The Mining Productivity Platform
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What does the Mining Productivity Platform do?
Before we start, have a look at the three bottle flow experiment (6 minutes). It shows flow through a bottleneck to explain the impact of the Productivity Platform, and how it differs from the traditional way of managing. Here is a summary article we published in Australian Mining Magazine in 2017 . For an explanation of the leadership implications of the Productivity Platform you may view the following video Leading in complexity , presented at the Da Vinci School of Managerial Leadership in 2016. It explains the reasons for the success of the Productivity platform in terms of complexity science, systems thinking and Organisational Development.
The global collapse in mining productivity
All is not well in the world of mining. According to a recent report by Ernst & Young (EY) (2014) entitled “Productivity in Mining: Now Comes the Hard Part”, capital productivity in Australia has fallen 45% since 2000, while labour productivity in the South African gold sector has declined 35% since 2007. The EY report was put together after interviewing more than 60 mining executives. Many mines are closing down or battling for survival as billions of dollars in mining market value have disappeared. At the same time, there has been a decline in mining productivity and employee engagement.
We believe the following section from the EY report (2014) highlights the core problems:
“Many productivity initiatives to date have focused on cost cutting, which has led to modest short-term results, but our survey participants acknowledged that what needs to be done now is more complex. Our view is that mining companies should move beyond point solutions and adopt an end-to-end solution to transform the business. There is a need to ensure that each part of the business is optimised, not on its own but as part of a business system.”
The EY report concludes that the issue of integration in the mining process is a key challenge and needs to be addressed for productivity to improve. This “requires an approach that breaks down silos and adopts an end-to-end perspective while empowering the workforce at the same time.” And, “it is about systems and processes, it is taking a holistic view of the different parts and how they fit together”. It points out that “Engagement is powerful. Telling people what is really important is powerful.”
What caused the collapse?
Why have mining companies not been able to turn around the productivity slide? After all, they have spent tremendous amounts of money on reputable change programmes and knew the issues that needed addressing.
In practice, the following happened: Over the past few years, the mining industry has developed more and more interventions, more and tighter controls, more focus on efficiencies, costs, savings and measurements. In attempting to manage these, managers have had to pay attention to much more information contained in many more reports. The majority of these measures were abstractions of reality and were devised by very bright people, doing spreadsheet mining on computers in offices very far from where things happened. This was followed by abstractions of abstractions and in developing all these measures and templates, more people were appointed to do more of the same. This resulted in more and more measurements that were imposed on the day-to-day operations. It covered each and every process and every resource; every activity. The intent was clear: optimise everything!
According to this paradigm, if we want to make more money we should ensure that we have just enough of every factor of production and no more. In this way, the parts will be efficient or “optimized”. This requires superb planning and execution and reducing variability in the system. These requirements put a high workload on management and workers since the mine production process is inherently variable and displays high interdependency.
On face value, this was good, until you took a closer look. Many of these measures and savings and controls caused just a small blip in the behaviour on the ground. As more and more controls were introduced, more and more blips occurred in the flow, almost undetectable at first. Slowly but surely the overall flow slowed down more and more as a result of the interdependencies – if one resource goes down, it impacts the whole chain. With more and more “savings”, the occurrences became more frequent, but one day, management found that costs had increased, and the productivity was down. Even worse, it was all firmly embedded in the system.
The balanced capacity paradigm
This belief in local optima leads to stop-start production flow and ultimately poor productivity. This paradigm is incorporated in our ERP/Budgeting system in the name of “improvement”. It became the straitjacket which prevents productivity improvement. As the costs went up and the productivity went down, we tried to compensate by using fewer resources, causing a negative spiral. We call this the balanced capacity paradigm and ultimately it destroys the Flow!
Now we have Gulliver, the mining giant, tied down by thousands of rules and controls originating from the balanced capacity paradigm. There are no buffers, no capacity to catch up, too many controllers and the cycle gets worse – a truly vicious cycle.
If the balanced capacity paradigm is so destructive why is it almost universally accepted as correct?
The article below explains why this is so and how the budgeting and ERP system has become the straitjacket preventing the system from improving
The Productivity Platform (PP) – a paradigm shift
The PP system creates a platform from where we can shift the prevalent Balanced Capacity paradigm (try to optimize all the parts) to one we call Optimized Flow (optimize only the bottlenecks). We reduce interference, we reduce the number of control measures and enable those who really know what to do, those who understand the impact of variation in an interdependent chain. We do the counter intuitive; we put in buffers and protective capacity and stabilise the flow on a much higher level. We put the essential players in a room and we look for creative solutions, using only a few of the essential measures that tell us what is happening in the chain as a whole. We develop pro-active, early warning signals that enable us to respond before things go wrong. We abandon the local optimisation or silo mentality and promote alignment, people engagement. Out of the collective ingenuity, energising from people’s beliefs, self-worth, and a spirit of engagement a new culture of excellence develops.
Under the Optimized Flow paradigm mine managers can manage the production flow holistically, to introduce an end to end solution and to break down silos while empowering the workforce. They can adjust the ERP Budgeting system so that it becomes a support instead of a straitjacket. It creates a permanent change platform, instead of a transient change programme, to enable better management of inter-dependencies and variability.
Over the last 15 years, there have been more than 80 very successful PP implementations. Production increases of between 10% and 50% have been achieved with operating cost per tonne falling by between 10 and 30%. In all cases, employee engagement increased substantially. Not only did operating expenditure per ton reduce, but these results were obtained within 3-5 months.
The PP intervention is based on the Optimised Flow Paradigm
The most powerful interventions focus at the level of paradigm change. Without a new paradigm we cannot change the structure and culture of our organisation. We will remain shackled to the old ineffective ways of doing and will spend inordinate amounts of energy on “doing the wrong things better” – the doing of the doing until nothing gets done. (Could this be why Big Data interventions have added a lot more to Tier 1 consultants’ bottom line than those of miners?)
The PP intervention replaces the industrial age Balanced Capacity paradigm with the Optimised Flow Paradigm, around which employees and managers develop a shared vision, can align their functions, and can enact horizontal coordination close to the action. The production buffers inserted in the process absorb variation and stabilise production flow. This creates predictability, drastically reduces the number of critical indicators and enables managers to manage proactively.
Our role is that of practitioners, to stimulate and create the conditions under which the new paradigm can flourish. The most crucial of these conditions is the need to protect managers and employees from the backlash generated by an ERP budgeting system configured for a balanced capacity environment and the spreadsheet miners.
Inside the PP room, we use colour-coded displays, we make the daily production flow visible. This allows employees to identify and focus on the leverage points in the system. Cause and effect become clear, and team learning occurs. Production flow stabilises, and we create “super flow in a spirit of calmness” The success of the new paradigm becomes evident, the new way of doing becomes part of the culture, very different from the typical change intervention. The principles of flow and dialogue, practised in the daily PIP flow meeting, enable managers and employees to identify the critical leverage points and focus improvement efforts there. It is now possible to rectify the factors restricting production flow, leading to improved results and increased intrinsic motivation.
PP changes the management paradigm and unshackles employees
Einstein is quoted as saying, “We cannot solve our problems at the level of thinking that caused them in the first place.” The Productivity Platform works by making the paradigm under which we work clear and setting up a more appropriate paradigm from where managers and employees can do what is required for success. It also makes the process of managing the parts less complex. We unshackle the mining Gulliver from the thousands of small ropes tying him down. This is how we can generate production increases of between 10–50% and cost reductions of 10–30% per tonne, within three to five months and without increasing expenditure.
TOC practitioners believe that optimised flow will occur when we optimise the constraint and only the constraint.
Since 2000, in more than 80 interventions we have achieved output increases of 10-50%, and have reduced operating cost per tonne by 10-30%, typically within 3-5 months.
- Enabling quick, sustainable productivity improvement
- Improved leadership and empowered/engaged employees
- Simplified management processes, no more firefighting
- Little disruption of current processes
- Limited involvement by consultants
- End-to-end solution
Some Exceptional Results
- Underground narrow reef platinum mine shaft x: 35% increase in output within one month
- Underground gold mine shaft no 4# (+60%)
- Underground gold mine shaft no 7# (+55%)
- Underground gold mine shaft no 5# (+50%)
- Open cast platinum mine (+45%)
- Open cast chrome mine (+30%)
- Open cast iron ore mine, producing 20% above design output for more than three years.
- Yearly ore production for 2014 increased by 82% to 1.1m tonnes, total tonnes mined went up 20% (from 27.5 to 33m tonnes). ) the return on investment (ROI) for the $50 000 consulting fees was 7180% (73:1). At the end of this year, the mine beat its larger sister mines and took the prizes for the best grade and process control, best production improvement and best safety performance.
- Kimberlite processed in 2014 increased to 2.9 million tonnes, 38% more than the 2.1 million tonnes for 2013. The payment backlog had been wiped out; the mine was profitable once more. The owners extended the life of the mine to 2037.
Here is a list of some PP successes:
- A diamond mine in Lesotho implemented the PP and three months later was running its bottleneck substantially better. The intervention enabled top management to find and address the design impediments to increased flow. As a result, management approved Capex to extend the life of the mine by 23 years. Employee engagement improved substantially.
- An open cast mine implemented the PP and reduced production costs by 30% five months later. Mining was the bottleneck and morale in this department was low. It was beautiful to see how senior and middle-level managers regained their confidence and started to work on the front foot instead of firefighting all the time.
- The Manager of Mining at an iron ore open cast mine had the following to say about the Productivity Platform. “In the year we implemented the Productivity Platform we managed to exceed all of our production targets. The Productivity Platform Meeting has substantially improved the communication and coordination between different departments. It enables our employees to see clearly how their area of responsibility fits into the overall performance and to hold each other accountable. We see problems developing in advance and deal with it in a spirit of calmness. I do not want to manage without it.”
Some of our beliefs
1) Increasing the production flow is the best way to make sure that cost per tonne reduces. Cost cutting has the opposite effect. It displaces the cost to other areas where it is harder to measure, reduces flow and results in increased cost per tonne.
2) It is better to do the right things poorly than to do the wrong things well (Find the few critical levers and focus most available energy there)
3) Identifying the right things is difficult due to interdependence and variability. Observing interdependence is difficult since our natural tendency is to manage functional departments in isolation and management traps keep us unaware of what is happening on the ground.
4) The natural tendency in all organisations is to work towards creating balanced capacity production chains. A balanced capacity chain leads to bankruptcy.
5) The ultimate constraint is the managerial span of attention (we can successfully engage with only a few items at a time). By focusing our efforts on the wrong things, we make it difficult for our subordinates to perform and to experience success. This, in turn, leads to low engagement and low motivation.
6) It is our task as facilitators to make the inter-dependency and variability visible and to enable the organisation to see the same picture. Under these circumstances the lower level managers can be given more autonomy, they begin to see their purpose and become accomplished leaders. Morale automatically improves, and work becomes fun once again.
7) The Theory of Constraints is the best technique to handle inter-dependency and variability. The Productivity Platform Meeting, which is based on the principles of Scrum is highly suited to make the flow and interdependence visible and to change the group dynamics from one of antagonism to being supportive.
8) Complexity theory (Cynefin) shows that mining management should ideally manage according to the recommendations from the Complicated (and some of the Complex) domains. In practice, many factors conspire to ensure that inappropriate actions are taken, typically ones which are right for the Simple domain.
9) By trying to control activities vertically and by remote control (which is legitimate good practice in the Simple domain), we dis-empower those that know best what needs to happen. To maintain vertical control and coordination senior and top management have to force certainty onto things that are inherently uncertain. Employee disengagement increases and productivity drops.
10) The PP intervention, which combines identification and managing of leverage points with the daily PP meeting and team and individual coaching, address the hard and soft parts of management better than any other techniques we know of. It enables management to manage according to the principles of systems thinking, which is ideal for the Complicated domain.
11) For a successful intervention, 60% of the intervention effort needs to be focused on the soft issues such as dialogue, mental models, group dynamics, purpose, mastery, and autonomy. The rest is spent on setting up the nuts and bolts of the PP meeting using the techniques of the principles of Flow (Lean and TOC)