Contractor Management in this Post-modern Era

1. Contractor Management in this Post-modern Era Rudy Phillis (Pr. Eng.) M. Sc. Eng. (Bus. Mgt.); B. Sc. Eng. Mining; TOC-Jonah MSAIMM; MAMA; ASACMA; AAMMSA Chief Executive: Ukhozi Group

2. Introduction • Mining Industry Concern: “Contractor Management and their safe operation, in our industry” • Workshop Objective: • BEST PRACTICE TOOLS FOR CONTRACTOR MANAGEMENT • What to change? & To what to change to? • Technical Questions • The 5th Discipline (Peter Senge): • Personal Mastery, • Mental Models, • Build Shared Vision, • Team learning, & • Systems Thinking • Focus: “HOW TO CAUSE THE CHANGE?” • Falls within fields of Psychology & Psychiatry

3. How to cause the change ? COMPROMISESafe Productivity Emotional resistance Perceived threat on security / satisfaction Perception drives emotion Every improvement is a change Most Management / Labour prefer comfort zones Every change is not an improvement

4. How to cause the change ? CULTIVATE Safe Productivity Emotion of the inventor is stronger than resistance Emotional resistance Perceived threat on security / satisfaction Perception drives emotion Induce Improvement Every improvement is a change Most Management / Labour prefer comfort zones Every change is not an improvement

5. BEE Partnerships -Core Conflict Business Fundamentals Pressure to promote & protect Convention SUSTAINABLE DEVELOPMENT Socio- Political Imperative Pressure to promote & protect BEE

6. BEE Partnerships -Core Conflict Conventional ‘modes of operations’ works Business Fundamentals Pressure to promote & protect Convention SUSTAINABLE DEVELOPMENT Socio- Political Imperative Pressure to promote & protect BEE BBSEE Charter is Law

7. Background • Objective: Common frame of reference • Management in Antiquity • (Source: Griffin, R.W. – Management 3rd Edition) • Evolution of Management Theory • (Source: Russell, R. S., & Taylor III, B. W. – Production & Operations Management) • Quest for a Postmodernist Theory • (Source: Blignaut, J. N., Department of Economics – Pretoria University) • Characteristics of the paradigms • Cosmological views of the paradigms

8. Management in Antiquity • Practice of management dates thousands of years • 3000 B.C. – Summarians, Greeks, Babylonians • Management not considered a serious field • Economics - the first discipline devoted to commerce • Economists believed managerial practice to be efficient • Focus was on Economic Policies & Non-managerial aspects of business • Business (Family) goals were survival not growth • Organisations were governmental • Unlimited powers over taxation • Little accountability for waste

9. Evolution of Management Theory • 1700s – Industrial Revolution: Widespread production of consumer goods • 1776 – Adam Smith ‘Wealth of nations’ – labour division – Unprecedented advance in technology • 1800s – Advent of Cost Accounting & other controls • 1900s – Scientific Management – Taylor • 1700s-1960s – USA dominance • 1970s – International competitiveness led by Japan • Conversion from mass production – lean manufacturing • 2000s – Y2K (No real return on IT investments)

10. Quest for a Postmodernist Theory • Source: “Economic Thought: A passage through time & a Quest for a postmodernist theory”by: Prof. Blignaut (Pretoria University) Ancient Imperialism Post- Modernism Paradigm 1 Modernism Paradigm Feudalism 2 Socrates Plato Aristotle Mercantilism 3 Industrial Revolution 4 Black Death Sustainable Development 5 476s 1770s 1970s 1350s 1500s 500sBC

11. Modernism Human being as a rational, autonomous being Universe (nature) as object of the needs of the human being Absolute, deterministic influence of science & technology General optimism with regard to the prospects of development and growth – i.e.: Improvement Truth as objective and neutral Post-modernism Human being as a relational being Universe as dynamic organism Science: chaos & qualitative Development and progress – scarcity & limitations Truth, objectivity & neutrality subject to the role of belief & value systems Characteristics of Paradigms • “Not merely an adaptation of old Paradigms”

12. Modernism Stable Closed Determined Predictable / measurable / controllable Post-modernism Unstable / chaos Open (holistic) Systems thinking Relative / randomness / indeterminacy Complex Cosmological View • Problem: How is it done?

13. Holistic / Systems Thinking / Scientific Approach • Metaphysics, Ethics, Logic & Epistemology • Three distinct stages of Science: • Classification • Correlation • Cause & Effect • Only when stage 3 is reached is the subject a science

14. Cause & Effect • Effect-cause-effect • Research starts with one effect • Once Predicted Effect is found does the research gain the name of THEORY 3 Predicted Effect (different in nature) 1 Effect 2 Hypothesize a Plausible Cause

15. Why did the apple fall down? 3 Earth revolving around the Sun 3 Electron revolving around a neutron 1 Falling Apple 2 Gravity

16. LAW governing Management • Operations Management = 1+4+3 1 Production Management 4 Logistics / Distribution Management 3 Project / Engineering Management 2 LAW

17. Business Complexity • Holistic 1 Operations Management 4 Finance Management 3 People Management 2 LAW 7 Market Management 5 Strategic & Tactical Management 6 Sales Management

18. BEE Partnerships -Core Conflict Conventional ‘modes of operations’ works Business Fundamentals Pressure to promote & protect Convention SUSTAINABLE DEVELOPMENT Socio- Political Imperative Pressure to promote & protect BEE BBSEE Charter is Law

19. Contractor issues • Contractor professionalism is somewhat wanting • Site management take chances – behaviour management • Resource management cost not discounted when estimating • Entrepreneurship mentality (“one wo/man show”) • Disability of developing human resource capacity • Contractor disability to grow NAV (Net Asset Value) • Plant/Machine acquisition vs Premium for Plant Hire • Partnership mastery procedure is wanting • Disputes resolution – “Customer is King” (Judge & Jury) • Contract feasibility – Banks want more • Cost of Capital – interest rates higher than Clients • Contract profit / period

20. Belief / understanding of Complex Sytems I LHS RHS G A H E I H D E A C B

21. (i) What to change ? Contractors compromise Safe Productivity Contractors feel pressure to take chances i.e.: skip steps / short cuts Contractors are forced to make plans to finish works without “King” assistance Contractors are under pressure to finish works, already delayed due to unreliable resources Contractors work with unreliable resources for the remaining contract life Contracts are at the End-of-Life Financial Institutions insist on long-term contracts & credibility Resources are at the End-of-Life

22. (i) To what to change to ? Contractors cultivate Safe Productivity Contractors applies management tools effectively & efficiently Contractor employees make use of “King” assistance of maintenance & expertise Contractor employees have all necessary resources reliably to conduct works Contractors work with reliable resources for the contract life Timely issue of 5-year contracts with credibility statement Financial Institutions insist on long-term contracts & credibility Resources are at Start of life cycle

23. (ii) What to change ? Contractors compromise Safe Productivity Contractors are not setup to adequately manage risks/hazards of out-of-scope works Often Contractor employees perform works that don’t fall within scope of contract Contractors simply cannot risk relations with “King” Often “King”/ employees make requests that don’t fall within contract scope Contractors are at the mercy of the proverbial “King” for Future Contracts Contractors are desperate for work

24. (ii) To what to change to ? Contractors cultivate Safe Productivity Often Contractor employees perform works that don’t fall within scope of contract Contractors & Client manage risks/hazards of out-of-scope works Contracts allow for out-of-scope work Contractors simply cannot risk relations with “King” Often “King”/ employees make requests that don’t fall within contract scope Contractors are subject to a fair monthly performance review system (with invoices) for Future Contracts Contractors have 5-year Contracts

25. How to cause change? I A E G H I H D E A C B

26. How to cause the change ? Contractors cultivate Safe Productivity Emotion of the inventor is stronger than resistance Emotional resistance Perceived threat on security / satisfaction Perception drives emotion Induce invention Every improvement is a change Management / Labour prefer their comfort zone Every change is not an improvement

27. Induce Improvement • Socratic Method • Equip management with simple, practicle tools for clear verbalization of intuition • Tools must allow for Management to test own beliefs in a critical manner & unleash true intuition • Management must facilitate a discovery process: • Employees are allowed to derive solutions to their problems vis-a-visManagement providing solutions • Help employees recognize the limits of their knowledge & motivates them to learn

28. Conclusion • Postmodernist Paradigm • Primate: Sustainable developent • Quest to invent a methodology that guarentees success • ‘What to change’ and ‘To what to change to’ are technical questions – often intuitively known • ‘How to cause the change’ – a psychological question • Manage human behaviour in line with company goals • There is an integratedLAW that governs business management: • Law addresses the physical systems • Law addresses human systems

29. Technology Top 100 Company (2001)‘Environmental & Social Responsibility’ Questions???