PERFORMANCE TEST: Management at Giant Yellowknife Mines is out to

The Yellowknife division of Giant TYellowknife Mines has been Tdogged by high-cost gold production. The mine began operation as an underground mine in 1947 with total aggregate production of gold to date of slightly fewer than seven million ounces. Since 1978, ore has been sourced from both underground and low-operating-cost open pit reserves.

In 1987, the company instituted a forward sales program to provide some protection against fluctuations in spot gold prices. Notwithstanding the supplemental open pit ore source and revenues from forward sales, the future of the Giant mine looked bleak indeed. Production costs ranged between $549 and $425 (Canadian) per oz for the first half of 1988, while the spot gold price for the same period was $527 to $445.

The two most influential factors affecting continuing operations have been the low-cost open pit ore and forward selling of all gold production at premium rates over the spot market gold price.

Unfortunately, as both these supports come to an end by 1991, the bottom line for the Giant mine has been either to cut costs by up to 40% or face closure.

The average cost of production at publication date for the combined open pit and underground mining operations has been reduced to $357 per oz, just $15 short of the target and $192 below the January, 1989, cost. (All dollar figures are stated in Canadian currency.)

Also, the threat of closure has been eliminated, but continuing efforts like those that have fuelled the initial turnaround are still required if the Giant Yellowknife mine is to sustain future operations.

The Problem

During the first six months of 1989, the company had instigated a number of technical initiatives and implemented specific cost-cutting measures (i.e., manpower reductions, administrative belt tightening and so on) to effect a $123-per-oz reduction in costs (to $426 per oz from $549). But a further reduction in costs of $84 per oz was still required if the targeted operating cost of $342 was to be achieved. Additionally, the collective agreement with the union representing the company’s bargaining unit employees had expired March, 1989.

By June, 1989, negotiations for a new agreement, already three months overdue, had deadlocked (with the parties apart by 10%). The union membership had voted in favor of a strike mandate.

The 1989 results to June, when compared with company performance for the period ending December, 1988, had demonstrated a marked improvement but, of course, it was nowhere near what was required. The pressures on mine manager J.S. (Steve) McAlpine to bring about further positive changes were significant; the opportunities to do so, limited. The consequences of failure of any new initiatives would be critical to the mine’s future.

The Solution

After cutting costs through technical and administrative measures and not achieving the target production cost of $342, McAlpine determined that his only chance of saving the operation would be through more efficient management of the mine’s remaining resources — the employees.

He was convinced that working through, and with, employees (especially front-line supervisors), real efficiencies could be achieved. The vehicle to entice the initial involvement of the supervisors and employees was a process of stepping up information feedback to employees. In simplistic terms, the mine manager wanted to tell his employees what was expected of them and as soon as practical to let them know how their actual performance compared with what was expected. Providing more information to employees also meant upgrading the existing skills of front-line supervisors and employees.

With the encouragement and support of Ken Blower, vice-president of operations, and with my assistance, McAlpine developed a draft program to put into effect his ideas regarding information feedback. With the approval of president Adrian Fleming, he set about implementing the program.

Four months into the program and with amendments and adjustments made to accommodate changed circumstances or emerging needs, the basic thrust of the Giant Yellowknife program (i.e., keeping the employee informed) remains intact.

The Program

Initially, the program set out to change expectations and attitudes of the company’s 400 employees at the Yellowknife mine in the Northwest Territories. Each stage of the process to effect the change began with the company’s providing a more-than-usual level of information about selected current key issues of concern. For example, in June the budget figures for the financial year ending June, 1990, and the short-term and long-term consequences of a failure to meet the budget were considered key issues. As well, the status of the collective agreement negotiations provided a certain and specific point of interest property-wide. Taking full advantage of the heightened interest in company issues, McAlpine patched together a communication which he personally delivered to front-line supervisors at workplace meetings. Questions were responded to candidly and supervisors were encouraged to pass on the information to their own direct subordinates.

In late June and early July, the key issue was, of course, the terms of settlement of the collective agreement. Significant efforts had been made to ensure supervisors were the first informed of the settlement and of the terms of the agreement. As well, the information given front-line supervisors, and therefore employees, is becoming more extensive and more specific.

The information exchange initiatives of June/July were followed up in August to October with an advanced supervision/management training program in which all management levels participated. The following were the central themes of this program:

* As far as is practicable, all management processes, such as decision-making, planning, forecasting, budgeting, motivating staff, and so on, must be pushed down to or below first-line supervisor level. Supervisor initiatives leading to improved employee and operational performance will have the support of senior management.

* Management’s focus should be upon planning, implementation and follow-up.

* Time and employees are as valuable as ore in the ground, and managing them requires as considerable a focus as managing ore extraction.

The supervisor-training courses had been prepared by me and Les Foreman of L.D. Foreman and Associates, both of whom participated extensively in course presentation. McAlpine also attended each of the 3-day courses and, whenever the opportunity presented itself, reinforced the message of management support for supervisor initiatives. He also continued to demonstrate a preparedness to respond candidly to questions or openly discuss current mine site issues.

Course participants were exposed to a range of management skills and techniques, encouraged to reappraise and upgrade their existing skills and challenged to take back and use in their work areas any new ideas or insights gained through the course. As a logical extension of the supervisor training courses, commencing last October, a job clarification program was instigated and is still in place. Once again management participation at all levels is required. In this exercise, the focus is on the major objectives to be achieved from each employee’s job-related activities.

Also during October, the first edition of a company newsletter was published containing detailed operational information and statistics. Employees reacted by requesting that future editions contain not only similar information, but also a more detailed analysis of the data.

In addition to each of the above initiatives and as an integral part of the overall program, two departments (maintenance and mining) were singled out for special attention. In both departments, the key objective was to establish and utilize better measures to achieve performance improvement. The Alexander Proudfoot organization was brought in to work with the maintenance team in establishing standard job times, improved productivity measures and more efficient organization of the department. In the underground mine, the existing six beats have been reorganized into five work areas. The management element of the team in each area consists of two mine co-ordinators, a geologist, and a mine planning engineer. The balance of the team comprises miners, mechanics, electricians, trammers, timbermen, scoop-operators and service personnel.

The Results

Supervisors have responded by requesting more detailed and much more specific information. In numerous instances, supervisors have taken new initiatives and, more recently, there have been indications of supervisor-led employee involvement in decision-making. This heightened supervisor awareness and reaction is evidenced by the speed and completeness with which reorganization has occurred both underground and in the maintenance department.

Higher efficiencies and reduced costs have occurred since June in both areas against a background of reductions in staffing from 402 to the new target of 378 employees and production cost reductions of $69 per oz (to $375 from $426). A further reduction to the $342 objective is anticipated.

It is noteworthy that the provision of information per se is no longer a point at issue — increasingly, the requirement is for information that is detailed, relevant, and specific to a particular work area. The reaction to the information contained in the first newsletter, concerning production costs, exemplifies this development. Rather than being satisfied with what had been provided, employees were much more concerned about the information that had not been supplied — such as milling costs.

Also emerging is a requirement for more appropriate and specific measures of performance on both an individual and a work-group basis. This trend began earlier in the program at the mill but now has taken hold in both the mining and maintenance departments.

The Lessons Learned

As indicated in the opening paragraphs, success in the past four months has not caused complacency — continued improvement is both possible and required. Looking ahead, the mine needs to prepare for the time when its open pit reserves are finally depleted and the results of its forward sale program diminished.

Looking back over the past several months for any lessons that can be learned from the program, the most significant appear to be the following:

* Changing employee expectations and attitudes over the long term is difficult, but over the short term it is an even tougher assignment. At Yellowknife, some employees have not bought into the new initiatives even though their future employment and the viability of the mine are dependent upon their active participation. No doubt, in time, all employees will find a role in the implementation of change.

* Employees have a huge capacity to absorb and react positively to information.

* Measures of performance must be specific to the activity being performed rather than general. In fact, employees appear to be more interested in information on specific measurements rather than on broader objectives.

* Employees respond to genuine senior management commitment and reciprocate with equal commitment in achieving targets, or, phrased differently, what the employee sees is what the manager gets.

* Once the spark of change is lit, management must be both sensitive to, and patient with, the rate at which change occurs; and finally . . .

* In response to the question: Can the Giant mine continue as a profitable operation into the 1990s?, an enthusiastic “yes.” Provided, that is, the employee-generated momentum of the past six months is sustained.