Print

Globally the mining industry is faced with a shortage of qualified talent to meet its production needs. Every year there are more people leaving than entering the mining industry to pursue job and career opportunities. Some of the key reasons for this trend include:

• The general image of the industry
• Declining numbers of graduates from mining related programs
• The drain for talent and knowledge as a result of mining industry turn-over and retirement

These trends and challenges have been widely discussed in traditional mining countries such as Canada, the United States, and Australia for well over 10 years. Depending on industry growth estimates, the Canadian mining industry alone will have to recruit between 36,000 and 81,000 employees over the next 10 years, due to retirement, and voluntary separation. From 2004 to 2014, the number of individuals employed in the mining industry is expected to decrease by 12.9%. Mining companies are now beginning to acknowledge that the current supply shortage is already impacting the productivity, efficiency and profitability of their operations. The shortage of skilled workers in combination with high turn-over rates are among the top factors impacting industry growth; either by stopping or delaying projects that would otherwise proceed, or by significantly adding to the cost of new projects. Our research has revealed the following critical risks for the industry:

• Increased competition for labor
• Expansion of skills shortage
• Increased competition for entry level talent
• Increasing mismatch between the available labor pool and the competencies and characteristics required
• Loss of operational knowledge, due to low retention rates and retirement
• Loss of executive knowledge, due to retirement
• Impaired productivity
• Stagnating growth
• Limited capacity among managers and leaders to access and respond to a changing environment

In a 2006 industry survey in Australia, 73% of respondents agreed that the skills shortage had affected their workplace and 77% agreed that the skills shortage had left their company short staffed. The same number of respondents agreed that the people at their workplace were under increased pressure due to the skill shortage.

As the mining industry is seeks sustainable short and long-term solutions, which often call for the support and collaboration with government, consulting experts, labor organizations, educational institutions, industry associations, native and special interest groups, there is a tendency to try to find a ‘One Size Fits All Solution’. Some of the suggested ‘general to the industry’ solutions include:

• Improvement of the industry’s image
• Improve industry relations with the tertiary educational sector
• Attract skilled workers from foreign countries via work-programs and/or citizenship-programs
• Improve and/or establish industry wide standards and programs for the development of industry-relevant knowledge and skills
• Increase the amount of women, native people/shareholders, and non-traditional workers within the mining work force
• Establish training programs to meet current and future demands through various internal development programs
• Attract more general engineering and technical talent from alternative industries
• Leverage technology to improve production processes 

While all of these strategies are part of a comprehensive solution to the problem, they are still generic in nature. These recommendations are non-discriminating by: company size, commodity, organizational set-up, production processes etc. 

Furthermore, the current talent supply shortage is often portrayed as a problem beyond the control of the individual company, or as being primarily a recruiting issue. As one senior HR representative of a large mining corporation commented, “The problem is less of bringing talent into our organization, it is the retention of the right talent over time.” In addition to losing new talent, the industry currently has more than 50% of mining employees over the age of 40.  Retirement poses a serious impending issue, with more than 40% of employees expecting to retire over the next ten years.  The age-distribution of mining industry labor is due in large part to a mining boom in the 1970s (when a very large pool of twenty-something year-old employees were hired).  Re-structuring, downsizing and lay-offs in the 1980s and 1990s resulted in a significantly reduced number of graduates and general talent entering the industry.

Over this same time period little attention has been given to the evaluation and improvement of current internal HR and management practices within mining organizations as a critical success factor in solving recruitment and retention issues.  In 2005, a MIHR survey concluded; “the industry is not well prepared from a human resource planning/succession planning perspective and does not appear to be in a position to deal with the loss of skilled and experienced workers.”  It is also evident from our research that the industry is not recognizing and empowering its HR functions as a partner for organizational growth and business success.  One of the key findings, from a recruitment and retention workshop in Australia called for lobbying “for an attitude change to human resources.”

The primary recruitment and retention strategies, particularly of some larger operations, still focus largely on offering a competitive compensation and benefits package and financial incentives such as sign-on bonuses.  As a result, the industry continues to experience rising labor costs, and while money may bring new employees into an organization over the short term, it won’t retain them over time.  Operations also assume significantly increased costs through the lack of retention of existing staff; some corporations have more than 30% in turnover at mine sites and the associated costs are often ignored.  When employees leave, they take valuable process knowledge, customer and supplier relationships and a host of organizational know-how with them.  For skilled workers the cost of turnover is generally estimated to be between 50 – 150 % of their annual wage, compared to professionals whose costs which are generally estimated to be between 100 – 250 % of their annual salary.  These estimates should be considered ‘conservative’ when considering the following cost components:

• Past investment in the departing employee
• Loss of knowledge and special skill-sets
• Loss in productivity

In the case of one of the researched mine sites, 2006 costs for turn-over can be estimated at the very low end at $2,800,000.00 USD. This is approximately 45% of the site’s investment in process improvements for 2007.  As the mining industry is faced with increased competition with other industries over skilled workers and professionals, internal systems for retention management are becoming more critical. This will ensure that operations are able to:

• Quantify the actual costs of turn-over
• Assess current and future skills and knowledge gaps
• Identify current strengths and weaknesses with regard to: recruiting, retention, talent development programs and strategies
• Adjust the organizational strategy accordingly

Some of the commonly referenced strategies to address the problem of retention in general (A), and to offset the risks regarding the potential knowledge drain in the industry (B) are summarized in the following list:

(A) Retention in General

• Implementing proactive human resources management practices and succession planning programs
• Retain senior employees to minimize the negative impact of attrition
• Develop a collaborative, cross-industry strategy for training/educational programs, and employer-provided training to facilitate the availability of a skilled labor force
• Ensure standardization of skills and consistency of training delivery in order to facilitate recruitment
• Actively support and enhance the people skills and relational abilities of all employees through training and development programs
• Recognize and leverage the motivators and learning styles of emerging and departing generations
• Engage in benchmarking to work towards best practices as an industry
• Greater emphasis on addressing cultural issues, soft skills and management support
• Access to professional development/ on-going educational opportunities
• Supporting structured professional/trade development
• Planning technical career paths for employees
• Training managers to actively manage retention in their areas

(B) Off-set of risks

• Develop voluntary mentoring programs to facilitate the transfer of knowledge from experienced employees to their potential successors
• Facilitate the capture of knowledge and experience that will be necessary to maintain skill levels in the industry
• Tracking pertinent workforce statistics
• Establishing retirement projections and identify talent shortages
• Planning the organization’s future workforce, considering the company’s changing organizational, market and technical needs
• Consider rehiring selected retirees
• Slow the departure of older workers due to retirement

In all polled marketplaces, employers stressed the need for research to identify the barriers and best practices for retaining employees throughout the industry.  While some of the suggested solutions above can be addressed by the general industry as a whole, other recommendations require individual organizations to take action based on their specific needs and requirements.  This would allow individual mining operations to reverse an industry wide threat into an opportunity for positive differentiation within a highly competitive business environment.  Management of human capital and knowledge will be one of the keys to future business success. Comparing recent surveys and articles on how mine sites are managing retention issues with similar publications dated between 2002 and 2004, suggests however, that little progress has been made. Some of the similarities include:

• Tendency to see retention as outside the sphere of managerial control
• Cost of turnover is significantly understated
• Very little monitoring of trends and patterns
• Poor follow-up on departing employees
• Very little attention given to turnover amongst employees of contractors
• Little organizational data and information regarding the organization’s capability to recruit and retain employees
• Inconsistent use of performance management tools, such as performance reviews

Looking at a consolidated view of all identified recommendations and strategies on how to overcome current and future recruitment and retention challenges, we anticipate an increase of competitive differentiation within the industry. This will expand the competition for talent beyond compensation and benefits, and drive differentiators like organizational culture, a company’s value proposition to the market place, market performance, business strategy, and the organization’s vision for the future to the forefront.  This broadened approach to position oneself as the “Employer of Choice”, will require a significant commitment, investment, and active involvement of management on all levels.  However, the result of such actions, substantially improves the organization’s ability to attract/acquire, retain and develop the right talent for the organization.  At the same time, this Total Talent Management approach will increase productivity and lower the cost of doing business.  It will improve the operations ability to leverage the current opportunity in the world markets and sustain the organization when market prices fall or fluctuate and the industry goes through renewed waves of consolidation.

Fundamental Conclusions Regarding the Future:

• The industry wide supply challenge for unskilled and skilled labor will only ease as raw material prices fall. At this point mining operations will very quickly respond and start to lay off human capital that exceeds the new demand. Retaining experienced miners will remain critical to success.
• The current supply challenge for engineers and management talent will continue regardless of raw material prices. This is due to the described developments regarding overall birthrates, enrollment numbers in mining programs, competitive recruitment efforts from other industries (for example Oil & Gas), and the demographic trends involving the Baby-Boomer Generation. The later will also continue to pose significant risks to mining companies with regard to maintaining a sufficient knowledge and skills base that ensures organizational competitiveness in the future. 

Chart 1:          Impact of Future Raw Material Prices (Trends)

The current supply challenges are being addressed in multiple ways:

1. Considering the impacts of recruitment & retention issues as a ‘pain’ that is only temporary (lack of un-skilled and skilled miners), and continue to compete for talent strictly from a monetary point of view.
2. Accepting that the recruitment & retention issues impair productivity and profitability, but taking comfort in the fact that currently high raw material prices and subsequently record margins cover up negative impacts. 
3. Trying to sustain the company by focusing on quick wins and tactical “band aids.” This approach assumes that long term, strategic investments won’t be justified as the industry ultimately will have to face falling raw material prices.

   Chart 2:          Tactical Approach to Problem (cost over time)
   

4. Approaching the current issues as short-term as well as long-term problems, that can only be resolved by competitive organizational differentiation (for example EOC-Strategy) well beyond compensation & benefits.

 

Chart 3:          Strategic Approach to Problem (cost over time)

Research Sources

Internet

www.mining.bc.ca
www.mining.ubc.ca
www.bcminerals.ca
www.geo.arizona.edu
www.marketresearch.com
www.shortlist.net
www.canadianminingnews.com
www.mihr.ca
www.cim.org
www.businessedge.ca
www.companymine.com
www.propertymine.com
www.newsmine.com
www.investmentmine.com
www.eresearch.ca
www.ereseachinternational.com
www.oilgas.net
www.petrohrsc.ca
www.cim.org
www.miskillscentre.com.au
www.prospectingthefuture.ca
www.abc.net.au
www.economist.com
www.industry.gov.au
www.working.canada.com

 

Magazine, Reports and Articles

• CIM Magazine
• PWC Survey Mining: The Mining Industry in British Columbia, 2006
• MiHR Reports 2005 - 2007

 

Other Sources

• InfoMine Database (including CostMine and EduMine information)