Miners should have clear business strategy: consultant

By Jeames McKibben and Manish Garg

Certainly many smaller mining or exploration companies are highly dependent upon cutting costs rapidly, changing focus and implementing new technologies as a matter of survival. Whilst business conditions have recently begun improving, has the requirement for change diminished?

Many mining executives claim to be satisfied with their proposed changes however history suggests that relatively few will deliver the desired results. Why is this so?

Arguably, it is because strategy implementation is an art, not an exact science; not easily taught or mastered.

Strategy execution is currently rated as the leading issue impacting on business performance by senior executives. Recent estimates from the US, suggest that managers spend more than US$10 billion annually on strategic analysis and formulation. Yet, despite such expenditure and the focus on developing strategies, less than half of the developed strategies are ever actually implemented. In fact, the successful implementation of planned business strategies is estimated to be as low as 10 per cent.

Strategy is often a misused and misinterpreted term. Simply put, strategy is the determination of “what should be done” to advance the company from its current situation towards a target or goal (positioning the firm).

For exploration and mining companies yet to develop their projects, the strategy and its successful implementation is what shareholders and stakeholders rely upon. However, in order to move from strategy to “action”, companies must convert theoretical concepts to practical policies, procedures and outcomes.

The majority of strategic plans fall short during implementation due to a combination of poor staff support and/or involvement (“buy-in”) and inadequate communication. Essentially a lack of buy-in is a reflection of management’s ability to communicate and convince staff of the need for change or the “vision” for the future.

To be successful the initial development of a strategy should be widely communicated and staff actively engaged in the process to ensure “buy-in”. The key elements to a successful strategy are:

Strategy + Buy-In + Measurement   = Real Business Results

Strategy Development – The “Thinking Process”

This is the part that most mining and exploration companies “get right” since, as mining engineers and geologists, we are principally concerned with and enjoy “task oriented” processes. As such geoscientists and mining engineers tend to find planning, analysing the industry/market/competitors, goal setting, commitment of resources, and monitoring of progress both stimulating and rewarding.

Of prime importance is that the strategy formulated should describe your organisational vision and proposed future direction.

Strategy Alignment and Communication – The “Buy-In” Process

Having spent long periods in isolated environments, many geoscientists in particular are relatively poor communicators and this is where most come unstuck in the overall process.

Getting people engaged at all levels of the organisation and throughout the entire process is vital for effective strategy execution. People like to know and understand the big picture, how other people are contributing and, most of all, how they can develop and assist with in the strategic delivery in their own area.

Ensuring the strategic vision filters through all levels of the organisation is essential to successfully implementing the strategy. Organisations benefit from each functional/sub-business area identifying their contribution to the overall strategic plan. Armed with the relevant information each functional area should create their own “road map” to success and define specific performance measures.

Performance Measurement – The “Check” Process

Despite all the work done in developing and communicating the business strategy it is not enough to ensure success. The “she’ll be right’ attitude is insufficient if results are to be sustained. Organisational success comes from regular measurement of the alignment between strategic objectives and the changing environment. Organisations must ensure they have robust measurement and monitoring systems in place to assess the ongoing performance against strategy.

* Jeames McKibben and Manish Garg – from Xstract Group, a team of specialist mining consultants. For more information email: jmckibben@xstractgroup.com or visit: www.xstractgroup.com