Developing And Enhancing Organisational

Effectiveness At Gold Fields OD&D Conference

Shane Hodgson

May 30th 2013

Certain statements in this document constitute “forward looking statements” within the meaning of Section 27A of the US Securities Act of 1933 and

Section 21E of the US Securities Exchange Act of 1934.

In particular, the forward looking statements in this document include among others those relating to the Damang Exploration Target Statement; the Far

Southeast Exploration Target Statement; commodity prices; demand for gold and other metals and minerals; interest rate expectations; exploration and

production costs; levels of expected production; Gold Fields’ growth pipeline; levels and expected benef its of current and planned capital expenditures;

future reserve, resource and other mineralisation levels; and the extent of cost efficiencies and savings to be achieved. Such forward looking statements

involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the

company to be materially different f rom the future results, performance or achievements expressed or implied by such forward looking statements. Such

risks, uncertainties and other important factors include among others: economic, business and political conditions in South Africa, Ghana, Australia, Peru

and elsewhere; the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions, exploration and

development activities; decreases in the market price of gold and/or copper; hazards associated with underground and surface gold mining; labour

disruptions; availability terms and deployment of capital or credit; changes in government regulations, particularly taxation and environmental

regulations; and new legislation affecting mining and mineral rights; changes in exchange rates; currency devaluations; the availability and cost of raw

and f inished materials; the cost of energy and water; inf lation and other macro-economic factors, industrial action, temporary stoppages of mines for

safety and unplanned maintenance reasons; and the impact of the AIDS and other occupational health risks experienced by Gold Fields’ employees.

These forward looking statements speak only as of the date of this document. Gold Fields undertakes no obligation to update publicly or release any

revisions to these forward looking statements to ref lect events or circumstances after the date of this document or to ref lect the occurrence of

unanticipated events.

Forward looking statements

Gold Fields Limited | Presentation Name | Date

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Developing And Enhancing Organisational Effectiveness At Gold Fields

Developing The Discipline Of Organisational Effectiveness

Adopting An Enterprise View of Change Initiatives

Assessing Whether The Organisation Design Is Fit For Purpose

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Agenda

What are the Performance Drivers In Mining?

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Trends that can create a complex and volatile leadership landscape

External influences in the mining industry

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Risks of Re-engineering for Cost Reduction

In this challenging business environment, knee-jerk reactions can do more harm than

good. Ad-hoc spending cuts can damage reputation and infrastructure and demoralize

employees. For cost conservation and reduction measures to stick, companies must

clarify the cost drivers of the business and use that knowledge to create a culture of cost

consciousness, in both bad times and good.

The essential elements of a cost reduction and cost management and control framework

include financial management and control, procurement and supply chain, business

process execution, and performance management

http://www.canadianminingjournal.com/news/sustainable-cost-control-and-

reduction/1000228386/

Effectiveness: the extent to which the organization achieves its goals or goal.

Efficiency: Takes into account the amount of resources used to produce the desired

output.

Thus: Organizational effectiveness is the concept of how effective an organization is in

achieving the outcomes the organization intends to produce

Rather Focus on Organisational Effectiveness

Constituency Approach: Effectiveness is the ability to satisfy multiple strategic

constituencies both within and outside the organization.

Domain Approach: Effectiveness is the ability to excel in one or more among several

domains as selected by senior managers.

Goal Approach: Effectiveness is the ability to excel at one or more output goals.

Internal Process Approach: Effectiveness is the ability to excel at internal efficiency,

coordination, motivation, and employee satisfaction.

System Resource Approach: Effectiveness is the ability to acquire scarce and valued

resources from the environment.

Given the reality that mining needs to satisfy multiple groupings of stakeholders in order to

achieve a social license to operate as well as a regulatory license to operate – and needs to

attract talent across different generations, the “Constituency Approach” is deemed the

most appropriate one for Gold Fields.

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Choosing Our OE Orientation

"When I use a word,' Humpty Dumpty said in rather a scornful tone, 'it means just

what I choose it to mean — neither more nor less."

"The question is," said Alice, "whether you can make words mean so many different things."

"The question is," said Humpty Dumpty, "which is to be master— that's all.“

“Through the Looking Glass and What Alice Found There” by Lewis Carroll (1871), from

http://en.wikiquote.org/wiki/Through_the_Looking-Glass

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Using the Lewis Carroll Approach …

Adopting a Model for OE in Gold Fields

As a foundation, we use the Burke Litwin model

as a framework for assessing the factors we believe are important in organisational performance when seen from an HR or OD

viewpoint. This imparts a distinctly “OD” flavour to the analysis and subsequent interventions,

and distinguishes us from the more process-oriented approach of our Business Improvement department.

Work done by Martins and Coetzee (2009) indicates that the Burke Litwin model provides a

“… convenient and valid shorthand method of identifying and explaining multiple key organisational phenomena that affectthe

organisation’s performance and overall effectiveness”

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The Burke–Litwin model highlights two distinct sets of organisational dynamics. One set is

primarily associated with the transactional level of human behaviour, or the everyday

interactions and exchanges that create the climate of the organisation. The second set of

dynamics is concerned with processes of human transformation, amounting to sudden

‘leaps’ in behaviour.

The transformational variables refer to those areas in which alteration is usually caused

by interaction with environmental forces (both within and without the organisation), and

which therefore require entirely new behaviour sets on the part of organisational

members.

According to Burke and Litwin, the external environment affects transformational factors,

which are identified as the organisational mission and strategy, leadership and culture.

The transformational factors, in turn, affect the transactional factors, which are identified

as the organisational structure, systems, management practices and climate. Both types

of factors reciprocate, and eventually impact on, individual and organisational

performance and overall effectiveness

“Applying The Burke–Litwin Model As A Diagnostic Framework For Assessing Organisational Effectiveness” Martins and Coetzee, (SA Journal of Human Resource

Management; Vol 7, No 1, 2009)

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Transactional and Transformational Dynamics

External environment: Any outside condition or situation that influences the performance

of the organisation.

Vision, mission and strategy: What employees believe to be the central purpose of the

organisation and how the organisation intends to achieve its purpose over an extended

period of time.

Leadership: Behaviour that encourages others to take necessary actions, including

perceptions of leadership style, practices and values.

Organisational culture: 'The way we do things around here.‘ Culture is the collection of

overt and covert rules, values and principles that guide organisational behaviour.

Individual and organisational performance: The measurable outcomes or results, with

their relevant indicators of effort and achievement. Such indicators might include

productivity, customer or staff satisfaction, profit and service quality, salary and benefits,

and recognition.

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Transformational factors affecting OE

“Applying The Burke–Litwin Model As A Diagnostic Framework For Assessing Organisational Effectiveness” Martins and Coetzee, (SA Journal of Human Resource

Management; Vol 7, No 1, 2009)

Structure: The deployment of functions and employees so as to implement strategy,

including levels of responsibility, decision-making authority and relationships.

Management practices: What managers do in the normal course of events in using the

human and material resources at their disposal to carry out the organisation’s strategy

Systems, policies and procedures: Standardised policies and mechanisms, such as

rewards, controls, budgets or SOP’s that facilitate work

Departmental/work unit climate: The collective current impressions, expectations and

feelings of the employees in their respective areas

Task requirements and individual skills/abilities: The behaviour, specific skills and

knowledge required for task effectiveness.

Individual needs and values: The specific psychological factors that lead to individual

actions or thoughts relating to stress, well-being, recreation and living conditions.

Motivation: The tendency to move toward goals, take needed action and persist until

satisfaction is attained.

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Transactional Factors Affecting OE

“Applying The Burke–Litwin Model As A Diagnostic Framework For Assessing Organisational Effectiveness” Martins and Coetzee, (SA Journal of Human Resource

Management; Vol 7, No 1, 2009)

Key metrics used in OE are currently aimed at assessing the climate within which

successful change can be initiated, and successful interventions can take place. This

does not supersede the standard metrics of a project such as benefits or value realised,

but rather tracks the alignment of leadership around key goals and measures; the fit -for-

purpose nature of organisational structures, roles and competencies and the use and

accuracy of balanced scorecard performance measurement.

Some major Transformational metrics are thus Employee Engagement, Net Employee

Advocacy; Net Nurture of Talent; Organisational Change Readiness and more.

It is important to note that our definition of the discipline of OE perhaps includes far more

of the domain of classical Organisational Development than is fashionable. It is not only

about an initiative-based focus on operational metrics, but also at a corporate level it is

about building a clear line of sight all the way from the individual at the stope face to the

organisational strategy. We see that line of sight as an alignment between an individual’s

KPIs, motivation and opportunities with those of other individuals, forming groups with

aligned competencies and norms and giving rise to organisational capabilities and culture

– all supporting our strategy.

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Key Organisational Metrics in OE

We know that providing strategic clarity to all our employees will fulfil a very fundamental

and important need for them. We all want to know what we’re supposed to be doing; how

it contributes to the overall success of the company and where we as an organisation are

heading. That same clarity is also important for our shareholders and for the communities

in which we operate. Combining this with a strong focus on our organisation’s values

means we can be depended on to do what we say we will do, and we know exactly why

we’re doing it.

Another critically important theme is sustainability – and in this context we can talk about

how sustainable our HR practices are. Work by John Boudreau shows that increasingly

HR practitioners need to ensure that we can achieve success today without

compromising the future – and in South Africa I think we need a fairly fundamental

reinvention of the way we think about HR

Our newly reduced size will oblige us to work far more collaboratively across functions

that has previously been the case. We will also need to adopt a much more robust

approach to the creation, capture, sharing and management of knowledge. Knowledge

Management practices have been found to mediate the effects of structure, strategy and

culture on OE (see overleaf).

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Major OE Themes for Gold Fields

“Linking organizational culture, structure, strategy, and organizational effectiveness: Mediating role of knowledge

management” Wei, Baiyin and Maclean Journal of Business Research Volume 63, Issue 7, July 2010, Pages 763–771

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Knowledge Management Affects OE

Scope - Gold Fields OE Centre of Expertise

Organisational Effectiveness

Organisational Design

Knowledge Sharing

Organisational Structures

Organisational Development

Culture and Engagement

Change Management

Organisational Performance

People Scorecard and Resource Utilisation

HR Sustainability

Collaboration and Virtual Teaming Coaching and Mentoring Enterprise Transformation Office

Fit for Purpose Structures Roles and Grades Group Org. Design Methodology

BeQ Culture Transformation

Organisational Climate Employer Branding and EVP

Group CM Methodology

Change Network Formation Agility, Resilience and Wellness

Change Capacity

HRIS usage People Scorecard

Attraction and Retention DJSI

Best Employers Community Engagement

ALIGNMENT TO ORGANISATIONAL VALUES

We believe that it is critically important to build change management competency within the

company; not only in transactional change management but in transformational change

management. This requires the establishment of change management as a strategic

discipline, and the adoption of a single point of view (and point of triage) for all business

change initiatives requiring organisational change management. This is supported by the

work of Dean Anderson and Linda Ackerman Anderson on Organisational Transformation.

They say:

“We have identified five key strategies so far to creating change as a strategic discipline:

(1) identifying and managing an enterprise change agenda;

(2) having one common change process methodology;

(3) establishing a change infrastructures;

(4) building a strategic change center of excellence for all change practitioners; and

(5) creating a strategic change office” (Anderson and Anderson)

Anderson and Anderson, from http://changeleadersnetwork.com/transformational-change-authors

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Taking an Enterprise View of Change

Another component of organisational effectiveness is a regular review of the

organisational structures, seeing if they are fit-for-purpose. In a multi-country, largely

decentralised operation such as ours, the degree of fit between organisational structures

and the business and strategic drivers of structure needs to be tested every year or two.

Key components of this are:

Ensuring that the company structure happens by design and not by accident

Ensuring the structures are fit for purpose – e.g. the structure for a feasibility study is different for a full scale project

Striking the right balance between Standardisation and Customisation

Getting accurate data from your regions/ operations on structures (Nell, A. 2013)

Given that organisational structures are a framework through which strategy can be

articulated; processes expressed; resources allocated and people deployed, we need to

strike a fine balance between flexibility and rigidity; between standardisation and

localisation and between the “… two rival organisational structures

of cooperation and competition that coexist in any organisation in different intensities and

mixtures. Finding a desirable mix of the above two structures is currently a challenging

task and no explicit method exists for determining such an ideal mix”

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Conducting Organisation Structure Reviews

A conceptual model for managing incompatible impacts of organisational structures on awareness levels

Shahla Ghobadi1 and Farhad Daneshga, Knowledge Management Research & Practice (2010) 8, 256–264

1. Do the Structure and Design support the GFI strategy and purpose?

2. Are Stakeholder needs and expectations met?

3. Are Work flows simple and standardised?

4. Do Service areas cooperate?

5. Are both Knowledge management and communication effective?

6. Does the Structure incorporate opportunities for career progression?

7. Is the Staff composition manageable?

8. Do the Structures comply with GFI’s governance and legislative responsibilities?

9. Are the Positions designed to be satisfying and motivating?

10. Are the Position titles simple and clear?

11. Are Regular reviews conducted?

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Our Approach to Organisation Structure Reviews

There is no one perfect right answer – but there is a “best fit” design at a moment in time

The true relationship between Structure and Strategy is not that Structure follows

Strategy, but that there is a dialectic between them. The structure is a way to articulate

the strategy through resource deployment, but it is also an information filter that limits

what we can see and thus constrains our strategy.

Given our strengths and weaknesses, the design should not be rigid, but should allow for

flexibility and compromises in structure, thus probably ending up as a hybrid model

(Geographic plus augmented Centre, or similar)

We need to be able to manage the trade-offs in the model by using the levers of

processes, people, leadership and culture.

We need to spend as much or more time on integration as on differentiation. That means

equal importance for linking groups and functions as for the initial grouping.

Matrix organisations are notoriously difficult to manage – rather choose a good Grouping

and then support that with linkages.

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Principles of Effective Organisation Design

CEO’s Span of Control is Increasing, but…

Paradoxically, as CEO’s widen their span

of control they tend to become more

involved in detailed management of

operational issues – perhaps because with

the wider span of control they are exposed

directly to much more information, and are

directly involved with a greater number of

organisational units

As CEO’s length of tenure increases, their

span of control should decrease. As

CEO’s start looking for and grooming a

successor, they typically consolidate their

direct reports to 6 or so (Neilson and Wulf,

2011, HBR)

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The discipline of Organisational Effectiveness is a relatively new one both within Gold Fields

and in South Africa as a whole. The imminent formation of a virtual community of practice

(CoP) in this discipline will bring together practitioners from different industrial sectors, using

a local Enterprise 2.0 collaboration suite called Firestring http://www.firestring.com/

We look forward to refining the definition of OE and integrating it more deeply with the

disciplines of Sustainability and Human Capital Management. To that end your comments

and suggestions are welcome and can be addressed to me on zimpsych@hotmail.com

Thank You.

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In Summary…