Introduction:

The Client:                   Kazakhmys Corporation LLC

Description:                 One of Kazakhstan’s largest mining companies employing 75,000 people over 22 active assets which include mining, processing, smelting, refining, and selling copper and copper products.

Case Location:            Kazakhstan

Products:                     Copper, zinc, silver, gold

The Situation:

It was considered by the senior management team that the company had become cumbersome and there was little confidence in delivering upon the strategy and giving a valuable return to the shareholders.

A majority of organisational and individual problems that the company encounters based on the results accumulated during the audit phase can be tracked down to the poor structural organisation of the Company.

One of the key problems that prevent the corporate strategy from being implemented successfully is that this implementation is performed on a poor fundament – an inappropriate organisational structure.

The key signs of inappropriate structure the management wanted to eliminate are:

  • Unclear accountabilities and authorities – duplications and overlapping
  • Unclear reporting lines – “multiple bosses”
  • Messy horizontal relationships among various units of our Company
  • Slow decision making and poor communication across the Company
  • Structure is built around people, and not around tasks
  • Unequal work distribution among different units of our Company
  • Employee cost higher in comparison to competitors
  • Poor line of sight down the Company, loss of high potential people and poor visibility of talent
  • Too many layers of management that cost the Company too high and add value too little
  • Low productivity
  • Poor strategy implementation

As a result, there was a lack of organisational consistency throughout the business and within each asset or GOK. The Kazakhmys Senior team decided they needed to restructure their organisation to make sure it remained successful in the future, independent of the current Copper price.

In order to this, the CEO wanted to design and put into place a strong and resilient organisational structure decided with an organisational effectiveness that will deliver the company’s long-term goals effectively, efficiently and at the right cost.

To ensure a systematic and learnt approach the CEO authorised the organisational design work to be based on the principles of Levels of Work. To expedite the restructuring, it was decided the best approach would be to take the spine of the organisation, from company CEO down to the lowest level of management at one of the assets “Zhezkent GOK”, in the north-eastern region.   This would enable the company to develop an organisational language and clearly describe the different levels of complexity in decision making, in turn, this would enable fair comparison across the entire organisation.

Following that, the restructuring project was formed and our consultants were subcontracted to deliver the restructuring method and approach.

The Restructuring Objectives:

The Kazakhmys senior management team identified the following objectives for the restructuring project at Zhezkent Mine:

  • Develop the optimal organisational structure of the mine
  • Reduce the number of organisational levels in the Mine’s structure
  • Optimise the number of the management team of the Mine
  • Reduce the cost of the management team
  • Ensure clear accountability for the results in every role of a new organisational structure
  • Ensure the match between the role complexity and capability in management roles of a new organisational structure
  • Improve horizontal working relationships between the roles in a new organisational structure
  • Develop and optimise the structure of the headquarters of the Eastern Division in Ust Kamenogorsk that is aligned with the Mine structure.

The Restructuring Approach:

In order to achieve the restructuring objectives, the restructuring approach was established and approved as a guideline for the restructuring team:

The Analysis:

To evaluate the current organisational arrangements of the Zhezkent Mine and Eastern Division

  • Analyse the approved structure according to which the Company is supposed to operate
  • Analyse how the employee of the Company assume they operate (assumed structure) and how they are operating in reality through their interconnections (real structure)
  • Evaluate these three types of structure (approved, assumed and real structures of the Companies)
  • Compare the results of the evaluation with the benchmarking or optimal results
  • Establish the causes of all mismatches identified between the approved, assumed and real structures of the Company– why we operate or assume we operate differently from how we are supposed to operate
  • Identify directions for necessary improvements and develop recommendations to remove mismatches for the structure to suit the Kazakhmys Organisational Model
  • Analyse the value the existing accountabilities deliver to the Company, duplications or gaps in accountabilities, cost and directions for improvements
  • Evaluate how accountabilities are functionally aligned to ensure functional specialisation and that all accountabilities are managed.
  • Evaluate whether roles and accountabilities taking into account their complexity and value are located at a proper level of our Structure
  • Analyse any cause of conflicts in horizontal role relationships and establish the options to remove any conflict opportunities

The Design / Change:

To ensure the correspondence of Kazakhmys Structural Arrangements to the future needs and current realities

  • Design the new organisational structure based on the results of the Structural Audit and the feedback from the employees across the Company and at all levels in regard to the efficiency of our structural arrangements at all levels

  • Taking into account the results of ANALYSE stage (approved structure, assumed structure, real structure, the value of accountabilities performed across the organisation, efficiency of horizontal role relationships, functional excellence)
  • Utilising a variety of methods and concepts for every dimension
  • Adapting the methods and concepts to specific needs and circumstances of the Company
  • Develop several design options of the new organisational structure
  • Test all design options quantitatively and qualitatively to select the best option for further implementation and compare the results with the established criteria and seven principles
  • Agree on the final organisational structure for further implementation

The Implementation:

  • Develop Work Content – fill the structure with the content by developing or changing role descriptions with accountabilities and authorities, developing or changing value workflow, processes, procedures, policies, standards
  • Develop coordination – establish correct coordination mechanisms in place to support changes in the Kazakhmys Organisational Model and work content.
  • Even small changes can have a “ripple effect” on the Company through a network of interconnections.

The Audit:

To evaluate the efficiency of our Organisational Structure and its influence on the efficiency of the Employees

  • Assess if it generates any signs of poor structure
  • Assess if it delivers the benefits expected
  • Assess if it is causing any horizontal role relationships conflicts and has a “ripple effect” across the Company
  • Assess if it supports future needs and facilitates an achievement of current objectives
  • Collect and analyse a feedback from the employees within and outside the structure to substantiate and investigate claims of the structure’s inefficiency

Outcomes and Benefits:

Zhezkent Mine Organisational Structure:

By applying the approved restructuring approach to the organisational structure of Zhezkent mine the following objectives were achieved in terms of developing better and more efficient organisational structure:

Levels of Work As Is Number of employees To Be Number of employees Number of removed roles
4 1 1
3 32 9 5
2 108 32 11
Total 141 42 16

 

With the key benefits achieved:

  • Reduction of number of organisational levels from 12 to 4
  • Reduction in the size of the management team who is accountable for key managerial decisions
  • Reduction in the wage budget due to re-evaluation of the complexity and level of some roles
  • Reduction in the number of roles

Eastern Division Organisational Structure:

By applying the approved restructuring approach to the organisational structure of Eastern Division’s headquarters the following objectives were achieved in terms of developing better and more efficient organisational structure.

Measures BEFORE Restructuring AFTER Restructuring Change, %
Measure 1: Number of Levels
Number of Levels 8 4 -50 %
Measure 2: Number of Employees
Number of employees involved in structure (before functional alignment)
Level 8 1 0 -100 %
Level 7 2 0 -100 %
Level 6 3 0 -100 %
Level 5 7 0 -100 %
Level 4 14 1 -92.85 %
Level 3 32 6 -81.25 %
Level 2 87 24 -72.41 %
Level 1 515 563 +9.32 %
Total 661 594 -10.14 %

 

Measures BEFORE Restructuring AFTER Restructuring Change, %
Measure 3: Organisational Design Strategy
Number of structural cells in the structural matrix 558 134 -82.43
Deformed Structural cells in structural matrix 330 4 –98.79
Deformed Structural cells, % of total structural cells 59.14 % 2.98 % -56.16
Structural Gaps and compressions 129 2 -98.45
Managerial Complexity of organisational system 387,755,952 26,982,508 -93.04

 

With the key benefits achieved:

  • Reduction of number of organisational levels from 8 to 4
  • Reduction in the size of the management team who is accountable for key managerial decisions
  • Reduction in the wage budget due to re-evaluation of the complexity and level of some roles
  • Reduction in the managerial complexity

Overall High-Level Project Benefits:

  • Structure is built around tasks, not people
  • Optimisation of managerial levels that cost the Company too high and add value too little and, oppositely, increase complexity unnecessarily, slow down management functions and decision making
  • Decreased cost of managing the “structural infrastructure” of the Company
  • Structure fits the Company’s vision, objective, strategies and plans
  • Structure allows every employee to manifest his/her capabilities and talent
  • Every role with accountabilities and outputs of certain complexity is matched with the employee capable to execute this complexity efficiently
  • The system of sufficient authorities to support accountabilities’ execution
  • Clear reporting relationships that are based on an understandable distribution of managerial authorities – the “One Boss” principle should be observed
  • Structure strengths Functional and Technical specialisation and development that is required by Kazakhmys’s needs for further development
  • Improved employee morale
  • Clear career opportunities for managers
  • Minimisation of cross-functional and horizontal conflicts due to a better horizontal alignment between functions, within functions, corporate centre and divisions

Key Client Reference:

“In terms of the outcomes of the work carried out for us by the consultants’ team of En-sync group I can only praise the high quality and commitments to achieve the objectives of the project.

The support we received from the consultants was very significant in the overall implementation of the project. Detailed methodological knowledge, as well as good training and communication skills and proactive approach, were among major success factors of the project.

Not only all planned benefits were achieved but we then built our entire HR strategy around this approach and now in the process of its implementation. I would describe the En-sync group’s consultants as organization development professionals strongly focused on the goals set.”

Mr Alisher Abenov – HR Director Kazakhmys Corporation LLC

About En-Sync 8020

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Our combined experience exceeds 100 years. Our service delivery methods guarantee our clients success by ensuring that they have a robust and well-communicated strategy, a healthy structure and reliable systems and processes, supported by the right people in the right roles. We have delivered our services throughout the world and across industries such as:

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