Saturday 22 November 2008

Human Resources Practice in Mining Industry

Herman Seran

Introduction
The effectiveness of human resources and industrial relation has become a central issue to modern organizations. A research reveals that four out of five companies’ strategic priorities are related to human resources concern (Jensen & Spencer, 2003). Since the organizations incorporate human resources and industrial relation into one body, the discussion will treat both as human resources management. In similar vein with other industry in this cutting edge world, mining industry is dealing with the same concern, nevertheless, given its uniqueness, mining companies are facing even more difficult situation in their strategic human resources management. It is because the mining companies are forces to continuously maintain low cost business while trying to breakthrough cyclical and exhaustive nature of the industry. Furthermore, more and more ore bodies found in remote area, with considerable socio-economic impacts, has put additional burden as well as general trend of declining real price for most of the commodities.
This paper, therefore, is going to discuss the effective human resources management practices in mining industry in order to maintain the profitability. Firstly, the theory regarding human resources management functions in an organization is considered, followed by assessing its contribution to the organization and how these functions fit into the organization’s structure. The paper then touches on the practicality of the human resources / industrial relation in mining companies.

The Responsibility of Human Resources Management
Human resources management aims to maximize the productivity of human capital to achieve organizational goals and the satisfaction of the employees. In order to achieve organizations objective, human resources management has experienced various changes and development through a long way of history. Campton and Baird (2005) suggest that human resources management in Australia has experienced evolution from welfare administration to personnel management and industrial relations in 1900 to human resource management and strategic human resources management (SHRM), and since 2000 entering the so called SHRM in the new millennium. This evolution has further impacted the integration of human resources and industrial relations which were previously separately managed.
The productivity of employees is undoubtedly becoming an important proxy in channeling an organization’s competitive advantage in facing globalization forces. In today’s world, despite its traditional administrative roles, strategic human resources management concern has further extended to strategic functions to maximize a sustainable growth of an organization (HR Focus, March 2006 p.8). A study conducted in 2004, reveals that human resource management should deal with change management and leadership development as the today’s most challenges and the future biggest concerns will be the organization effectiveness and leadership development (PricewaterhouseCoopers, 2004). The survey further reveals that being strategic business partner to the management in now days consumes larger portion of time than the administrative works.
A strategic business partner refers to the notion that the strategic human resources management aims to maintain the competitive advantage of the overall organization. The strategic human resources management implies dedicating time and effort to ensure that every decision is a win – win solution between organization objective achievement and employee satisfaction (Newton, 2005). Rufat-Latre (2005) believes that strategic effort is to build corporate-wide capabilities by continuously producing innovative employees who become agent of change and growth. In order to establish its strategic role as a strategic business partner, human resources staffs are required to continuously work at operational and functional levels as their traditional responsibilities (Nankervis, Campton and Baird, 2005, p.31). Consequently, human resources management practitioners are required to understand internal and external conditions, the objectives of organization and organizational plans, which facilitate them to contribute effectively to the bottom line of the organization.

HRM Contribution to Organizational Success
Since the human capital is the key input of an organization, intuitively, human resources management indeed contributes significantly to organizational success. In what ways human resources management can contribute? Research indicates that human resources management impact on business performance rather derived from its strategic roles. Nevertheless, human resources management practitioners are yet to be seen as strategic partner to senior management (Jamrog & Overholt, 2004). Unsurprisingly, the researchers find it difficult to draw connection between human resources management practice and the economic performance of a company.
A research done by Guest, at al. in 2003 as cited in Wright and Huggerty (2005), for instance, reveals that human resources practice were correlated to profitability but not productivity, yet also failed to prove it causes in employee performance. Wright and Huggerty further argue that this inconsistency comes from incomprehensive research methods that treating the parameters independently from each other. Another hindrance, to define human resources practice contribution in adding value to the organization, is problem of measurement (Wright and Huggerty, 2005).
There are at least four important contribution required from strategic human resources management. They are attracting and retaining qualified people, improving employee productivity, leadership and the development of management behavior, and organizational change and employee attitude (Jensen & Spencer, 2003). By conducting these strategic roles, human resources staffs can add value to the organization.

Suiting Human Resources Functions to Organizational Practice
‘Different pond different fish’ principle is accepted beyond doubt, when it comes to human resources practices. In general, human resource management functions are shared among human resources practitioners, line managers and often external consultants (Nankervis, Campton & Baird, 2005). Nevertheless, organizational culture, nature of the business, size and location, and other consideration play considerable role in how these functions executed. For example, the human resources function may disappear from the organizational structure at site level for a mining company, and the role may well be conveyed by site manager or project manager. Additionally, small companies and big companies may have different policy regarding the importance of the human resources practice.
Even though in many cases human resources management practitioners may not fully included in the organizational structure, the functions are always there with the companies. To other companies, the functions may appear in head office structure and other companies may employ human resources personnel just to run administrative functions rather than strategic functions. However, large number of executives believe that human resources management functions is critical to the future of the company, and human resources practitioners (if any) are demanded to take more control in shaping organizational effectiveness (Jensen & Spencer, 2004). Therefore, given the absence or lack of human resources staffs, the human resources management functions, especially strategic functions, are delegated to line managers or consultants if required.
The effectiveness of human resources management functions, in general, can be achieved by joint-decision making between human resources professionals and line managers. However, there is no single recipe can fit all, as human resources issue is a dynamic field that depends on constrains and opportunities faced by an organization. Accordingly, it is not uncommon to find some organizations incorporate their human resources affairs in the organizational structures; others shared the function between human resources practitioners and line managers, and even others companies have no human resources practitioners at all. Consequently, an effective human resources management assumes that ‘basic human resources literacy’ is embraced by the managers of the organization.

Human Resources Management in Mining Industry
As previously mentioned, mining companies face additional human resources problem given the industry’s distinctiveness. Unlike other industry, mining industry is highly uncertain as it strongly responsive to ‘economic boom and bust’ in addition to its exhaustive nature. Mining industry is driven by location where ore body is found regardless to availability of other resources including human capital. Furthermore, the industry is constantly facing the decline of commodity real prices forcing the industry to maintain low operational costs. For an illustration, gold deposits may be found in the inland of Borneo Indonesia, which is far away skilled labor market, and its economic viability depends on gold prices which than control other decision making, including how to fulfill skilled labor shortage.
Mining industry, as a matter of fact, has to overcome the human resources management problems which mostly derived from its uniqueness. Mining companies find it hard to maintain long-term strategic human resources, especially in project level and small companies. During the industry booming, attracting and retaining suitable people is of the problem due to the competition with intra-industry and other sectors. At the same time, mining companies should take into account the interests of other stakeholders such as governments and local communities. For instance, large number of mining development was delayed because of lacking skilled labor force. Meanwhile, companies who operate in Borneo Indonesia should allocate extra-training to unskilled local labor as solution for overcoming skilled shortage and local community demand.
Big mining companies, nevertheless, have more room to move in terms of maintaining as strategic human development in their companies. These companies, to some extent includes the head office of small companies, have more access to qualified workforces thanks to their economies of scale in terms of multiple projects, long mine-life, and financial capability to satisfy the employees needs. Small projects and small companies are less unattractive to skilled labor due to less promising benefits they can get. Accordingly, the strategic human resources management is a real challenge for small companies.
Mining companies normally split administrative functions and strategic functions between site office and head office, even though there is often no clear cut between the two. Given the fact that site operations last shortly, maintaining a permanent human resources personnel to deal with strategic functions is an inefficient strategy. Such kind of roles is normally delegated to line managers who are familiar with job requirement. Human resources practitioners focus on administrative roles such as industrial relations, employ related administration and legal advices. Meanwhile, strategic roles like human resources planning including, hiring, promotion and employee development belong to line managers. This strategy is an effective choice because the issue facing by site operation level is less complicated as of those in corporate level.
For example, Straits Resources Ltd, an Australian based diversified mining company, does not employ human resources staffs for its Mt. Muro Project in Indonesia. As the project has approximately four years mine life, the human resources administrative functions are running by another subsidiary company that looking after other projects as well. Meanwhile, strategic human resources functions at site level were shared among the line managers and other supervisors in charges. This approach is indeed efficient, even though may not be effective in the long run unless the head office human resources professionals deliberately integrated it into long-term strategic human resources management system.
Big mining companies, despite having ‘human resources literate’ line managers, have integrated the human resources management structure at the site level. This assumes additional costs, yet very effective to win and retain qualified workforces which will contribute to long term benefit of the company. Human resources staffs in these companies have maintained a comprehensive human resources management system ranged from recruitment, employee development, promotion and leadership succession. The involvement of line managers appears at last stage when the candidate has fulfilled the company strategic requirements.
PT Freeport Indonesia, a Freeport McMoran Pty. Ltd. subsidiary, has implemented an integrated human resources management system in its Grasberg Mine. The site human resources department, as well as its administrative functions, is responsible for recruitment, employee development, and promotion in cooperation with line managers as the users. The department has implemented strategic policies such as conducting management training program for fresh graduates and cooperative program for university students. These programs are very effective to detect and attract talented candidates, at the same time promoting the company to universities as the very source of skilled employees. As a follow up, the company will give the permanent status to best performers of the programs. The company also employs international human resources consultant to recruit experience candidates. Consequently, the company has advantages in employing qualified people and adequate numbers to fulfill organization demand. Additionally, company also prepares to provide competitive remuneration to its employees.
To sum up this section, mining companies realize the importance of human resources functions. The delivery of these functions depends on each company policy as strategy to face the industry specific challenges which may come in different forms and intensity. Therefore, the human resources management functions may be operated by human resources practitioners, line managers, or consultants or combination among those three.

Conclusion

Human resources management is a necessity to modern organizations. Human resources functions has broadened and shifted towards strategic business partner to top management. The strategic functions are recognized by company executives to be very critical to the company, although they may be implemented by human resources professional, line managers or even consultant. The effectiveness of the delivery of these functions is subject to various determinants.
Mining industry, as well as other industry, realizes how critical human resources management functions are. The challenges they face are even tougher as of the industry specific condition. The human resource functions, in small companies, are divided between site level and head office, where site human resources staffs deal with administrative functions and line managers and head office human resources staffs are responsible for strategic functions. Nevertheless, big companies may choose to have site human resources department due to their specific challenges. These choices are a trade of between the company demand and the ability to satisfy the needs, which varies from company to company.

References
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Nankervis, A, Campton, R & Baird, M 2005, Human Resource Management Strategies and Processes, 5th ed, Nelson Australia Pty. Ltd., Southbank, Victoria.

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PricewaterhouseCoopers 2004, Survey of Global HR Challenges: Yesterday, Today and Tomorrow, World Federation of Personnel Management Association (WFPMA).

Rufat-Latre, J 2005, 'Beyond Training: The Role of Human Resources in Innovation', Employee Benefit Plan Review, vol. February 2005, no. 59/8, p. 15. Retrieved: April 12, 2006, from http://proquest.umi.com.dbgw.lis.curtin.edu.au/

Wright, PM & Haggerty, JJ 2005, 'Missing Variables in Theories of Strategic Human Resource Management: Time, Causes and Individuals', Management Review, vol. 16, no. 2, p.164.
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