By Christine Leonardi
Most organisations preach, “People are our most valuable asset.” In practice, few believe it. The world’s third largest gold producer AngloGold Ashanti is one of them.
The Johannesburg-based global mining company’s new CEO Mark Cutifani, who ordered a review of all AngloGold Ashanti’s assets to drive up cash flows and value after he took over from Bobby Godsell in October last year, finds the statement: “People are our most valuable asset,” annoying.
“You have got to be kidding. People aren’t assets. If you think of people as assets, then you are in the wrong business,” he said at a recent forum event hosted by the University of Pretoria’s Gordon Institute of Business Science (GIBS).
“Buildings are assets; chairs are assets; resources in the ground are assets. How can you include people with buildings and chairs?” he asked.
“Everything we do is about people. People are the business; our business is people,” he said.
Despite its ranking as the world’s 3rd largest gold producer, AngloGold Ashanti is only the 11th largest gold producer in terms of market capitalisation, which is a shareholder value indicator.
“If we want to deliver exceptional performance to shareholders, we have to create entirely different relationships with our people,” he said.
This means changing the entire organisational culture. Amongst other things, organisational culture involves how people interact with each other at work; how they treat each other; how they support the organisation and its mission; and how they work together toward achieving common goals.
Cutifani said many of AngloGold Ashanti’s employees are still trying to get their heads around how to articulate what a direct relationship with 60 000 people would look like.
But, in order to build a forward looking business development case that can deliver on its value potential, AngloGold Ashanti first has to address weaknesses in its core operating business.
“We must deliver on our potential,” he said. “We are not managing people to support them to manage the business to its potential. And, for people to reach their personal potential, we must deliver true managerial leadership.”
True managerial leadership involves a confident, self-aware leadership style that is both genuine and consistently influential, successfully managing projects and activities, and accountability for decisions within a development framework.
If you want people to make the right decisions, you have to give them some guidelines on how to make decisions.
As a managed asset portfolio, AngloGold Ashanti is developing a clear view on how to create value from the assets it has and shouldn’t have. Building from the basics is the pathway to value for its mining operations.
In setting the scene, Cutifani said the world is moving though a transition “in the order and affairs of people that is resetting the centre of gravity of development and economic and political power.”
Heightened expectations on the quality of life in old and developing economies are creating new paradigms for political, community and business leaders; the commodity business and for gold.
In this context, AngloGold Ashanti is at a cross roads in its future. The company faces the following challenges:
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an open share register -Anglo American is selling its shares in the business
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a strengthening price of gold in response to an increasing structural cost base and as a store of relative value – AngloGold Ashanti’s current hedge book structure limits meaningful upside participation in the short-term.
Although 80% of the world’s annual gold production is used for fabrication purposes in the jewellery industry, gold is held by central banks, financial institutions and private individuals as a store of value or a form of investment.
Cutifani said in the new world, the global mine supply of gold is declining as the industry struggles to deliver.
Increases in labour, energy and materials input costs, as well as a decrease in the quality of the company’s gold reserves over the last five years, have increased AngloGold Ashanti’s operating costs by 20% year-on-year. This makes it much more challenging to start new projects and limits exploration opportunities.
But, AngloGold Ashanti, which is currently in a phase of gold production decline, is laying new foundations for its future. Amongst other things, it is developing strategies to rebuild the company’s production base to create shareholder value.
Cutifani said to create shareholder value, AngloGold Ashanti needs to deliver:
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Cash and sustainable cash flow
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Growth by delivering increased cash and cash flow built from competitive returns from its assets and investments,
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On its commitments - only then will its investors come to rely on the value the company promises in its future and be recognised as a preferred industry investment.
“Delivering on promises must be part of our culture to encourage investment to support future development,” he noted.
In order to create value for its employees and social and business partners, AngloGold Ashanti needs to deliver:
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A future, which reflects its strategy to grow the business
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Meaningful roles - to be part of a successful business and a partner in the business’ success
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A supportive community and social infrastructure framework
To be recognised as a preferred industry partner, Cutifani said AngloGold Ashanti needs to develop a value proposition that every employee, as a global business ambassador, will believe in and commit to.
He said “our people, shareholders, and social and business partners must be able to “rely on the company to be positive and constructive members” of our communities.”
“The way forward is to focus on managing the issues, bring the company’s asset portfolio to account, generate value through real cash flow and invest in future value growth,” said Cutifani.
by Christine Leonardi:Freelance writer, communications practitioner and the editor of The Gordon Institute of Business Science's online journal,
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