Improving Business Performance by aligning Strategy and Organisation Capability

Improving Business Performance by aligningStrategy and Organisation Capability

Contents 1 Organisation Capability 2 Capability and Performance 3 Installation Process 4 Benefits

Organisation Capabilities • Organisation capabilities are those collective abilities a company requires to execute its business strategy • Organisation capabilities are combinations of: • Processes & Systems • Assets • People competencies • Structures • Measures • Culture • Misalignment between business strategy and capability invariably destroys value • Capabilities help bridge the gap between strategy and implementation by focusing resources and efforts on those actions that count the most

Organisation Capability and Strategy Strategic Position Strategies Capability Platform Unique combinations of processes, systems, people competencies, assets, structures, measures and culture required to realise strategies and meet performance objectives

Organisation Capability and Strategy Higher Value Strategy Strategy New Capabilities Existing Capability Platform A higher value strategy will require a different capability platform, achieved through a systematic design and installation process

Capability and Performance • Realising full value from strategy requires ‘good management’ • Sound technical-, functional- and people-decisions • The right organisation capabilities • Misaligned capabilities invariably manifest as: • Failure to meet plan • Higher than planned cost • Unplanned bottlenecks and compromised capacity

Capability and performance (cont.) • Specific factors which typically cap value creation include: • Failure to manage the organisation as a total system • Lack of integrated planning and a robust management operating system • Sub-optimum cost strategies • Frontline inefficiencies • Fragmented individual performance management • Lack of a rigorous approach to problem-solving • Lack of balance between people, output and improvement work

3. An integrated approach is followed to build the requisite capability and realise full value Manage the Project and the Change (Design criteria, Transformation Plan) • Align the Organisation to the Strategy • Core Process • Operational Processes • Management Structure • Implementation • Service levels • Operating systems • Work of the role • Leadership principles • Install a Management • Operating System • Forecasting • Reconciliation • Gap-closing • Alignment • Improve high-value Processes • Define Projects • Target improvement of • costs and volume • Install an Individual Performance Management System • Cascading the plan, Roles, • Accountabilities, Reviews, • Development Transfer the Process Improvement Capability • Optimise the Frontline • Operating efficiencies • Operations structure • Supervisor competencies • Improvement Method

Project- and Change Management Process Objectives: • Develop a shared picture of the future • Agree on the design criteria and objectives • Position the project to achieve this sustainably • Install a strategic management process • Shape and develop the culture • Manage the dynamics of the change process Deliverables: • Shared view of the future • Requisite transformation plan • Strategic management process • Coaching process to implement the outcomes

Project and Change Management Process • Project Set-up • Strategic Management Process • Shared Picture of the Future • Design Criteria • Future Organisation State • Transformation Plan and Process • Communications Plan • Criteria • Timeframes • Process & Feedback • Stakeholders • Change Management • Establish conditions for • effective change • Integration of actions • Coaching of employees • Symbols of change

Aligning the Organisation to the Strategy Process Objectives: • Improve the operating capability and operating performance of the core process to meet current and future performance objectives Deliverables: • ‘As is’ Core Process map and a clearly defined future Core Process map • Value Drivers and defined future Operating Capability • Key Operating Philosophies (KOPs) • Optimum inputs, outputs & operating boundaries • Clearly defined core- and enabling work • Clearly defined Strategic Operational Units (SOUs) • Immediately available cost opportunities

Aligning the Organisation to the Strategy cont. • Optimum level III & II Core- and Enabling processes • Service Level Agreements • Optimum management structure (removal of non-value adding roles) • Structure implementation • Clear roles, accountabilities & performance indicators • Clear leadership principles

Manage the total system through the Core Process • Match market requirements and operating capability • Best position bottlenecks • Control variance at source to avoid fixing it downstream • Determine what is core work and what is not • Build the organisation around the requirements of the core process!

Value-loss can occur across core process High variability across the process Misalignment of the core process capability and the market (capacity, quality, cost) Services do not meet the needs of the core Market Resourcing Extraction Processing Logistics Enabling processes Lack of horizontal integration and subsequent sub-optimisation Ineffective mechanisms to close gaps in performance

Align the organisation to the Core Process Core Process Operating Philosophies Boundaries Value Drivers Inputs Outputs Core Work Service Requirements Aligned to Core Process Operating Philosophy III Processes II Processes • Management Structure • Optimum • Process-based • Accountability & Focus • Implementation • Work of Role • Service Levels • Operating Systems • Leadership Principles

Position roles to address the right complexity of work VI VI V V M A T C H IV IV • Complexity increases: • More variables • More intangible • Results further into • the future III III II II I I Complexity of problems faced Complexity of work

Optimise how plans are executed at the frontline Process Objectives: • Aligns operations work to the Core Process requirements • Optimise capital, people, work practices and consumables • Establish a rigorous operating system to execute plans and address non-conformances • Equip teams with the tools to continuously improve processes • Establish effective supervision Deliverables • Optimised capital, people, work practices and consumables • Efficient operations structure • Rigorous, day-to-day operating system • Improved processes • Supervisory competencies

Establish the most efficient way to execute work at the frontline Identify the current Processes Create Task & Equipment Inventory • Identify and quantify Improvement Opportunities • Work practices • Equipment use • Consumables • Define optimum Operations Structure • Operators • Teams • Supervisors Establish a rigorous Frontline Operating System Equip team with a Frontline Improvement Method Develop Supervisor Competencies

The Frontline Operating System Business Context Long & Medium Term Plan Short Term Plan Reconciliation & Gap closing Reconciliation Operation Plan (volume/quality) Shift Management Shift Handover Operation Report Process Management • Safety • Quality • Productivity • Resources • Issues Operation Schedule • Task Assignment • Performance • Monitoring • Feedback • Checklist Frontline Frontline • Estimate: • Capacity • People (hrs) • Skills • Equipment • Materials • Information • Energy • Training Suppliers Customers Input Control Process Control Output Control

The Frontline Improvement Method Training in the Improvement Method Step 1 Step 2 Step 3 Step 4 Select a process to improve Inputs Outputs • Follow the Improvement Method • Follow process guidelines • Use the Improvement Toolbox Repeat steps 2 - 4 • Implement the improvements identified, e.g. • Safer way to do tasks • More efficient work practices • Changed procedures, etc.

A method to remove process non-conformances identified through the Frontline Operating System Non-conformance Process Performance Acceptable limits Actual Non-conformance Time

Fragmented planning leads to sub-optimisation • Establish a vertically and horizontally integrated Management Operating System (MOS) • Integrate plans across the core process and link long-term objectives to frontline execution • Focus on the right timeframes • Manage value beyond the budget • Create line of sight between parts and overall performance

The Planning Process is part of the Management Operating System (MOS) Strategic Plan Reconcile Integrated Plan (Long, Medium, Short) Frontline Operating System Cascade the right context Operational Planning

An integrated Management Operating System Integrated Planning Process Reconciliation Reconciliation Reconciliation Reconciliation Strategic Planning Long-term Planning Medium-term Planning Short-term Planning Frontline Daily Review Reflected in Budget Context Context Context Context • Major strategic actions • Reviewed quarterly • Sets context for LTP • Exco • 3-5y Rolling plan • Major capital • Major shuts • Reviewed • annually • Sets context for MTP • Exco • 18m Rolling plan • Forecast & reconciliation • Critical performance • measures • Gap-closing actions • Sets context for STP • Exco & RM • Reviewed • monthly • 6w Rolling plan • Forecast & reconciliation • Critical performance • measures • Schedules • Gap-closing actions • Sets context for daily • review • RM & level 3s • Daily planning & • reconciliation • Level 3 & 2s Exco Meetings • Monday meeting • Production temperature • Corporate issues • Actions and progress • Exco Operational Planning (proposing objectives to Integrated Planning and executing agreed Medium- & Short-term Plans) Mine operations Maintenance (Fixed & Mobile) Processes Geology Services Labour Skills

Individual Performance Management System Process Objectives: • Implement an integrated performance management system to effectively manage the performance of individuals and teams Deliverables: • A system that integrates • Cascading of the business plan • Roles, Accountabilities, KPAs & KPIs • Recruitment and development (management, leadership & specialist competencies) • Key policies and procedures • Remuneration and reward

Individual Performance Management Methodology Cascading the Plan Work of the Role & aligned KPA’s & KPI’s Performance Feedback & Performance Review Business Context & Performance Objectives Scorecards Reward System Development System Recruitment System

Process Improvement capability Process Objectives: • Develop a process improvement competency in the organisation (DMAIC) • Develop the ability to manage the improvement in an ongoing capacity Deliverables • A core of employees trained in a rigorous method for process improvement ready to address more high-value projects • A set of tools and mechanisms to manage improvements in an ongoing capacity • Formally linked to the Management Operating System

Improvement work is linked to each role and to the management operating system (MOS) Select high-value projects ($) Identify & implement solutions Transfer the DMAIC capability Closing gaps in performance against plan Integrate into work of the role Link to the Management Operating System (MOS)

The DMAIC improvement method

4. Benefits of the installation • Business-wide focus on the execution of strategy and closing gaps in performance • Significant improvement of current business performance • Significant improvement of operational reliability • A strategically focused and integrated approach to ongoing performance improvement and capability development • A focus on initiatives to develop the capabilities that count the most • $ benefits that far exceed the cost

Improving Business Performance by aligning Strategy and Organisation Capability