How to keep your Gun Mining Executives Firing into the Future...
You have some good assets, you’ve got capital and cash flow to build on them and you’ve hired some great people... but how do you keep them great ...?
A good percentage of readers of this column are involved directly or indirectly in the resources industry. This industry has experienced change on a truly tectonic scale over recent years and it would seem the process might only just be beginning.
If the many mining finance commentators are right and the heavy period of mergers and acquisitions is still yet to kick into top gear, many of these deals will transform companies and leave them utterly unrecognisable compared to their former selves. Some will be considerably smaller having divested major assets, some considerably bigger having bought things, or some just different, having closed operating mines and refocused energy into a purely exploration/project identification mode.
These changes bring into even sharper focus, why in the resources space right now, .....
....it is not enough to hire great people, but rather it is essential you ensure they stay great.
I’ve based this article on a terrific piece initially written by Ben Horowitz. You can read the original article in full here.
I’ve quoted Ben before so I thought I’d also share some of his biography as found on the “Forbes Midas List” website.
Ben Horowitz can invest, blog, tweet and box, often seemingly doing it at the same time. The media-friendly cofounder of Andreessen Horowitz co-led the firm's investments in Twitter and Skype (making 4x its $50 million investment) and sold Nicira to VMWare for $1.3 billion in 2012. He also leads the firm's investment in wearables and speaker maker Jawbone. Like his partner Marc Andreessen (no. 19), Horowitz is a Netscape alumnus, and was CEO of Opsware (acquired by HP in 2007 for $1.6 billion) and before that was in product marketing at Lotus. He's on the boards of annotation site Genius (formerly Rap Genius), SignalFx, Okta, TransferWise, Columbia University, and Code 2040. The London-born investor's management tome, The Hard Thing About Hard Things, was a bestseller in 2014 for its frank advice for entrepreneurs.
I share this because while the mining game is not the technology game, I DO feel they have much in common. Additionally Ben has built and sold businesses and invested in numerous start-ups. As a result I imagine he has seen many executives (some great and some not so) come and go.
The background here is that almost every key executive hiring process I have seen in the mining industry began with some consistent belief in the mind of the CEO that they;
- WOULD find the very best person and
- Once found, ARE the best around.
Aside from the obvious issue that both these things cannot possibly be right in all cases, I think most CEO’s truly believe that at the beginning of all new employment relationships, they are starting with a gun in the seat.
To compound this strong ingrained bias, Ben quotes the example of world class athletes (or for that matter world class anything’s) not staying world class forever.
To pinch Ben’s example but Australianising it; one day you're Mick Malthouse and the next day you're… well... Mick Malthouse. Sorry Mick – from a (still not over it) West Coast Eagles fan.
Now I know this may seem harsh on a genuine Australian Rules Football coaching legend and games coached record holder, but the facts are; business changes, teams change and conditions change. If a top executive sticks around long enough, it should be abundantly clear that this person will not continue to succeed by staying the same.
Ben comes across as a serious hard-ass and I’m quite sure not everyone will agree, however he puts it so:
There are two kinds of cultures in this world: cultures where what you do matters and cultures where all that matters is who you are. You can be the former or you can suck. So you must hold your people to a high standard, but what is that standard?
You did not know everything when you hired them
It is perfectly reasonable to change and raise your standards as you learn more about what's needed and what's competitive in your industry.
You must get leverage
Early on, it’s natural to spend a great deal of time integrating and orientating an executive. However, if find yourself as busy as you were with that function before you hired or promoted the executive, then they are below standard.
As CEO, you can do very little employee development
One of the most depressing lessons of my career when I became CEO was that I could not develop the people who reported to me. The demands of the job made it such that the people who reported to me had to be 99% ready to perform. Unlike when I ran a function or was a general manager, there was no time to develop raw talent. That can and must be done elsewhere in the company, but not at the executive level. If someone needs lots of training, they are below standard.
Ben admits it is possible to take the standard setting too far and attempt to evaluate an executive based on what their job will be two years from now. Just evaluate them on how they perform today.
He then goes on to talk about two critical aspects of any successful CEO/Senior Executive relationship...
If you have a great and loyal executive, how do you communicate all this? How do you tell them that despite the massive effort and great job they aredoing today, you might fire them next year if they don’t keep up with the changes in the business? When I used to review executives, I would tell them: “You are doing a great job at your current job, but the plan says that we will have twice as many employees next year as we have right now. Therefore, you will have a new and very different job and I will have to re-evaluate you on that job. If it makes you feel better, that rule goes for everyone on the team including me.” It’s important to point out to the executive that when the company doubles in size, they have a new job. This means that doing things that made them successful in their old job will not necessarily translate to success in the new job. In fact, the No. 1 way that executives fail is by continuing to do their old job rather than moving on to their new job.
Finally, what about being loyal to the team that got you here? If your current executive team helped you 10X your company, how can you dismiss them when they fall behind in running the behemoth they created? The answer is that your loyalty must go to your employees—the people who report to your executives. Your engineers, marketing people, sales people, finance and HR people who are doing the work. You owe them a world-class management team. That’s the priority. As I said, Ben will come across as a serious hard-ass and not all of you will agree, however, we’re in rare times and they require soft conventions to be tested to ensure survival. I also want to say that his final point in shifting our attention back to all of the people who depend on us even more so, is empowering. Perhaps it’s a subconscious reminder from John Heather (ex Australian Workers Union local Secretary) and my father!