MRG in Business In Vancouver: Succession Plans Key for Mining Companies

Business in Vancouver May 4-10, 2010; issue 1071

Succession plans key for mining companies amid baby-boom retirement

The untimely departure or death of a senior executive could mean trouble for companies that don’t have effective strategies for developing personnel
By Joel McKay

As the demand for talent continues to heat up amid the baby-boom retirement, experts say succession plans are more important than ever for mining companies.

Andrew Pollard, president of Vancouver-based Mining Recruitment Group, said all companies should plan ahead.

“I think they should be having these conversations before they actually need someone,” said Pollard. “[It’s like] when you’re looking for a doctor, the best time to do it is before you need one.”

And you don’t need to dig very deep to see that a war for talent is already underway, he said.

According to a 2007 Mining Labour Market Transition study by the Mining Industry Human Resources Council (MiHR), the Canadian mining industry needs another 92,000 workers by 2017.

In B.C., MiHR expects the workforce to grow 35% by 2017 to approximately 22,225 workers.

Infomine.com’s global mining job board has statistics that are even more telling.

In Canada, active job postings totalled more than 1,600 at the end of March, compared with slightly more than 1,000 for the same time last year.

Not only is the industry growing, but many executives are older and looking to get out while the market is on the rise, said Pollard.

“What I’m witnessing more than ever is executives who think they’ve been through one cycle too many and are burnt out.”

That’s leading some executives to approach their boards about succession plans, but many junior companies have yet to broach the subject and plan to draw on their own resources.

“A lot of executives in the mining industry come through general networks … and that’s certainly fine for the junior exploration company where there might be quite a few qualified people out there,” said Pollard.

That’s how Vancouver junior Bearclaw Capital Corp. (TSX-V:BRL) handled succession when founder, president and CEO John Ross died suddenly on Christmas Eve.

“We had no plan,” said Bearclaw director Arthur Lilly. “Fortunately, the directors were all good friends … so there was no problem as far as succession goes.”

Scott Ross was appointed president and CEO in March, but not every company has a seamless transition.

Last month, shares of Peru-based silver and gold miner Hochschild Mining plc (LSE:HOC) dropped 5% after it announced the resignation of its CEO and CFO.

As well, stock of Vancouver-based Silver Standard Resources Inc. (TSX:SSO) fell $0.26 to $23.89 when president and CEO Robert Quartermain announced his resignation January 19.

A week after the announcement, the stock was valued at $19.95, and the company has yet to find a long-term replacement.

Michael O’Callaghan, a global mining leader with recruitment firm Korn/Ferry International, said succession plans are necessary if companies want to avoid share price hits and operational issues.

“Disruption at the senior level causes a ripple effect in terms of what’s happening in the business … so it absolutely has a big impact in the overall performance of the business,” said O’Callaghan.

Small companies can get away with interim leaders, he said, but larger companies should have succession plans that look beyond management’s upper levels.

“To be really effective, you have go all the way down into key corporate roles and identifying and assessing talent at that level to put development plans in place,” he said.

He also said companies should try to find replacements within the organization, but the war for talent means more are going to the market to find the right people.

When that happens, Pollard said recruitment firms could make the transition process easier.

“It allows me or any executive recruiter the ability to put together a well-defined and methodical search process to identify the best possible person in the marketplace, not simply the first person that answers a job ad,” said Pollard.

Both Pollard and O’Callaghan agree succession plans are different for every company, but the benefits of a good plan outweigh the consequences.

“If you don’t have a plan in place right now you’re probably already behind the eight ball,” said O’Callaghan. “The companies that have been more proactive … are certainly going to be much better positioned for addressing the issues we’re going to see in the next five years.”