The impact of Management Operating Systems on performance improvement through the lens of the coal mining industry, and its relevance to private equity turnaround management strategies

Abstract

Global mining productivity has hit new low levels and has been on an estimated 24% steady decline over the past decade. Productivity decline was rated the number one challenge in the mining sector. In this study we will examine the management operating system's impact on performance and its relevance to private equity turnaround strategies. Through a literature review the following recommendations were identified : addressing the integration gap, embedding effective management operating systems, prioritising operational excellence, and integrating the number of participants in the mining value chain to improve performance. Following the literature review, three research questions were identified : Does the design and implementation of MOS impact operational performance improvement positively? What is the impact of MOS non-financial performance measures on business performance improvement? Is there a significant difference in EBITDA performance pre and post-MOS implementation? To answer these, the study was divided into two quantitative research phases : An online survey questionnaire to 59 MOS experts with a response of 32, to gain their opinions and comments on nine items; and the analysis of secondary data from four mining operations to examine the pre and post-MOS tonnage, EBITDA performance, and the correlation between tonnage output and direct operating hours. The study found that when comparing tonnage output of the mine pre and post-MOS implementation, tonnage output post-MOS implementation was higher. Furthermore, EBIDTA earnings pre and post-MOS implementation were sustained over the period under coal prices were reported to have dropped by almost forty percent. Moreover, the study found that MOS's strength lies in its ability to improve accountability and behaviours, influencing issues within management control and integrating all levels of the management teams. Ultimately, this improves productivity and performance. The study furthermore suggested that MOS is more relevant to turnaround strategies and private equity firms as a management tool for executing operational strategy, improving productivity and performance improvement, especially as far as underperforming companies were concerned.