Price fall forces hiring paradox conundrum

AUSTRALIA’S mining, oil and gas players forced to restructure due to falling iron ore and oil prices are risking their profitability as a result of axing their most expensive but most knowledgeable people, a leading human capital industry expert says.
Price fall forces hiring paradox conundrum Price fall forces hiring paradox conundrum Price fall forces hiring paradox conundrum Price fall forces hiring paradox conundrum Price fall forces hiring paradox conundrum


Anthony Barich

Gregory Bayne, a phycologist (life science) at Total Leader & Coach Solutions Australia who will facilitate a special FIFO Mental Health Panel Session at AOG 2015 in Perth next month, cited a recent study that revealed organisations committed to understanding their human capital (knowledge, skills and experience) and leveraging and building it would reap the rewards in the longer-term.

“A study by Crook et al (2011) reports an 80% ROA (Return on Asset) improvement by increasing the collective number of years of executive-level experience from 35.2 to 59.4 years – the key implication being that organisations need to not only source, invest and develop human capital, but also retain the human capital,” Bayne said.

The problem is that current commodity price volatility presents a particular conundrum to both mining and oil and gas companies in balancing human capital while maintaining profits.

“Organisations with high turnover means you replace people with less competent people and need to spend much more time building up that expertise and knowledge again, there are more mistakes, work takes more time and is less efficient,” Bayne told

“When the iron ore and oil price is high it allows organisations to be less efficient.

“They can get people on board and not necessarily focus on human capital, and don’t necessarily develop the efficiencies.

“Then the prices drop and the profit margins drop, and profit per tonne has significantly reduced, and one of the most obvious costs is energy to produce the ore, so companies restructure and let people go, particularly over last 12 months.

“Yet companies need to remain profitable by hopefully hanging onto the most knowledgeable and experience staff. The downside is that the most knowledgeable and experienced staff are also the most expensive.

“So organisations have to make this really interesting decision about ‘who do we keep’ and ‘who do we let go’ when restructuring.

“Organisations will often take out the middle level management to flatten the structure which reduces costs but also potentially exposes the human capital risk – so have they got enough knowledge and experience to make the right decisions?

“This is a fascinating challenge, particularly right now in the industry.”

He added that the FIFO Mental Health panel at AOG would focus on providing insight and comments on the challenge of managing and supporting the prevention and management of mental health in the work place from a number of different perspectives.