Leadership interview with mining veteran, Hugh Morgan. Part of our Interviews with the Mining Greats series.
I was fortunate to be introduced to Hugh Morgan by a friend and associate, Matthew Grainger at Altus Strategies, the co-founders of Resource IQ. I hope Hugh will pardon me for describing him as one of the great elder statesmen in mining. A former CEO of the Western Mining Corporation, Hugh also served on the board of the Reserve Bank of Australia, as a government appointee, and the Business Council of Australia.
I spoke with Hugh in Australia and found him as actively interested in and enthused by the mining industry as anyone else I interviewed. I was disarmed by Hugh’s often brutal honesty and he struck me as a man who was reflecting on his time in the industry from a position of ultimate success, but not without difficulties on the way. Not that Hugh is ready to withdraw into quiet retirement just yet; he remains active in pharmaceuticals and private equity, and has a continuing interest in mining.
Stratum: Thank you for your time Hugh. Could you tell me how you first got into mining?
My father had been in mining for a long time. I had never intended to follow that profession, but at the time I qualified there were a lot of jobs available and I was about to take up a position with Shell International when I was persuaded to join what was then North Broken Hill. That was a last-minute decision, which set me off on a course of a lifetime in the mining industry.
Stratum: What would you say was your first big break in the industry?
Those who remember the Australian mining industry in the early ‘60s will know Collins House. Collins House was a collection of like-minded mining companies. At that time, it was headed by a man named Sir Maurice Mawby, and he had a second in command called Arthur Rew, who was the person who looked after all the administrative issues of CRA, later to become Rio Tinto.
Arthur Rew must have taken a shine to me, because he suggested that I should negotiate the South Australian Railway freight rate between Broken Hill and Port Perrie. This was a major contract for all the companies with the South Australian Railway works. I think I must have been about 26 at the time.
This ‘appointment’ recommended by a company other than which I worked for was at that time quite a strong statement of faith in me by Arthur Rew. That brought me more exposure than I would have ever expected. So that was a significant break in terms of engagement in the industry as distinct from engagement in the company.
Stratum: Reflecting over an entire career, what would you say was the biggest mistake that you’ve made?
I think I’ve got a catalogue of those! The largest financial one was the failure of some investments in the United States and Canada; we lost a significant amount of money. As CEO, you take responsibility for these issues, notwithstanding one had followed what was thought to be due process, etc. The answer is they turned out to be a dud. We ended up in that situation losing quite a few million dollars. Not a good call on the bottom line.
Statum: When you say dud, you mean the people or what was sold to you, or the asset?
The assets were dud, in fact you’d have been better off buying these four assets, going down to the bar and putting all the names on a dart board and you’d have done better!
Otherwise, you always have made some judgments internally that you would like to rerun, and I wouldn’t know a CEO who would not reflect that, if they were reappointed today, there are some things they could have done better and more urgently to achieve a better outcome.
Stratum: Absolutely, and that’s one of the things we are trying to achieve with these interviews, helping the leaders of the future learn from the past. I’m a great believer in that Roosevelt quote, “The only man who never makes a mistake is the man who never does anything.” As you’ve reached this stage of your career, I’m taking it a lot of leaders have started working for you; what do you look for in a leader these days?
I think leaders need to be selected on the basis of being fit for purpose at the time. It may well be you have a large company that needs to have a more aggressive accountability for what they’ve been doing, and you need a certain person to do that.
You may, on the other hand, need to implement a significant change in culture. Changing culture is very hard, it takes a particular type of leadership, and it may take anything up to ten years to put in place. So that you have an implicit change in behaviour patterns rather than just an explicit statement of behaviour.
So, I think the selection of a CEO today is governed by what is needed for the enterprise at that time, and that there is no mathematical model where you tick all the boxes and say, that’s the person I need on all the time, on every occasion.
Stratum: You mentioned behaviours. There’s a saying that goes that you tend to hire on gut feeling and skill but you fire on behaviour. Does that resonate with you?
I think there’s a fair bit of that, although unkindly, there’s also a fair bit of firing because of the market. The old saying is “good rains make good farmers” and if you’re in the mining industry good prices can make good managers. And the converse applies; prices collapse and you’re left with an overload of past ‘sins’ that land on the CEO at the time. It’s not exactly as you put it.
Stratum: Yes, but you do seem to get serial success over a long enough time frame. There tends to be serial success and serial failure between certain groups of people.
Yes, but it doesn’t last all the time. I felt very much engaged with, let’s say, Alcoa, in the early ‘60s; it was number one. Today, for whatever reason, it’s almost a shadow of its former self, and the query is, why is it so? For most of WMC’s association with it, but not at the finish, we had a remarkable association which was one of the most remarkable mining/metal companies in the world. So it’s not always given that this is the outcome, put it that way.
Stratum: If you reflect on your career now, what advice would you give to your 30-year-old self?
If I was in the mining industry today I would be saying having done your graduation, the important thing is to have as much experience in difficult places, in operations, as you can accommodate or accomplish before marriage, mortgage and kids. Because later it gets much more difficult. These ‘qualifications’ of having experience in tough locations become almost more prized and more recognised than the initial graduate qualifications later.
You cannot substitute at age forty or fifty the experience of having worked in China or Columbia or Brazil. These things provide a lifetime of experience and qualification and appreciation by your colleagues that you can’t go out and duplicate at a later stage.
This I think is something very special, that would be my starting point in talking to and mentoring somebody.
Stratum: Some of the younger new entrants seem to be very urgently chasing corporate leadership roles with a strong strategic element, and not so much getting their hands dirty.
That’s the very point. This is not just run off and get an experience with a major consulting firm and think that you’ve added to your brownie points. You’re better to get your hands dirty from experience with communities learning; the flexibility that’s required to handle people, the exposure to the multiplicity of obligations of management, remote location issues, supply chain… You get a first-hand experience of all that very quickly, which is something you can never substitute by being at a university, and is more difficult to get later.
Stratum: I know you’re not that actively involved necessarily in the on-goings of the global mining industry now, but were there or are there any particular leaders that you respect or that you follow, or that you communicate with?
Well it’s still a small industry, and so yes, I know several of them well, though there’s a generational change. For example, I’m not close to Andrew McKenzie, but I think he’s handling a challenging enterprise [at BHP] and he’s doing it well. And Andrew Michelmore, who’s dealing with MMG. He succeeded me at WMC Resources. He’s at the forefront of dealing with a Chinese-owned enterprise who have been smart enough to work out how to engage with a non-Chinese jurisdiction. Andrew, I think, is probably as equipped and has done as much as I can observe to handle that with great skill. Because it requires not just an understanding of engineering skills of mining, but being able to read the tea leaves of how to manage properly with owners who are a long way away. He’s done that with remarkable skill.
Stratum: Finally, are there any books you’ve found particularly interesting or insightful recently?
I’m always fearful of reading something because I put everything else down until I finish. The last book I read was Red Notice, Bill Browder’s book on the heritage investment history in Russia. It’s a fantastic book about the corruption that reads like a thriller; it’s compulsory reading for anyone who invests in Russia. Let’s get this right, though, they’re very smart; there are some very smart people in Russia, there are some very good things that go on in Russia. But also, it is a challenging environment that shouldn’t be undertaken lightly.
Biography
Hugh Morgan is Principal of First Charnock Pty Ltd. Hugh was appointed Chief Executive Officer of Western Mining Corporation (1990-2003) and prior to that served as an Executive Officer (1976-1986) and then Managing Director (from June 1986).
Mr Morgan has served as a Director of Alcoa of Australia Limited (1977-1998 and 2002-2003); Director of Alcoa Inc (1998-2001); Member of the Board of the Reserve Bank of Australia (1981-1984 and 1996-2007); President of the Australian Japan Business Co-Operation Committee (1999-2006); Joint Chair of the Commonwealth Business Council (2003-2005) and now Emeritus Director; President of the Business Council of Australia (2003-2005) and now an Honorary Member; Member of the Anglo-American plc Australian Advisory Board (2006- 2014).
Hugh is a Member of the Lafarge International Advisory Board; Chairman of the Order of Australia Association Foundation Limited; Trustee Emeritus of The Asia Society New York; Chairman Emeritus of the Asia Society AustralAsia Centre; Member of the Asia Society Australia Advisory Council; President of the National Gallery of Victoria Foundation. Hugh is a graduate in Law and Commerce from the University of Melbourne.