Professor Robert Harvey, Sam Walsh and Professor Kerry O. Cox
Global discussions, local conversations - how business communicates, involves and engages
Sam Walsh, Chief Executive - Rio Tinto Iron
Thursday, 8 November 2007, 4pm
ECU Joondalup Campus
Thank you for inviting me to speak this afternoon at this Oration.
While I give a lot of business related presentations around the world, this is my first oration.
When I received the invitation I thought I was taking a step up the speech-making ladder - until I turned to Encarta for guidance. Unfortunately, the definitions of an oration include "a speech that is considered pompous or inappropriately long" or "a speech that is designed to show off the speaker's rhetorical skills." This leaves a clear choice for me today.
You may also be relieved to hear that I am not here to waste your time with a quick course in Mining 101 and the wonderful world of iron ore. But I do want to discuss how business works to make amazing things happen and how sound relationships are the key.
To build, nurture and foster the thousands of complex relationships, Rio Tinto needs to involve, engage and communicate with our stakeholders. If we can't do this we will fail.
In the modern world, a company like Rio Tinto must work with stakeholders on two levels.
Firstly, via global discussions focussed on big picture issues and, secondly, through a far more intimate local conversation with employees and host communities, Governments, NGOs and ECU. Needless to say, this is complex work.
You will appreciate that a company of our scale has many stakeholders and today I am going to focus broadly on the importance of communicating with stakeholders of all shapes and sizes; our approach to engaging employees and the way we work with communities.
Email, the Internet, virtual worlds, and globalisation now connect people in ways we could never have conceived just five years ago. The capability for instant response - zoom - has drastically redesigned our business and social lives. The quality (and dare I say quantity) of instant information is stunning and has made the world a much smaller place.
So what is a global discussion?
What is a local conversation?
Does the distinction even matter?
As Chief Executive of Rio Tinto Iron Ore - effectively one of Australia 's top ten companies in its own right - and probably Australia 's largest exporter, I believe that this distinction does matter and we have to factor that difference into our work.
Rio Tinto is a truly international company, and my iron ore group operates its global headquarters from Perth with operations on five continents. And we are responsible for nearly 20,000 jobs across the world.
Our business and global contact takes place around the clock 24 hours a day 365 days a year. Our enlightened discussions involve a wide range of individuals, communities, Governments, customers and suppliers and other stakeholders all with a common interest in the serious issues that affect us all.
Issues like,
- developing capability in third world countries
- indigenous land rights and well being
- climate change and GHG reduction
- education, training and development
- a more vibrant Perth and Western Australia .
At the same time we communicate locally on a wide range of issues also involving employees, State and local Governments, regulators, communities and many other groups. An example, the levels of community services that need to be provided in the north west in order to double our exports.
It's not simple to have both levels of dialogue and do them consistently well.
This is the nature of a local global business.
On one hand we have to guide, motivate, inspire, inform - or negotiate with - people from different cultures in vastly different locations in different time zones every day.
On the other hand we must also understand and share the hopes, concerns, triumphs and trials of the people and communities that are intimately involved at each or our fifty plus locations.
Expectations abound on all sides that a company like Rio Tinto will communicate clearly and regularly with stakeholders about its strategy, and plans. I think that this is a perfectly reasonable expectation. And how do we ensure we can meet it?
The first step is to acknowledge the challenge.
The second is to have a clear point of view and to be able to articulate it.
The issues that we discuss today like sustainability were not at the forefront of any global discussions ten years ago.
The third step is to have the right conversation with the right people.
Rio Tinto can speak consistently, but we must be careful to talk about what really matters to people. Failure to differentiate is a quick way to damage relationships.
To speak to international NGOs only about our growth in the Pilbara is to ignore their legitimate interest in our nation changing developments in Guinea in West Africa or in the south west corner of Brazil .
To talk to the people of Tom Price only about our global sustainability efforts is to ignore local Indigenous employment issues. To fail to appreciate these distinctions damages hard won relationships. Each of which will be all that much harder to win the next time around.
The fourth step is to apply the proper resources.
This can range from training all of us how to communicate effectively to the technology resources required to brief our staff so they can talk sensibly and with relevance. Even within a developed country like Australia we find huge differences in the levels and access to information and communications technology.
Take the National debate on broadband as an example. There are also huge differences between individuals and communities in their abilities to make the most of technology.
So you can imagine the differences on a global scale. We see and experience the contrasts every day in our operations from Corumba in Brazil to Qinhuangdao in China .
No business of any size can succeed in the modern world if its leaders are not applying themselves to the steps I have outlined. But there is a final step. It is called listening. Communicating is two-way. A conversation involves listening.
Successful businesses learn to listen effectively.
Recently we surveyed opinion leaders throughout Western Australia . In fact we continuously survey different groups on differing topics. We are very interested in their views.
The results showed that our environmental concerns are similar to the public's, we see the same economic challenges, and want to influence important social issues like those relating to assisting Indigenous Australians. I say this not to pat ourselves on the back, but because I take it as evidence that we have been listening quite carefully to our local community.
That means we are having a useful local conversation and have heard what is being said. In other words, our communication is directly developing our view of the world.
Unceasing chatter from around the globe fills our offices and we must make sense of the things that matter most to us and to our stakeholders. Being in touch with our stakeholders ensures that we are better able to sift this information, make use of it, respond and continue the dialogue.
This is no mean feat. And every organisation must find its own way of doing this.
However, the essential point remains that companies like Rio Tinto must be conscious that they have to listen, speak, and be heard on a range of different levels. To be effective they must not confuse these or their messages.
At Rio Tinto we have a clear sense of our priorities, of who we are and what we want to achieve. This guides us in both communicating and listening.
My career in the car industry taught me that organisations that don't innovate, develop and regenerate will wither and die. Just by joining Rio Tinto 15 years ago, I became part of the company's innovation and regeneration process.
Of course my knowledge of mining was limited. But I had 20 years worth of other ideas and experiences, mostly new to Rio Tinto. There has been a neat fit between the company wanting me involved and me wanting to be involved.
Ideally, this should be the experience for most employees. So global discussions and local conversations are also critical to our ability to unlock the latent talent in people that is essential to our growth as a company.
A key part of my role is to promote involvement and engagement. I need to articulate our strategic global priorities and expectations in a consistent way.
Secondly, I must ensure that our businesses are having the conversations with individual employees and that they are challenged and excited by their daily work. I will keep using myself as an example.
I view car manufacturing and mining as similar processes. Both use people, equipment, and technology to deliver products. Admittedly car manufacturing has an emphasis on design, while mining focuses on logistics.
Few people understand that Rio Tinto operations in the Pilbara actually run like a car plant.
Instead of our mine sites being individual export operations, we run them all as segments in a single assembly line. In effect we are operating one very large mine, not 11 individual ones.
In the same way that a car is assembled, our design, planning, scheduling and operations create a blended product which is combined at our port. It is a fully integrated operation on a scale never envisaged by Henry Ford or anyone else involved in developing an assembly line.
Rio Tinto's conceptual innovation in the late 1990s is largely responsible for its current commercial success. It has added billions of dollars to Australia 's export income, helped boost our local economy and probably put money in your pocket as well as mine - directly or indirectly through tax cuts.
My story is an example of the power any company can unlock by getting people deeply involved in what they do.
Rio Tinto involved me in its future, I involved my colleagues and they involved others.
It's always challenging to implement innovation. The hardest work in business is definitely the leadership required to get individuals engaged in achieving a goal - whether it is six people or six thousand.
Modern leadership is a team effort. It requires constant collaboration with many individuals. The more this occurs the better the result.
At the grave risk of making political comments during a federal election, I believe that a direct relationship between management and employees, without third party interference, is now essential in business despite what Minister Michelle Roberts may say on the news tonight.
Our move to an All Staff Workforce in the mid-1990s changed the way we interact with our workforce and gave us the flexibility to introduce our one mine/all staff car assembly line approach.
Let's face it. If you want to excite, motivate or even learn from another person - you don't do it by remote control via a third party. You speak face-to-face and openly and honestly about your interests.
In the mid-1980s I successfully led the team that restructured General Motors Holden.
Judging from General Motors Corporation's US$38 billion loss last quarter I should have then been moved to the US to restructure there. The Australian project had already been studied by two teams and gone nowhere. My team's success lay partly in tough decisions, in endless communication and involvement by management and a focus on teamwork. It informs my approach today.
During my career I have worked in three business cultures - American, Japanese and Australian. My strategy for involving employees is linked to the Japanese "Genba Kanri" or shop floor management.
This is where front line staff are the key to finding solutions to business and operational problems.
I am a big believer that our front line employees are best equipped to make decisions about a whole range of front line issues, from new rosters to performing activities safely.
I'm not on our sites every day. They are.
Rules, procedures and lists can't and don't prescribe every activity. ECU assists you to analyse and think and that is exactly what we are seeking and encouraging. Our goal is to harness the energy, activity and innovation of individuals by empowering them to make decisions and take action as if they were business owners themselves.
This thinking is reflected in our Frontline Leadership Program, which nurtures and mentors individuals through challenging roles and projects. Our leaders are taught to be themselves, to build on their strengths, take into account the views of people around them, but ultimately back their own judgement and stick with their bold decisions and clear plans.
We can measure our success in this area via our recent expansions.
Since 2002 we have completed more than US$6 billion of expansion projects in the Pilbara. By next year we will have doubled our annual export capacity to more than 220 million tonnes of iron ore. Our next ambitious target is to expand to 320 million tonnes per annum capacity by early next decade.
'Bringing everyone along' is only made possible through continuous conversations that involve all of our employees.
Like most of Western Australia , the time and place that Rio Tinto Iron Ore is occupying is quite unique. The world wants our minerals and we are living just down the road from our main hungry customer - China .
It is an exciting time to be in business, which could well last for a generation. But it's a dangerous time. It's easy to just enjoy the ride without worrying about the future.
I am one of many local business leaders who believe it is absolutely vital to invest our current good fortune wisely in building a better community. This is an issue that many business leaders care deeply about because it is their community too.
Failing to build on the strength of our economy is not a legacy we want to leave to the next generation. It is the main reason I sit on a number of external boards like the Committee for Perth .
Just as we spend huge amounts of time and effort exporting big volumes of raw materials today, we must invest similar energy and resources in building a better community. This involves thinking big and maybe even importing an idea or two to complement our local knowledge and creativity.
A strong vision of the future supported by action to make it happen is essential. This requires the engagement of the broader community and the active recruitment of champions to explain and sell the vision.
You can argue that involving and engaging are essentially the same activity, so let me distinguish between them for the purpose of this presentation.
Engaging communities is different from involving employees because the relationship is different. Our relationship with employees is direct and focused and has a number of shared goals.
Our relationship with our host communities is far more subtle and complex. It often covers a multitude of interests. That is why it is essential to find ways of engaging each other around areas of common interest.
We don't have to be best mates, but we have to understand each other and appreciate our differences and our common goals.
Again, we have global discussions and local conversations. Our global talk is with broad communities of interest on issues like the environment, national infrastructure and sustainable development.
At the local level our conversations are around issues that have a direct impact on daily life in the short and long term. These issues include infrastructure, education,
health and particularly measures to achieve greater parity between Indigenous
and non-Indigenous communities. Today there is a growing engagement around sustainable development, which I believe is essential to our long-term success as a society.
Sustainable development is an important global trend. In the context in this speech it is important because it provides a broad framework within which we can engage our stakeholders. It is helping mining companies, governments and the public to shed the silly idea that our only contributions to the community are jobs and GDP growth. Too many people also seem to think sustainable development is just about the environment.
In fact it is a holistic view of the world. As an example our Western Australian sustainable development objectives include:
- creating enduring value for the State from its resources through community development
- helping diversify the regional and State economy
- improving the health, wellbeing, education and long-term prospects of indigenous communities and individuals
- and improving our environmental, water usage and GHG profile.
It should be clear that to achieve any of these objectives we have to engage seriously with our communities. How do we do this?
Here in Perth , our Future Fund has put more than $12 million of funding into the community during the past five years. I am delighted that our various partners have then used this to deliver more than $35 million worth of community development programmes.
The Future Fund is just one part of Rio Tinto's investment. Last year our iron ore business put a further $8 million back into community programs, particularly in the Pilbara.
I encourage you to visit our website www.ciwa.riotinto.com .
It will demonstrate the themes of my presentation by showing you how we conduct our local conversations and communicate, involve and engage with the Western Australian community.
Finally, there is an important element underlying all the points I have made this afternoon. It is the corporate and individual leadership required to achieve all of the above.
It is all very well to talk about communicating, involving and engaging but it has to be part of a personal leadership code. For me, the code is:
Listen to your heart and head. In other words lead by practice and example not by theory.
In the main, successful accomplished leaders appear to have high ethical and moral standards and strong values. In short, they are able to simultaneously listen to both their head and their heart before arriving at a decision.
So to each of you, let me say this - never underestimate your own importance in determining your own life compass, the things that you value your line in the sand and you won't find purpose in life without understanding this.
I believe leadership is essentially learned the hard way from wise counsel and your own success and failures. That is why good leaders spend as much time thinking about communicating, involving and engaging as they do about production figures. Experience has taught them how important it is.
I hope that these few thoughts today have given an insight into some areas that I believe are essential to business success. At every level of our business we are simultaneously having a global discussion and a local conversation with a huge range of stakeholders.
The key components of that dialogue are speaking and listening, involving our employees in our future and engaging the local community in the areas where we can contribute to their future.
This afternoon I have had a local conversation with you. Tomorrow this presentation will go on our website and become part of our global discussion.
That is how the 21st Century world works.
Thank you, and good luck.