Sam Walsh led some of the deepest cuts ever seen in corporate Australia. But the gently spoken mining executive is anything but fearsome.
Leading one of the world’s largest metal and mining companies through major culture and business changes isn’t a task for the faint-hearted.
But then again, Sam Walsh isn’t your average chief executive. The well-respected and quietly spoken West Australian father of three took the task in his stride without batting an eyelid.
Walsh led Rio Tinto into new territory. He explains that the company rose from a net debt position of $22 billion to a net debt of $6.8 billion, with debts continuing to improve. As such, Rio Tinto was able to commit to major growth projects, including a $2.6 billion investment in the Amrun bauxite project on Cape York, an incremental US$338 million investment to complete the development of the Silvergrass mine in Western Australia, and underground extensions to the Oyu Tolgoi project in Mongolia.
He exited the chief executive role in July 2016 after 25 years with Rio Tinto, setting the company on a strong path for the future that sees it continue to go from strength to strength.
Walsh was appointed to the Rio Tinto Board in 2009, rising to chief executive in 2013. He was responsible for its operations in more than 30 countries, including mining and processing of iron ore, copper, aluminium, coal, uranium, gold, silver, molybdenum, titanium dioxide, salt, borates, diamonds and industrial metals.
When asked how many employees he laid off during his time at the helm, he paused.
‘There’s no question there was a lot of change, and quite frankly, the world was facing a lot of change. The world is a very dynamic place these days, and people could see the need for the change when you physically explain how the business was performing and, in a way, it was tough times,’ he says.
‘There were some incredibly tough decisions mothballing or closing facilities. Obviously reducing employee numbers was tough. But people understood that during the bad times, the company had put on weight and become unfit for purpose.’
Walsh also reduced his executive committee from 11 to nine people.
‘A CEO doesn’t drive a haul truck. He doesn’t drive a shovel. He doesn’t sail a ship. A CEO relies on the rest of the organisation to actually carry out the strategy and deliver on the operational performance, and that’s exactly what I did,’ he says.
Guiding the change
Walsh explains that constant internal communication helped smooth the waters as he implemented a raft of significant changes.
‘People understood the sorts of issues we were facing as a company. They knew change was imminent, and necessary.
Walsh asked staff to operate as though they were owners of the business. ‘There’s a difference between being an owner and being an employee. It’s the difference between how you treat a car when it’s your own vehicle, compared to driving a rental car.’
Walsh also asked that staff spend company money as if it was their own. ‘Again, because there’s a huge difference between spending someone else’s money when there’s an open chequebook compared to spending your own hard-earned dollars.’
He admits it sounds simple. ‘Both of these approaches sound incredibly trite, but they’re not. They can actually drive a huge cultural shift within any large organisation.’
Walsh also increased the communication and transparency within the company, reducing forecasting deadlines from quarterly to monthly.
‘That doesn’t sound like a big thing, but within an organisation operating in over 30 countries with a huge number of subsidiaries, that’s a huge amount of complexity.
‘But it was very important that people got to look at things that they could influence rather than looking back on the spilt milk of what happened last month.’
The other change was moving to operating for cash rather than for net income – another complex change.
‘Your net income, with all the accruals and adjustments and heaven knows what, no longer gives you a real feel for the performance of the business.
‘Cash doesn’t lie. You’ve either got cash sitting in the bank, or you haven’t. You can lose sight of things with a whole range of accounting adjustments that you see in net income. I’m not saying that doesn’t give you an accurate representation, but when you’re physically running a business day-to-day, you have to have line of sight on what’s actually happening in the business at that point in time, rather than some theoretical notions of how the business is performing.’
Walsh also implemented a number of new checks and balances in the business, such as reinstating the project review processes, which he says had been relaxed over time.
Independent umpires were also appointed to weigh up the economies of internal projects. ‘Everyone wants to push for their projects. You need to have a neutral group to look at the technical aspects and economies of these projects.
‘The lesson learned is that good projects will always be good projects. Marginal products will always be marginal or disasters, and you need to be able to filter out those that are going to be in the marginal to disaster category,’ Walsh says.
Walsh admits he’s forged a reputation for being a calm and considered operator.
‘I’m also very much a team player. As someone who has worked for an American company, then a Japanese company, and then an Anglo-Australian company, you actually get a much better decision and result by working as a team, developing a consensus and getting people behind what you’re doing rather than questioning it or querying it or second-guessing you, or purely resisting change.’
As a leader, Walsh is a firm believer in accountability. ‘People need to understand that what they do adds value and is important. And of course they need to be rewarded accordingly.’
Corporate reinvention is also the key to survival, he says.
‘If you look at the car industry in Australia today – guess what? They didn’t reinvent themselves. And soon they won’t be there. I’m a great believer in technology and innovation, but I’m also applying that to myself.’
Walsh is no stranger to major corporate restructures.
A Bachelor of Commerce from the University of Melbourne and a Fellowship Program at Kettering University in Michigan has stood him in good stead career-wise, enabling him to cut his teeth in manufacturing before moving into the automotive sector.
In 1986, he led the team that restructured General Motors Holden before heading over to Nissan (1987-1991) as Executive Director of Operations, where he was responsible for aluminium casting, engine manufacture, plastic and trim manufacture, stamping, and paint and vehicle assembly.
He joined the resources industry with different thinking than his predecessors. Mining was long overdue for some technology upgrades, so Walsh led a bold move to introduce some of the latest techniques into the seemingly antiquated world of mining.
‘The technology in day-to-day mining had really dragged behind what was happening elsewhere, so I took a team to the US in 1988 to look at technology. We didn’t look at a single mining company on the trip. We looked at manufacturing companies, aerospace, oil and gas magnates, computer companies and universities.
‘We wanted to see which technologies were leading-edge and look at how that could be applied to the mining sector.’
The trip resulted in the company introducing automated haul trucks, automated drills, the Rio Remote Operations Centre, and an automated railway – the first of its kind in the world.
‘These were huge disruptive steps in the mining industry, and I can remember people saying that it will never work, but it actually is working brilliantly.’
Many of the techniques used in the automotive manufacturing world were relevant to mining, he says.
‘Whether it’s manufacturing or mining, it’s about optimising the use of your resources.’
Life after Rio Tinto has been anything but boring, and the 68-year-old hasn’t been resting on his laurels.
Walsh is very involved in the art world, including music, symphony orchestras, opera and visual arts.
His love for the arts has led him to the role of chair of the Art Gallery of Western Australia, director of the Arts Council of Australia. Walsh is also chair of the Accenture Global Mining Executives Council and Chair of the Royal Flying Doctor Service (WA Ops).
Most recently, Walsh joined the board of Japanese conglomerate Mitsui & Co – making him the first non-Japanese speaking member ever accepted into a board position for the company. The role requires monthly flights to Japan for board meetings.
The devout Anglican is also chair of the Perth Diocesan Trust, and the global president of the Chartered Institute of Procurement and Supply.
Walsh has also been a long-time and active member of AusIMM, which has helped him forge strong connections within the broader resources sector.
‘It’s a very diverse portfolio, and a very diverse life. It means that I’m busy, that I’m doing lots of interesting things and adding value in a lot of ways.
‘It’s the things that I love and enjoy. I think it’s important to keep engaged with life, and keep yourself active and involved.’
A love affair with Japan
Aside from visiting for work during his five years with Nissan, Walsh has a genuine fascination with Japan. He’s made 97 trips there since 1978.
‘Those work trips gave me the advantage of getting an in-depth insider view of how at least one Japanese company works. I love Japan. It’s physically a very beautiful place. It’s busy too; people work hard there.
When asked what Australian leaders could learn from Japanese business, he says: ‘The very thorough way that the Japanese go into a project before they invest, and how they physically manage their projects is something all Australian leaders could learn from.
‘Japan has turned business into a fine art of continually improving the quality of what they do and reducing failure. This has meant that Japanese products are regarded as highly sophisticated and reliable.’
Walsh isn’t prepared to rule out a return to corporate life. ‘It’s a matter of enjoying what I’m doing. Sometimes directors are asked to go into an executive role, and it would be something that I would have to think about at the time. Though it’s not something I’m pushing for now.’