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A Stake in the Ground

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By: Melanie D.G. Kaplan

When a multinational mining and mineral company realized it had a lot to learn about stakeholder engagement, it turned to Georgetown McDonough.

Nothing helps an international corporate employee put herself in the shoes of a native quite like role-playing.

Such was the case for Isabelle Brissette, manager of risk and human rights for the multinational metals and minerals corporation Rio Tinto. During an educational session at Georgetown McDonough, she and her peers acted out the parts of nongovernmental organization (NGO) workers and pygmy tribe members — groups that might have a stake in how Rio Tinto does business.

Participants ad-libbed, each taking their parts seriously. Those playing Amnesty International representatives, for example, produced drawings meant to portray the people injured or killed by their government. There was a lighthearted moment when the audience realized the tallest men in the class were those playing the pygmies, but they presented their case in such a quiet and humble manner that the room — filled with laughter just moments earlier — went silent, the participants spellbound.

Naturally, some were more gifted actors than others, but the consensus was that the exchange was decidedly compelling.

“It was good to try to put yourself in the shoes of a stakeholder with whom you normally engage,” says Brissette, who works out of Rio Tinto’s Montreal branch. “The perception of what you think you would say in a situation is very different from what you actually say in role-playing.”

Brissette, who spends much of her time traveling to countries where Rio Tinto is experiencing security challenges — or trying to prevent them — is one of about 300 executives, managers, directors, and advisers who completed the four-day Stakeholder Engagement Academy (SEA) at Georgetown McDonough in 2012. The SEA represents an effort by Rio Tinto to improve the way its employees interact with stakeholders ranging from farmers to financial analysts and, in turn, to gain a competitive foothold in the mining and extraction industry around the world.

Out of the Comfort Zone

Stakeholder engagement is not a new concept. In fact, the idea behind it has been around as long as humans have been negotiating.

“It’s understanding the stakeholder environment,” says Nancy Beer Tobin, assistant dean and executive director of Georgetown McDonough’s custom and open enrollment programs. Stakeholders for a given project would include anyone who could be influential or affected at any point during the cycle of a project. They include local and national governments, NGOs, media, shareholders, indigenous communities, competitors, labor unions, and employees.

Stakeholder engagement is critical to industries that are prone to discord, such as oil, tobacco, and mining and extraction. For example, in the developing countries where Rio Tinto mines, stakeholders can have extraordinary power. Not only can they thwart progress, but they can threaten to halt a multibillion-dollar project already years underway. In these industries, says Judy Brown, Rio Tinto’s chief adviser for stakeholder engagement, “the success or failure of a project hinges more on stakeholder engagement issues than technical issues.”

The obstacles to a successful mining project are more daunting today than ever: Geopolitical and environmental issues are more intense; the demand for and price of commodities are rising; nations are tightening their grip on natural resources; and conservation groups are fine-tuning their global strategies.

Yet too many companies are paying too little attention to stakeholder engagement, Beer Tobin says.

“Most companies don’t recognize the significance of strategic and well-executed stakeholder engagement,” she says. Research has proven that investing in this area yields more profitable projects. “The value captured is seen in more efficient deployment of resources, and fewer disputes.”

With all this in mind — and after fallout from negative incidents over the past couple of decades, including political tension and even violence — Rio Tinto made comprehensive stakeholder engagement training a priority. The company, based in London and Melbourne, began an extensive search for an academic partner in 2011.

Brown sought the expertise of a ­business school with the resources and brain trust of a public policy school. Georgetown McDonough won the bid, in large part because of the school’s ability to create an executive education academy with faculty around the globe. Rio Tinto has 70,000 employees in 40 countries, and for cultural as well as logistical reasons, it was critical that faculty be drawn not only from Georgetown, but also from other schools in places such as Australia, South Africa, and Europe.

Beer Tobin enlisted Georgetown McDonough Associate Professor Brooks Holtom as the academy’s academic director. In designing the program, he interviewed two dozen Rio Tinto executives and learned that the company wanted to offer courses at their sites around the world, and it was important to have digital resources available to every employee as well as interactive, on-site instruction for top-level management.

“This topic is of increasing importance,” Holtom says, “and to do this well — to understand the cultural nuances and the different issues in Australia and Papua New Guinea — we had to source experts from across the globe.”

In fact, with the SEA, Georgetown created the largest yet of its custom programs, with faculty members from nearly every continent. The final product: a four-day residential course in cities including Johannesburg, Perth, Paris, and Singapore. Two pilots were held in early 2012, followed by monthly programs beginning last June. Courses will continue, roughly every month, for the next two years in new locations including Mozambique and Mongolia. In addition to the face-to-face component, the SEA also includes an online offering (part of Rio Tinto College) and has the ability to create new material on an ongoing basis.

Each cohort is made up of 25 to 30 executives. The courses are built largely from case studies from Rio Tinto and other companies. Holtom teaches negotiation principles and preparation, and strategic alliances. Other classes cover stakeholder mapping, cross-cultural intelligence, and coping with political, economic, and social dynamics.

Robert Court, Rio Tinto’s global head of external affairs, says for employees who are already good at their jobs, challenging them to put themselves in other people’s shoes will push them into a new area of understanding. “I was very keen to make sure all our senior managers recognize they have a share of responsibility in maintaining our stakeholder relationships,” he says. Of course, seeing situations from the perspective of different stakeholders can be trying at times, especially for folks who tend to be more technically minded, like engineers. At the end of one course, a participant reported that he was outside his comfort zone — in a good way — the entire time.

Court, whose background is in foreign affairs, acknowledges that even after an entire career of engaging with stakeholders, it remains difficult to pay attention to things often taken for granted, including the reflection of one’s own bias and experience. “It’s a reminder how diverse and dynamic the world is,” he says.

The Case for Stakeholder Engagement

Rio Tinto’s businesses include open-pit and underground mines, mills, refineries, and metal production facilities. Much of its work occurs in challenging terrains and climates, not to mention some tricky political environments, where corruption and bribery are common. When Rio Tinto begins a project, the company expects to be in the project’s location for the long haul, sometimes 100 to 150 years. Within this framework, there are countless ways the company touches its stakeholders, and countless ways those individuals can affect a project.

From his office in London, Court offers radically diverse examples: In Rio Tinto’s diamond mine in Canada’s Northwest Territories, a major concern was caribou migration. The Papua New Guinea copper mine became a factor in a civil war. Then there is village relocation in Mozambique and anti-mine sentiment in Peru, and many countries experience environmentalist disruptions and worker strikes. Add to these examples the expectations — when a “rich Anglo company arrives,” Court says — of population growth, investment, pollution, and infrastructure, and all that comes with it.

The issue of water is a good example, Court says, because it means something different to every stakeholder. “We see water as a matter of engineering and cost,” he says. “But many indigenous communities see water as a matter of tradition and endowment and spiritual significance.” He says water is on people’s minds all the time — whether it has to do with ceremonial uses, droughts, or pollution.

In addition, many of these projects can have a national impact. In Mongolia, for instance, where 80 percent of the exports are minerals, Rio Tinto has already poured $6.2 billion into a copper and gold mine below the surface of the Gobi Desert. It is expected to account for one-third of the country’s GDP by 2020 and will be one of the world’s five largest mines, according to The Economist.

So it’s easy to understand what’s riding on each of these stakeholder relationships and how quickly they can turn south if not properly maintained. For one tragic example: In August, police killed 34 striking workers at a competitor’s platinum mine in South Africa.

Court says Rio Tinto is moving into a much deeper understanding of stakeholders that values relationship building over browbeating. Rather than approaching stakeholders to divulge the next phase of an operation, it’s more of a conversation, asking, “What’s important to you? What’s on your mind?”

“We’re not saying, here is our project, this is how we do it, and if you don’t agree with what we’re doing, we’ll just lobby you until you agree,” he says. “If we understand them, we can build them into our project and bring the mitigation of external stakeholder risk into the project.” For instance, if Rio Tinto needs to build a port, after hearing the concerns of villagers, the company might build a structure that also supports local fishing.

Putting a Price on Relationships

Brown is the first to admit that there will still be issues and challenges, even though the company has placed stakeholder engagement at the core of its business. But the SEA undoubtedly gives Rio Tinto a competitive advantage in terms of being a developer of choice, she says. “We have a reputation as the type of people who will work with local communities and governments,” she says, “that we not only will get a social license to operate, but we’ll keep re-earning it.”

In essence, enhanced stakeholder engagement leads to fewer delays and disruptions and increased cooperation, which means Rio Tinto can extract more minerals at a faster speed, which leads to higher returns to shareholders and favorable reports from analysts. But change of this sort starts at the individual level, and it is already apparent in the way Rio Tinto employees approach challenging scenarios.

After completing the SEA, employees are more aware of different viewpoints and more thoughtful in planning their strategies. Court says the education reminds people to do a better job of listening, which inevitably broadens their thinking about the world and ultimately makes them more effective in their jobs.

“We hope parts of the program will reach hundreds of our current and future leaders,” he says. “Nobody at a high level says, ‘This has nothing to do with me.’ People really get a sense that this is integral to their success, just as much as finances or safety.”

A key component of each SEA is the Stakeholder Engagement Challenge, which asks participants to apply what they’ve learned to create action plans for current workplace issues. Court says this allows participants to put lessons to use immediately.

He also says that the discussions around individual experiences are among the richest parts of the course. In one class, a participant talked about dealing with a minister in a West African village near Rio Tinto’s iron ore project. “What he failed to mention was that he was that minister,” Court says. “And now he’s an employee. So he was looking at it from a very different perspective.”

Brissette says she has a better understanding now of how to build a more robust stakeholder engagement strategy. Her job involves identifying where Rio Tinto might have security conflicts and figuring out how to prevent them. “We can’t have conflicts with local communities,” she says. In some of the countries where Rio Tinto does business, Brissette says the company can’t count on civil conduct (let alone protection) from the police, who might react to a situation with abuse. She works at connecting with the police, training local security guards, and getting to the root of the conflict.

“It’s proactively trying to discuss the risks, the potential for human rights abuse by security forces, and how to prevent it,” she says. In some countries, the issue of human rights is not discussed openly, so any conversation about it must be handled carefully.

Brissette says the SEA also reminded her of the importance of internal stakeholders. “In the past, sometimes I’d talk with local stakeholders, but I forgot to effectively communicate what I do with some other important stakeholders: the leadership within the company.”

While the consensus is that the SEA will positively affect Rio Tinto’s bottom line, it is inherently difficult to assign numbers to this field of study. “On the one hand you have very hard numbers like the railway line costs,” Court says, “and on the other side you have relationships.” He says Georgetown is helping push him to think about the value of stakeholder engagement. “It all comes down to this,” he says. “How do you measure things like trust?”

He says although the company cannot yet put a number on everything, he understands that the SEA is pushing Rio Tinto to reach a better understanding of its key relationships. “If you can demonstrate that to your investors and those who calculate your investment profile, you are demonstrating good management of external risk,” he says. “That’s a distinct byproduct of the partnership with Georgetown.”

 

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Click here to access the Winter 2013 Georgetown Business magazine