Warren Holmes: Share success, shoulder the blame

In The Director’s Chair with David W. Anderson: After nearly a decade as chair of Hudbay Minerals and a career in Canadian mining, Warren Holmes has learned a few things about leadership and creating a culture that puts company performance ahead of personal ego

It takes all kinds of skill sets and personalities to make the business world go around. But when Warren Holmes talks about lessons learned and his accumulated wherewithal as an executive, a board chair and a corporate director, it’s clearly rooted in the things he’s absorbed through working with others—whether underground or in the C-suite. Don’t misunderstand: Holmes has the requisite MBA you expect of executives of his stature, but embedded in the stories he tells and the insights he shares here in conversation with leadership adviser David W. Anderson, are things learned in the real world, not in the classroom. From topics like innovation and environmental responsibility, to board renewal and strategy, Holmes offers a primer on the value of common sense and sound, straightforward thinking.

Warren Holmes, outgoing chair Hudbay Minerals: "Creating change by choice—implementing an improvement initiative—is like trying to lose weight: the most permanent change comes slowly and as a result of discipline, with setbacks along the way"

David Anderson What did you learn as a miner that makes you a better director today?

Warren Holmes I spent a long time working underground as a miner. Early in my career, two things caught my attention with lifelong effects. First, the average miner was clever and capable. Though often without a lot of formal education, they knew what they were doing and how to do the job better. I didn’t know much, so I learned early on to listen to the people who did the work. This understanding is critical to everything I’ve done since. Second, at age 25, on day two as a new mine superintendent, there was a fatality. This had an immense impact on me. I learned you have to be working on safety all the time. The status quo was not acceptable to me, even if it was to others. In time, I saw this applied equally to driving improvements in our approach to the environment and corporate social responsibility.

David Anderson Cost reduction in the pursuit of profit is a common objective in business, framed at times in opposition to environmental, social or safety issues. How do you view cost management?

Warren Holmes You always have to be lowering your costs. The rationale for cost reduction, safety and corporate social responsibility is rooted in basic business survival. It’s important because it ends up being your competitive stake in the world. In mining, many would say your competitiveness is a result of the quality of your ore, and while that’s important, anyone who ignores their cost structure will eventually get in trouble. When I was running a gold operation in Timmins—the lowest grade ore in the world—we were able to make it profitable because we were focused on costs constantly. A low-cost operation has to be safe and good environmentally. Part of keeping your costs down is listening to employees to learn how to do things better and to remain focused on safety. For me, I learned these things through experiences, not out of a text. Any of us can cut costs by 10% tomorrow, but that’s not a long-term solution. You can’t run on poor safety and be careless with the environment and expect to be low cost for long.

David Anderson What’s the link, then, between business strategy, corporate social responsibility and profit?

Warren Holmes You have to look ahead. It’s not just about meeting expectations of customers, society and government today, it’s looking to see where they’re headed and moving in that direction today. It sounds like this is costly, but it is much less expensive when you can anticipate, and work out a long-term plan to accomplish objectives. Work this understanding into your normal activities and make people throughout the company conscious of it. Get it done as a way of life, not as a project that costs you money.

David Anderson Being conscious of these responsibilities might slow business decision-making down in a time when much is made of the need to act fast. How do you think of this trade-off ?

Warren Holmes We think of business as moving quickly, and while occasionally I get a surprise, I see change within organizations happening gradually. Creating change by choice—implementing an improvement initiative—is like trying to lose weight: the most permanent change comes slowly and as a result of discipline, with setbacks along the way. The board and management have to learn from the past and stay focused on the future. We have to identify the trends, and the changes necessary to improve competitiveness, and be constantly working towards achieving these.

David Anderson Exactly how has your leadership philosophy been operationalized at Hudbay?

Warren Holmes Hudbay is highly conscious of safety, the environment and our social responsibilities. Our expectation is that every year our performance in each area will improve, as measured by a range of metrics. This comes through in our CSR reports. The basic business is mining. Efficient operations generate profits for shareholders, which is as it should be. To remain cost competitive, it’s important that things like safety, environment, community, reputation and responsibility are not given a back seat. This is a role of the board, with a broad and general view of not only the financial side but also the broader mandate and functioning of the corporation.

David Anderson As a student of human nature, what are some observations you’ve made that have informed your approach to leadership?

Warren Holmes I found that listening to and helping people sort through their own issues goes a lot further than trying to come up with solutions on my own in isolation. People buy into their own solutions. Similarly, relying on and working with colleagues yields the best results and was necessary for me to get done what was needed in all of my management roles. You can’t demand cooperation, though some think they can!

In my early days, I quickly developed an ability to talk to people. I spent a lot of time on the shop floor, underground and in the processing plant asking people what they were doing and what was going on. In a position of leadership, I prefer to credit someone else for success and accept the blame when it’s going around. People know the reality. You don’t have to spell it out. Understanding human nature is very important. None of us are very good at it, but the better you do, the better off you are.

David Anderson The leadership you’ve come to exhibit over your career is a study in ego management. How have you disciplined your ego to stay out of the way?

Warren Holmes I like to pretend I don’t have an ego! Big egos get in the way. I had little or no training when I started in the mines. You learn quickly you don’t know very much and I’ve kept that perspective. I have had experience working with people with big egos and I recognized how often they were wrong, which cost big money. Ego has very little to do with ability. We need lots of ideas and very little is black-and-white in the world. I put this into practice: if you and I had our own ideas but you were the one working with it, if I didn’t think you were making a mistake, I’d go with your idea because you’d make it work. If it was my way, you’d be less inclined to make it work. Many will tell you that people don’t like change, but that’s not true. People don’t love being the subject of change, but they do like the opportunity to make changes in their work they think should be made.

David Anderson In your role as chair, how do you work to ensure that your views on leadership and human nature get reflected in your approach?

Warren Holmes My goal is that we all understand where we’re going and why. The whole board needs to know where we’re going together to have accountability. It is difficult work to get people aligned. I make sure I involve both board and management, summarizing what’s been said along the way. I’ll check in with people to ask what they’ve heard, what they’re thinking and what concerns they might have. I make use of my sensitivity to body language as I listen and watch participation around the board table and draw people out if I see someone holding back. I will get to the bottom of withdrawn behaviour over time, but not necessarily in that meeting. I make a point of following up with people inside and outside the board meeting.

David Anderson What do you say to management to aid them in interacting effectively with a board?

Warren Holmes It’s not easy for management to fully appreciate what value a board can bring, or the centrality of the role of chair in orchestrating the board. I didn’t fully appreciate these points myself until I became a director and chair. The value comes through relationships. Board members I serve with feel comfortable talking to management and vice versa. Value comes from our vantage point one step removed from the business, looking in from the outside. We’re less likely to identify the individual trees that might crash down, but we’re good at recognizing the health of the forest. Value comes from the range of expertise among directors. When the board and management are working well together, both will recognize that individual members of the board have experience, knowledge and skills that are unique and can be utilized to improve the overall performance of the company.

David Anderson As chair, you’ve not left your board’s effectiveness to chance. What are you doing to demonstrate governance value to management and your stakeholders?

Warren Holmes A lot of thought has gone into determining the skill sets required to make a good mining board. We’re known for emphasizing industry skills and knowledge. One half of the board has extensive background in the business and its operations. This is complemented with country knowledge where we operate and organizational skills such as finance, legal and HR.

As a board, we believe in board renewal. It’s not just me, or a committee chair, but the board itself is committed to continuous renewal. With a 10-member board, we change out one person every year on average, to have complete turnover each decade. Without resorting to term limits or age limits, our annual turnover gives us frequent opportunities to rebalance our skill sets for what’s required over the next three to five years. New eyes and fresh energy is how we show management and our stakeholders our value.

David Anderson In the absence of codified service limits, how do you ensure that on average you have one person leave each year—your engine of renewal?

Warren Holmes We have a shared commitment to performance over personal preference. Most people are able to self-assess their interest and contribution and realize when it’s time to go. Knowing the process, we’re all aware that someone is going to leave every year. In the rare case when it’s necessary, I will ask someone to leave.

David Anderson That takes unusual chair leadership and an impressive board culture to function that way. Many boards say they have the discipline to sustain a performance culture but almost none do in my experience. How do you sustain your culture?

Warren Holmes One way we stay fresh is by avoiding the dangers of routine. A chair who stays around too long creates routine. Our committee membership is fluid and the committee chairs also change up within four years. Each year we evaluate ourselves by interviewing senior management and directors, looking for ideas to improve how we work together and conduct business. Every year I learn something and implement substantive ideas that make a difference.

The core of our performance culture is our internal discipline. It creates the expectation and commitment to our company and our performance in the service of our company above personal interests. Board chairs often get uncomfortable with a discussion about performance at the board and director levels. Many boards need term or age limits because they lack the backbone necessary to renew the board on a regular basis. Self-preservation wins out. Our constant effort to refresh the board reinforces our focus on the business and our drive for shareholder value. It’s this business focus that is the basis of our enjoyment in being directors and makes it all worthwhile.

David W. Anderson, MBA, PhD, ICD.D is president of The Anderson Governance Group in Toronto, an independent advisory firm dedicated to assisting boards and management teams enhance leadership performance. He advises directors, executives, investors and regulators based on his international research and practice. E-mail: david.anderson@taggra.com. Web: www.taggra.com.

Warren Holmes — Biography

Primary role Chair, Hudbay Minerals Inc.

Additional chair and director roles Lead director, Foraco International SA; lead director, Wallbridge Mining Company Ltd.

Former chair Nuinsco Resources Ltd.; Victory Nickel Inc.; Ontario Mining Cluster (co-chair); Mining Association of Canada (vice-chair)

Former director Altanta Gold Inc.; Campbell Resources Ltd.; Kirkland Lake Gold Ltd.

Former executive leadership roles Executive vice-chair and interim CEO, Hudbay Minerals Inc.; president, Canadian Institute of Mining, Metallurgy and Petroleum; SVP, Canadian Mining Operations, Falconbridge Ltd.; VP and GM, Pamour Porcupine Mines Ltd., Noranda; president, Ontario Mining Association; VP, Mining Association of Canada

Education BSc, Mining Engineering, Queens University; P.Eng; MBA, Ivey Business School, University of Western Ontario

Honours > Canadian Institute of Mining, Metallurgy and Petroleum Past Presidents’ Medal

Age when first became a director 60

Years of board service 15

Photography by Jeff Kirk

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