Rio Tinto workforce Planning - Current Requirements
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1 Functional Focus The Arc of Workforce Planning at Rio Tinto By Hugo Bague and Clark Hymas, Rio Tinto, Mike Sokol, HP and Bob Farrell, Consultant Any approach taken by a company to understand their future workforce needs has to connect with the current systems used by the company, as well as fit into the culture and skillsets of the users. We have too often seen the introduction of a sophisticated set of processes and tools that are sub-optimized or rejected by users because they created a gap too wide between what is in place today and the expectations for tomorrow. This article explains how Rio Tinto developed a plan that met the current environment and pushed it forward without causing major disruption or frustration for the user community. An Economist Intelligence Unit study conducted in 2007 identified human capital as the number one risk factor in their survey of executives. The concern was widespread about keeping the talent that companies had and hiring the talent they needed in the future to keep ahead of the changing characteristics of the business. The traditional approaches to hiring, retaining, and developing their workforces were not working for them. They knew that a strategy and plan were needed to position the people side of the enterprise for success. The survey also said that these executives didn t feel that the risks associated with the workforce were being addressed adequately. There were 11 risks identified and, of the 11, the people risks being addressed adequately were ranked 10 th. It s understandable that while executives see a clear and present danger to their workforces changing as their products and services change, they don t see it being addressed effectively. The labor cost to a company can represent anywhere from 30 to 80 percent-plus of its total cost. A capital intensive company like Rio Tinto has a workforce cost of about 33 percent, whereas a software company whose product is intellectual property might have a workforce cost of 80 percent or greater. How do you effectively plan and manage the workforce needs of the company with this much money at risk? If you have too few employees, business objectives can t be met. If you have too many employees, profit is eroded. Also, you must make sure that you hire for critical positions and skills needed in the next 24 or 48 months, given the rate of change in markets and technology. The growing volatility in all industry segments makes it critical that companies have a plan for their current and future workforces. Investing in future skills is as important as investing in capital. Knowledge workers are becoming scarcer commodities as new markets open up and the world continues to flatten. A company without the right skills in its workforce will lose because the pace of change is continuing to quicken each year. If you re not developing comprehensive plans, you won t see your future competitors, because they could be coming from a different market segment not thought of as traditional competition. Rio Tinto understands the changing markets because of the dynamic number of acquisitions and divestments going on in the mining industry. Add to this the continuing changes in governments and how they view their natural resources around the world, it makes sense for Rio Tinto to know as much as it can about where and how it will find its future workforce 5 to 10 years in advance. Rio Tinto is a leading international mining group headquartered in the United Kingdom. Rio Tinto s business is finding, mining and processing mineral resources. Its major products are aluminum, copper, diamonds, thermal and metallurgical coal, uranium, gold, industrial minerals and iron ore. The company s activities span the world and are strongly represented in Australia and North America with significant businesses in Asia, Europe, Africa and South America. Rio Tinto s 67,000 employees work in more than 40 countries, including some of the most difficult in terms of terrains and climates. Rio Tinto s businesses include open pit and underground mines, mills, refineries, smelters and power stations, as well as a number of research and service facilities. The group s products are present at every point in the development cycle, from the iron ore that builds the fundamental infrastructure of our cities, to the copper and borates in the smartphones that keep us connected. As we looked to the future at Rio Tinto, we understood that to grow our businesses at the rate desired, we would need to more than double our workforce over the next 15 years. These numbers were arrived at when you factor in attrition, retirement and other actions, plus the growth rates we see through This presented itself as a daunting task because of the sheer numbers, location of the various facilities as well as the changing technology. As we continue to develop our Mine of the Future, the skills and knowledge needed by elements of our workforce are changing dramatically. Think of people managing digging, hauling, and loading remotely using computer screens and joysticks. This is not the picture most people have of mining operations. As if this weren t enough, Rio Tinto has a distributed management style born from its history of developing as a holding company made up acquisitions and partnerships, which made the introduction of common systems 20 March 2014 Workforce Solutions Review
2 a true change management challenge. The functions set standards for the business groups that implemented their policies and systems to meet their individual business needs. This led to having a variety of human resource systems that didn t fully connect with each other. The company was also in the middle of the implementation of an SAP ERP system, which would not be completed for a number of years. Senior management recognized the need for a view of the future workforce based on solid analytics of the current state, which brought about the need to better connect the current human resource systems. A Human Resource Foundation project was completed that identified 52 data elements that needed to be pulled into a central data bank. This was a challenge because the various systems had differing definitions for many of the data elements, such as full-time employee versus contractor. All of these data elements were defined consistently and one database was developed that was fed from the multiple human resource systems in place at that time. This foundational database gave Rio Tinto the ability to look across the company at the entire workforce of 67,000 regular employees and 30,000 contractors. This gave the company much clearer information about the current skill base across the workforce. It allowed them to match the current workforce profiles with the changes in technology, geography, and demographics that would position the company for having the skills needed in the short- and medium-term future. As stated earlier, the company was facing major workforce expansion in some of its current locations, as well as the opening of new locations in various geographies. Another aspect of workforce development for a mining and minerals company is that locations are fixed, so there isn t the opportunity to decide on locations to optimize workforce impact. Once these critical pieces of infrastructure were in place, we were able to develop a tool that allowed us to better understand the human capital needs of the company and associated labor costs. Human Capital Planning at Rio Tinto The mission of Rio Tinto s Human Capital Planning team was to support establishing a core company competency to perform strategic workforce planning. Simply put, the mission was to plan our human resource requirements (short-, medium- and long-term) based on our business objectives and knowledge of our internal and external environments to ensure that we have the right people, in the right place, at the right time, with the right skills to support our aim to be the global sector leader. The goal of the human capital program at Rio Tinto is to design and deliver the processes, tools, and information to support the organization in developing this critical competency. The first step in this process was the development of an Operational Workforce Planning Tool (OHPT). The major purpose of the tool was to provide a consistent, highly accurate approach to labor demand planning, by position, looking out five years. Once this tool was established, the team moved on to develop more sophisticated modeling tools and analytics. The OHPT was rolled out using a well-defined process that ensures business readiness, quality planning and explicit reports. This approach provided a repeatable solution of introducing a tool-based enhanced workforce planning process to multiple organizations within Rio Tinto. Figure 1. Annual Head Count Plan Process. The OHPT was designed to: Provide a 60-month view of positions required to deliver business objectives; Consolidate annual plans to provide a group-wide view by senior management to ensure that hiring is aligned to business strategy instead of leading or lagging business requirements; Provide head count data for labor costing; Understand business drivers and workforce needs; Provide information needed to build business cases for workforce changes through the capture of justification for increasing the number of positions required for a particular project and/or the delimiting of positions as projects ended or were modified in some fashion; Create reports to enable people-related functions to operate more efficiently and effectively across the company: Workforce Solutions Review March
3 Finance integrated planning; Recruitment sourcing demand picture by role and time period for hiring; Logistical support, e.g., housing, fly-in-fly-out, and equipment utilization; Shared services accounting, i.e., cost of II, Employee, Payroll, Staffing, etc.; Information system and technology hardware requirements and software licensing; Major projects labor resourcing and modeling to ensure adequate staffing and avoid risk of project slowdowns; Procurement support, i.e., licenses, fees and insurance premiums, etc.; and, Compare plan versus actual to track variability. Figure 2. Areas of Impact. The Tool Specifics We worked closely with Human Resources business partners and business workforce planners in mapping out both data requirements and business processes to ensure acceptance of our application. After a search through multiple vendors, we found none that had an application that met our needs. Thus, we determined that we would work with our Information Systems and Technology team to develop a solution internally that would fit our business requirements. The key requirements and outcome of our internally developed OHPT include: Visual process by which organization structure views can be captured and manipulated at aggregate or position level. This gives managers immediate feedback on what their organizational structure looks like as they make planning changes to head count and full-time employees, while it is aggregated and visible throughout the planning process; Planning changes could be made monthly, 60 months out, and include actions such as: Position creation, Position deletion, Org creation/deletion, and Transfer of positions and org structures; Simple user interface (Web-based); Track reasons for planning changes and be able to report on changes (waterfall justification reports, below); Output to flat files that can be sent to labour-costing engines; and, Manage multiple plans/scenarios on baseline data (current organization structure) and be able to update either baseline structures or plan data independent of each other. The tool needed to be flexible enough so that near-term (one- to two-year) planning could take place impacting hiring plans, budgets, and resource allocation data collection capability, but also long-term (three to five years) head count information that could be used to build scenarios on future projects/mine sites and model out the cost of labour based on current projections looking out three to five years. Labour costing was the biggest driver in developing the head count planning tool, as the human capital planning program was linked closely to the integrated annual planning cycle that is driven by the Finance function. By reviewing the head count plans on a monthly basis, large cost savings have been recognized through job phasing and ensuring that labour was hired with the right amount of lead time. In the past, because of the perception that budgets might be cut later in the year, hiring sprees took place in the first quarter, even though equipment may not be ready until the third quarter, causing excess labour costs to the organization. This was largely eliminated once visibility to hiring plans was given to senior managers. The head count planning tool relies on data extracts being fed into the tool from the SAP ERP system. As with any data-based decision-making, data quality is extremely important in ensuring that outputs are as accurate as possible. With that in mind, we built data integrity checks into the annual planning process, ensuring that the business reviews and data were scrubbed prior to the planning cycle. Establishing the discipline with the organization to do this work is one of the change management challenges. We were also faced with a number of technical challenges due to the complexity of reporting relationships, with the size of database addressing position movement over time. 22 March 2014 Workforce Solutions Review
4 Some of the technical challenges we faced included: Developing the extract, transform and load (ETL) process to flatten and manage multidimensional organization and positions changes over 60 months; Managing database size and performance due to the compounding effect of each core data element being dimensional; Layering baseline data with plan data for multiple plans, and having the flexibility to re-upload baseline data and linking changed baseline data sets to plans; and, Building out reports that presented complicated change and movement in a manner that met human capital planning objectives. Some samples of OHCT reports follow: Figure 3. Head Count Overview. Figure 4. Plan Summary by Year. Figure 5. Plan Summary by Justification. Conclusion Getting an organization that has the inherent complexity of Rio Tinto to adopt a new approach to workforce planning and labour costing is always going to be a challenging task. This is due to the varying requirements of each organization, coupled with the desire to maintain local control. What made this effort ultimately successful was a combination of the vision of senior leaders coupled with the creation of true value-adds at the local level and corporate level. We also recognized that this approach was as much a change management effort as a technical change, and so we introduced it across the organization in a gradual fashion. This approach resulted in a pull, rather than a push introduction. Every organization s business culture is different, so it is important as you introduce this type of application, with its potential for transformation, that you recognize this and adapt your approach to the organization s maturity level. The tool/approach that was detailed earlier reduced the level of effort for the local businesses by more than 50 percent. It gave them greater flexibility to re-plan if assumptions changed either in labour costs and/or production growth, cutting the time for revising plans to hours versus months. Fundamentally, it brought hiring and labour costs from the future to the present and, therefore, allowed management to make appropriate changes when they were misaligned with strategic objectives. Because all organizations within and across Rio Tinto s business units were now using the same approach, aggregating information became possible, providing senior leadership with a more accurate picture of projected labour costs and hiring challenges. In one particular case, this brought to light a tendency to over hire in first quarter of the year. When the hiring was pushed out into Q3 and Q4, labour costs of approximately US$100 million were avoided. The bottom line is that the tool saves time and human resource costs and provides a more accurate picture of hiring needs and labour costs, which removed risk to the enterprise. Workforce Solutions Review March
5 Figure 6. More Accurate Data for Stakeholders. About the Authors Hugo Bague is Group Executive, Organisational Resources with overall responsibility for Human Resources, Health, Safety, Environment and Communities, Media Relations, Corporate Communications, Procurement, Information Systems and Technology, Shared Services, and Group Property. Previously he worked for six years for Hewlett Packard where he was the global vice president Human Resources for the Technology Solutions Group. Prior to this he worked for Compaq Computers, Nortel Networks and Abbott Laboratories based out of Switzerland, France and Germany. Since March 2011 he is a non-executive director and member of the nominating and governance committee and the compensation committee of Jones Lang LaSalle Incorporated. He can be reached at hugo.bague@riotinto.com. Clark Hymas is a principal advisor of Human Capital Planning for Rio Tinto. He has more than 10 years of HR experience working in the mining, defense and service industries, with a focus on workforce planning, HR technology and HR business partnership. He received his MBA from Westminster College in Salt Lake City and has a bachelor s degree from the University of Utah. He can be reached at clark.hymas@riotinto.com. Dr. Michael Sokol is vice president Workforce Planning & Analytics for Hewlett-Packard s Enterprise Group. He received his Ph.D. in Research Psychology from Boston University. After consulting for a number of years with Fortune 100 companies and government agencies, he moved to work in the high tech industry at Data General, Digital Equipment and Hewett Packard Corporate in the areas of Organizational Design, Talent Management, Learning & Development, Succession Planning and Human Capital Planning & Analytics. From there he was recruited to Rio Tinto where he designed their Workforce Planning function to manage the workforce planning aspects of a capital spending budget of between billion dollars. He is currently back at Hewlett Packard in the Workforce Planning Enterprise Group and can be reached at Michael.sokol@hp.com. Bob Farrell has held executive HR positions with Digital Equipment, Compaq, Hewlett Packard and Rio Tinto. His last two positions in HP and Rio Tinto were VP Human Resources Strategy and Workforce Planning. Both of these companies developed innovative workforce planning methods that tied business planning to people planning. This improved the selection, development, and succession planning and retention efforts at both companies. Farrell now consults with companies about workforce planning, HR strategy and executive leadership. He can be reached at Bobfar@comcast.net. 24 March 2014 Workforce Solutions Review
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