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Labour productivity – Banking your investment

Many mining companies are currently exploring significant automation, centralisation and technology advancement programs to reduce operational costs and optimise business as usual. These are driving a more strategic view of investment management, cost control, and the need for more effective people management, thus forcing the industry to examine the cost effectiveness and productivity of all assets, including human capital.

Australian Bureau of Statistics 2012 data* on labour productivity (gross value added per hour worked) shows a productivity peak in the mining industry of A$200.08 in 2001/2. This has been in strong decline since, and in 2011/12 was only A$87. While the level of investment in mining in the past decade has played a significant hand in this decline, Deloitte Access Economics has predicted that good news is around the corner, with production dividends set to increase from 2013 onwards.

As the industry continues to move from a growth and construction phase into a more steady state, there are a number of actions that can be taken to increase labour productivity. The focused and effective use of people is a key driver of labour productivity, and outlined below are six levers that can be used to drive this improvement.

  1. Strategic organisation design By developing the right operating model and aligning functions, teams and roles to strategic business objectives, leaders can deliver an organisation of the right size, reduce duplication, improve the timeliness and quality of decision making, and improve output from their workforce.

  2. Developing resilient and innovative leaders
    Deloitte’s 2014 Global Human Capital Trends report highlights leadership as the highest priority human capital challenge across all geographies around the globe. Organisations need to develop resilient leaders who have the ability to inspire across a range of volatile markets and times, and be innovative in their approach to problem solving. This is a critical lever in driving increases in labour productivity.

  3. Invest now for the future - the easing ‘war for talent’
    Many mining and mining services companies have reacted to cost pressures by slashing headcount, sometimes without a well-thought-through future structure in mind. This will leave these businesses with critical skill deficits in the long term. However, they have also led to an increase in high quality talent in the market. Now is the time for forward-thinking companies to invest in talent by recruiting for the critical skills and talent required for the future – and probably at a lower overall cost than in the last five years.
  4. Ensuring capability to deliver – workforce planning and the growth of operational excellence
    The next phase for the mining industry will see a focus on throughput and output delivered by experienced people who can drive operational improvements to reduce costs. Having the right people with the right skills at the right time to drive operational and technological improvements will be critical to reducing the ‘waste’ that accumulated during the boom time, and can be driven through regular and effective workforce planning.

  5. Driving a culture of high performance
    A high performance culture can be delivered through bringing together aligned organisation structures with innovative leaders who know how to engage their people in problem solving, idea generation and focused delivery. This culture has a hard edge, and in today’s new world, a high performance culture is fundamental to business success.

  6. Engagement – encouraging discretionary effort in an overwhelmed world
    Our human capital trends report also identified that factors such as information overload and an always-connected 24/7 work environment are overwhelming workers, undermining productivity and contributing to lower employee engagement. In the mining industry, people are being asked to do more with less, use new technologies, and work in new ways. Effective, people-centric leadership is critical for increasing the motivation levels of overwhelmed employees. Focusing on the engagement of a diverse workforce will drive effective idea generation and a more productive environment.

    Improving labour productivity is a key driver of innovation and growth and the domain of leadership, not just the HR team. The benefits that can be realised from the levers above are substantial and will help the mining industry to stay competitive and relevant long into the future.

* Australian Bureau of Statistics “Estimates of Industry Multifactor Productivity, Australia: Detailed Productivity Estimates” (data cube). Released at 11.30am (Canberra time) 7 December 2012.

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Julie Harrison
Human Capital, Deloitte Consulting
Tel: +61 8 9365 7061

Sinead Booth
Senior Consultant
Human Capital, Deloitte Consulting
Tel: +61 8 9365 7104

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