mismatch between the capability of the role holders and the complexity of the roles that is below the 85% mark established by new CEO
- The higher the level in the organisational hierarchy is the higher % of mismatch in the roles
- With the current match, there was a high probability of new strategy’s non-delivery
- Low of maturity of HR systems with the existing focus on employee relations and operational/transactional HR processes
- Poor quality of managerial leadership at all levels of the organisational hierarchy
- Mismatch of managerial Authority’s due to excessive number of organisational levels and structural compressions
- Gaps in the management operating systems at all levels especially in regard to the plans that are not based on real capacity planning
- The absence of unified company-wide management standard. Managers apply the management standards from their previous place of work (De Beers, Rio Tinto, AngloGold Ashanti, BHP, etc.)
Business Continuous Improvement
- The framework for continuous improvement exists however it is applied consistently by the managers
- The managers are not trained on all aspects of the continuous improvement framework
- The managers do not have any objective and performance appraisal in regard to their continuous improvement efforts
- As a result, there is a lack of efforts to improve the processes and work within the area of their accountabilities
- An absence of unified and strong organisational culture, huge differences between the assets and units
- A mismatch between the organisational values of new CEO and the rest of the organisation
Accountable Management System: Development
Based on the business review findings the objective was set to develop and implement the Accountable Management Systems that is going to address the gaps and improve the organisational effectiveness of the company and its ability to deliver the plans and new company strategy.
CEO and Senior Leadership Team set the following objectives for the Accountable Management System in line with Requisite Organization Principles:
- Develop the organisational structure that is aligned with the new strategy of the company
- Ensure 5-level organisational structure from CEO to miners
- Set the level of work for every role in the new organisational structure
- Develop role descriptions in a unified template for every role
- Establish the Unified Role Titles by organisational levels
- Ensure that the match between the capability and complexity for the company reaches 85% (in 85% of the roles there is match between capability of a role holder and complexity of work in a role)
- Set up human resource strategies to utilise the existing talents at right levels and in a case of a gap that cannot be covered by internal human resource sources use the external recruitment to fill the gap
- Identify the optimal number (quantity) of human resources required to deliver the work aligned with the new company strategy by applying Zero Base Budgeting approach
- Develop or improve the maturity level of HR management systems
- Priority HR processes to be developed or improved:
- Talent management and talent pool development/management
- Recruitment and selection
- Performance appraisal
- Fair compensation and benefits
- Establish a set of required managerial leadership practices to be performed by every manager of the company
- Allocate required managerial accountabilities to every managerial role required to deliver the managerial work
- Establish the standard for management operating system to be set up by every manager in the company within the area of their accountabilities
- Train managers on the aspects of the new managerial framework
Business Continuous Improvement
- Train managers on the continuous improvement framework
- Set up continuous improvement objectives for the managers
- Monitor the achievement of improvements
- Establish a set of organisational values to support the delivery of the new company strategy
- Set the programme to achieve the strong organisational structure and cultural alignment between various organisational levels, assets and units.
The following implementation sequence was established for the Accountable Management System:
- Approve new organisational structure and role titles
- Develop the roles in the organisational structure with the right complexity of the work that corresponds to the organisational level at which the role was allocated
- Select the candidate with right level of capability
- Assign the candidate into the role
- Provide role holder with the required training: in cultural development, in managerial leadership practices, and in Accountable Management System overall
- Support a role holder in setting up the effective management operating
- Monitor the individual effectiveness of a role holder in the role
- Implement corrective actions, if required
This allowed positive conversations to take place with the account managers as the system and structure were being developed.
Role Orientation and Cascading Accountabilities:
- The process of cascading better-defined roles allowed managers to understand what their direct report (manager) was accountable for delivering and the importance of their own role. This helped the role holders identify how their success directly impacted the business strategy.
- The expectations of performance were clearly described during discussions and in the role description, including managerial discretion and decision-making authorities. This helped the role holders understand the size of their role and the freedom to exercise their managerial judgment.
- Managers were asked to describe not only their understanding of the imminent constraints to be managed, but also to use their judgment to as to the constraints that would impact the strategy being delivered. The helped the managers to think about the development of their plans and the types of resources they would require.
- Managers were assigned peer support around specific tasks where there was certainty on the reliance of different skills. The managers were also asked to consider where additional support was required from their peers and to include these relationships in their role and management plans. This helped to develop the cross functional relationships and ensure timely and relevant discussions and service requirements were described.
Seekingalpha.com described the situation of the company in 2015 as the following:
- “Acacia Mining has turned free cash flow positive and has finally presented its vision for the mid-term future.
- We are convinced that a turnaround has been accomplished and we are expecting significant growth going forward even at today’s gold price levels.
- Management has succeeded on just about the most difficult task available in the gold mining industry. We are confident that it will deliver on its 5-year plan.
- Acacia Mining remains severely undervalued and should rerate over time to account for its successful reinvention.”
The impact of implementing the 1-year transformation programme to tackle key organisational fitness indicators resulted in the following key results achieved by ABG (Acacia Mining):
- Introduction of capacity planning
- Planning in short intervals
- Integrated planning
- Dispatching system
- Zero Base Labour Budgeting
Work Execution Efficiency:
- Cutting organisational layers from 15 to 5
- Increase in production by 13%
- Mine to Plan (M2P) Increase by 27%
- Improvement in labour productivity by 31%
- Reduction in personnel by 18%
- Improving the competency match of the personnel
- Improve the development meters per 1 drill from 50 meters to 216 meters per month
- Increase in total development meters per months by 41%
- Increase in planned maintenance from 35% to 55%
- Decrease in AISC by 18%
- Reduction capital cost by 34%
- Improve the operating cash flow by 55%
The Dynamics of the share exceeded the average dynamics in the mining sector. Market Vectors Gold Miners ETF (NYSEARCA) almost by 50% during the last year of the project.
The graph below showing declining market price of gold and cost control of Acacia Mining throughout the project.
The graph below showing Cumulative cash for sensitivity for Acacia Mining projected to 2019 supporting the 5 year delivery on the business objectives defined during the project.
Key Success Factors:
- Involvement and engagement of CEO and SLT
- Keeping managers accountable for changes (not consultants)
- Training all managerial levels on improvement tools and approaches
- Matching the rules’ complexity with role holders’ capabilities (the target to ensure 85% match)
Key Client Reference: Janet Reuben-Lekashingo | Chief Advisor, Learning and Development
“Organizational Changes within African Barrick Gold (Now Acacia Mining Plc) was implemented through a process we named the Accountable Management System. I highly recommend the company for assisting us to achieve, embed and sustain the following results:
- Business Strategy Stream: Unified and integrated approach to business effectiveness at the mine sites from strategy through execution.
- Organizational Management Stream: Effective Organizational Structures that corresponds to the Business Strategies and production plans at right cost, clear accountabilities and relevant authorities to make decisions about resources and improved working relationships
- People Management Stream: Effective People Management that is directed at developing employees, improving their knowledge and skills ensuring that they are motivated and value their work
- Work Execution Stream: Effective Work Management that ensures that work of every employee is organized and managed properly by improving our processes and enhancing the abilities of our managers
- Engaged Employees: Effective cross functional relationship, Effective Employees Relationships (with clear accountabilities), Effective Managerial Practices and Effective Manager-Once-Removed Practices
- Accountable Management System Manual
Implementation of the system has improved the Company overall performance by ensuring that the Company has all organizational conditions required to utilize available people at their full potential and effectively. And also ensuring that all the control mechanisms for monitoring the effectiveness of the employee utilization are in place (organizational structure, management systems and practices, process organization and management” – Janet Reuben-Lekashingo
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