The second story comes from Brazil where Paulo Castellari becomes the fifth Manager of Anglo-Americans Minas-Rio mine. This project would require 170 million hours of labor, 19,000 tons of steel, 36 million cubic meters of Earthworks, one and half million meters of cable, and 4,100 vehicles who would travel four million kilometers per month in order to construct the mine. The beneficiation plant, the pipeline, the power transmission line, and the port, which all told span three states and dozens of communities in Brazil. When Paulo took over, the project was five years behind schedule and five billion dollars over budget. His mission was to achieve first ore on ship as soon as possible. When he analyzed the problems behind the failure of the previous management, a leading cause of the delays and cost overruns was the failure to coordinate activities across departments, so as to maximize value of the project as a whole rather than for a given function or task. For example, when engineers encountered an obstacle to the construction of the pipeline such as a rock that was too big to move, they would propose using an explosive charge to blow it up, and they would classify that as an emergency because otherwise, they couldn't keep moving with the construction. The use of the explosive though requires a set of permits and approvals involving the legal and environmental teams. The engineers would send these teams an urgent email requesting their assistance, but those teams had their own objectives, their own timelines, and they were reluctant to rapidly allocate resources away from their priorities in order to help the team with the explosive permits. Such real-time reactions would lead the teams to miss their own internal targets and come in over budget on their financial metrics. As a result of the conflict between the teams, construction would stop. Sometimes for days, even for weeks. Capital equipment just sat unused, and workers would be paid for waiting. The engineers blamed the lawyers, the lawyers would blame the environmental team, the environmental team would blame the engineers. They'd all blame each other for not acting sooner. In the end, the target date for completion of the pipeline would again be postponed, and the budget would again be adjusted upward. But no one gained any insight into why the delay had occurred, and they didn't change their behavior, so it would just happen again. Another example could be found in the process of land acquisition for the pipeline. Here are the previous management team and measure their success according to the percentage of necessary land acquired, which in one sense seemed like the reasonable performance metric. However, not all hectares of land were equally important at a given moment in time. As the construction process grew to involve thousands employees and hundreds of bulldozers, it was a paramount importance to acquire contiguous blocks of land that would allow for construction of large segments of the pipeline and to fill in the gaps that prevented the completion of such segments and even the transfer of equipment and manpower between them. But since the different teams involved remained separate, uncoordinated, and focused on their own task and methodology, it was really difficult to achieve this goal. The land management team for example consisted of trained negotiators, and they were focused exclusively on minimizing the cost paid for each hectare of land. Drawing on psychology, they worked to develop tactical advantages and bargaining power using subtle people skills. In contrast, the construction team was methodically analytical, and it's focused on the construction schedule. Also involved was an archaeological permit team which was focused on the government agencies and technical processes needed to get the permits issued. All three had to cooperate closely in order to avoid costly halts to construction. Paulo's new leadership team quickly zeroed in on a key defect of the existing management processes and systems. Though they were working with a world-class project management tool called Prism, this tool failed to include the critical information that was actually holding up the project in these and myriad other examples. The team manage the data in the tool and viewed these above-ground risks as exogenous and beyond their control. The shortfalls weren't their fault, rather the support staff had failed. The corporate affairs teams by contrast blamed operations for not consulting with them, not sharing information, and not heeding their advice about the legal process that had to perceive their actions. It suddenly seemed obvious to Paulo. He needed to expand the scope of the project management system, to encompass land acquisition, permitting, licensing. In the words of Paulo, even to start a conversation on what we should do differently, we needed better data. The system prioritized issues of concern to stakeholders based on the product of their severity, the average risk to new permits, the impact on construction and the impact on the community, the environment as well as effort, the average of solution complexity, and third-party dependency, as well as urgency. For each issue, a risk mitigation plan targeting specific stakeholders who were concerned about the issue was identified. For each of these stakeholders, the government relations and local stakeholder engagement teams amassed rich information on attributes, including their socio-economic profile, a technical profile, the degree of impact on the mine, the pipeline, the port, their perceptions of Minas-Rio, their interests, and their behavior. All of this information could be extracted into a single page, they captured a photo, a career and educational history, a description of the formal role of the stakeholder, and the list of other stakeholders that influenced or were influenced by the focal stakeholder. There was also information on the stakeholder's personal traits, a summary of their relationship with Minas-Rio, capturing both the tenure and issues involved in that relationship. There was also estimates of stakeholders' power over the mine, the pipeline, the port. Such stakeholder records were available for 1,500 local, regional, and national stakeholders. Next, a new system was implemented to classify stakeholders according to their capacity to influence others, where they're leaders or followers, and their degree of support for Minas-Rio, from favorable, to opponents, to criminal opportunists. Then strategies were designed to guide the community affairs and government affairs team and their relationship with each type of stakeholder. In the coming months, a dedicated team of 15 staff would expand this data and connect it to the project management software. The vision was simple, include every task in a single database that allowed managers to quickly track the information, see linkages across functional areas, and ensure coordination with those areas at a highest level of performance. For example, a deadline for finishing the tunnel by December 2013 would require land access by December 2012. Everybody should be able to see this coming, not only in December 2012, but well before it, and certainly not because latest 2013 or 2014 as was the case in the old system. Given sufficient lead time, the land acquisition team would have the grounds and the expectation to ask for help. They could call around and get whatever they needed from licensing, negotiations, and the environmental units because everyone would recognize and agree on the importance of their tasks. This initiative first met with substantial resistance. The finance team believed that they owned the reporting, but now it seemed that the ownership had been taken away from them and moved to a centralized project management team, they reported directly to Paulo. Making it worse, the large upfront expense involved in building this external data tool using a consultant significantly heightened the finance team's opposition. Other managers' reactions ranged from cool skepticism to what Paulo called hostile fits. Having operated in a decentralized flexible entrepreneurial structure, the shift to a highly bureaucratic centralized data-driven system was a shock to the management team. People didn't want to report to a new project management organization. They didn't like this external group controlling their lives. The additional staff time spent reporting, and in particular in designing the baseline reporting structure was time taken away from action on a project whose delays and costs just kept escalating. Paulo focused his efforts on the organizational chain strategy necessary to align resources, governance, formal incentives, even informal rights and ceremonies with his vision. He ensured that there was sufficient staff, systems in place to integrate that staff with the rest of the organization, incentives for all to cooperate, and cultural signals regarding the importance of and rewards to costly change. Careful attention was paid before deciding to have a single relationship owner inside Minas-Rio for each stakeholder. A dedicated stakeholder engagement team separate from the other functions. A dedicated information support team. In the end, they followed closely the design of customer relations management systems, and the team was divided into relational owners, technical support, market intelligence, and a strategic function. All of the team's activities and interface with the rest of the organization are carefully planned and synchronized to integrate rather than add to the reporting burden. New budget codes allowed for the tracking of costs, cost savings and revenue enhancements, and informal incentives including signage, celebrations, and bonuses that could double entry-level salaries, as well as tokens of celebration-like parties all contributed to a sense of shared mission. Perhaps most notable was the inaction of this new system by the CEO himself. You'd never see Paulo Castellari without his project management briefing book. He referred to it in every meeting, every time he met with the manager, every interview with the press, every meeting with a government official he looked at the book. He made it clear that he managed according to the data in the book, and if your data wasn't in the book, your problem wasn't going to be managed by Paulo. Over the ensuing months, Paulo observed a notable shift. By May 2013, just a few months after implementing the new reporting initiative, a turnaround was already evident. Most notably on the issues, conditions, and land acquisition process. The number of conditions with issues fell from 192-11, even though the total number of government-imposed conditions had climbed from 1,630-1,833. The number of programs with issues had fallen from 60-31. The new leadership team was also able to point to two additional successes in the rollout of the initiatives. The first success, just like at Newmont Ahafo, the relationship between the managers leading the initiative to develop the project management office and their peers within the various functions, finance, operations, legal, was improving. At the beginning when the functional managers saw the project management team, they would hide and avoid them. They wouldn't want to give them the data, they wouldn't want to tell them the truth. Only a few months later these same guys realized they were partners, partners in achieving first store on ship. The functional managers would ask for help from the project management office or the environmental licensing office. The second success was the advocacy of different members of the functional teams once they observed how the reports could actually save them time. For example, the government relations team would constantly be asked for status reports and updates by government officials. Every time they had a meeting, they had to prepare a briefing packet. Before the new systems, the team had to custom develop these reports for each government meeting. You call one guy in and get one answer, and then if you called someone else in, they'd deliver a different report with a different answer. Then the government official would come back and demand a new report and a new response, and they each denied ever telling you something different. As a result, the company would lose time, lose credibility, and the government would threaten their licenses. The new systems made things so much easier because they offered an integrated report where everyone could go for the same answer. As the systems developed, the government relations team could focus on strategy and relationships because the reporting structure provided the leadership team with all the answers that they needed for their meetings, and it assured the accountability of the managers responsible for the deadlines. Did this system actually make a difference to a project five billion dollars over budget and five years behind schedule? Flavio Valle, who is the Logistics Director of a Contractor at the Port, named Prumo, was skeptical, until one day when he was in a meeting, he turned to a secretary bringing in a cup of coffee after Paulo was boasting of the singular clarity of focus that he had achieved. Flavio asked this woman, "Where are we on the project?" Without missing a beat, she replied instantly, that they're on Milestone 7 of 14, and the next step was the water treatment facility. She knew how many days were left to complete the next milestone on time, and she was going to work late that weekend to help members of another division meet their deadline. Everyone knew what to prioritize. Everybody knew what was important. There was no gibberish, there was no waste, there was only a singular focus on the next milestone. When something was missing or late, everyone worked together to achieve it. Flavio had never seen anything like it in his life.
