Developing And Enhancing Organisational Effectiveness At Gold Fields

AUSTMINE 2013 Dr. Shane Hodgson

Perth, May 22nd 2013

Forward looking statements

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 benefits 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 from 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 finished materials; the cost of energy and water; inflation 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 reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

Gold Fields Limited | Presentation Name | Date Page 2

Risks of Re-engineering for Cost Reduction

In the current challenging business environment, knee-jerk reactions to the diving gold price 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.

Rather Focus on Organisational Effectiveness

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

Choosing Our OE Orientation

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.

Cameron, K (1980) from http://webuser.bus.umich.edu/cameronk/PDFs/Organizational%20Effectiveness/Critical%20Questions.pdf

Using the Lewis Carroll Approach to Defining OE

"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

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 processoriented 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 affect the organisations performance and overall effectiveness

Transactional and Transformational Dynamics

The BurkeLitwin 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.

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 BurkeLitwin Model As A Diagnostic Framework For Assessing Organisational Effectiveness Martins and Coetzee, (SA Journal of Human Resource Management; Vol 7, No 1, 2009)

Transformational factors affecting OE

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.

Applying The BurkeLitwin Model As A Diagnostic Framework For Assessing Organisational Effectiveness Martins and Coetzee, (SA Journal of Human Resource Management; Vol 7, No 1, 2009)

Transactional Factors Affecting OE

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 organisations strategy Systems, policies and procedures: Standardised policies and mechanisms, such as rewards, controls, budgets or SOPs 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.

Applying The BurkeLitwin Model As A Diagnostic Framework For Assessing Organisational Effectiveness Martins and Coetzee, (SA Journal of Human Resource Management; Vol 7, No 1, 2009)

Scope - Gold Fields OE Centre of Expertise

Organisational Design

Organisational Structures

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

Communication and Knowledge Sharing

Collaboration and Virtual Teaming Coaching and Mentoring Internal Communication

Organisational Development Organisational Effectiveness

Culture and Engagement

BeQ Culture Transformation Organisational Climate Employer Branding and EVP

Change Management

Group CM Methodology Change Network Formation Agility and Resilience Change Capacity

People Scorecard and Resource Utilisation Organisational Performance HR Sustainability

HRIS usage People Scorecard

Attraction and Retention DJSI Best Employers Community Engagement

ALIGNMENT TO ORGANISATIONAL VALUES

Key Organisational Metrics in OE

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-forpurpose 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 individuals 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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Major OE Themes for Gold Fields

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

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 763771

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Taking an Enterprise View of Change

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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Conducting Organisation Structure Reviews

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
A conceptual model for managing incompatible impacts of organisational structures on awareness levels Shahla Ghobadi and Farhad Daneshga, Knowledge Management Research & Practice (2010) 8, 256264

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Principles of Effective Organisation Design

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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In Summary

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 shane.hodgson@goldfields.co.za

Thank You.

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