9. MANAGEMENT & STAFFING

This section normally explains the appointment of management. It specifies

• which party nominates or seconds management.
• the approvals which are required.
• the compensationCompensation: something (such as money) given or received as payment or reparation (as for a service or loss or injury). to be paid.
• the general intent of the parties regarding hiring and training.

One of the most important provisions for ADCs is the definition of management and decision making procedures. Generally, non-Aboriginal partners will claim the authority to make most or all decisions on account of their experience and skills. Indeed, ADCs will often be looking for partners with a track record in managing the type of business under consideration.

This is a section where the ADC must be very clear about what it wants. How high in priority are profits, compared with jobs and management capacity?

If management capacity is high in priority, the ADC must work out in some detail the meaning of this commitment. Perhaps no Aboriginal manager is available or is likely to become available in the very near future. In that case, it may be wise to add a provision that the JV will hire a qualified candidate if and when one becomes available. (See Module 5, “Employee Evaluation and Advancement,” p. 5-10.)

You have to be fairly careful about your philosophy when the section on management and staffing. From the beginning, control your expectations. Act to secure a management and workforce that can carry out the duties of the business in a very competitive and profitable way.

Our practice at Kitsaki was to view staffing as an important opportunity to get Aboriginal people employed. We did not insist that they get every job, however. We often didn't have anyone qualified to fill a position. In those cases, we went for a qualified, experienced person provided by the partner or recruited further afield.

Nearly always Kitsaki relied heavily on management appointed from our partner. We just didn’t have access to experienced Aboriginal management for any of our Joint VenturesJoint Venture: commonly, a business to which two or more parties contribute the essential land, capitalCapital: cash, property, equipment, services, and contracts or leases., and services, in return for a share in its ownership and control. (Note: the Joint Venture is very strictly defined under Canadian law.). In most cases, things worked out regardless.

We felt we should create opportunities. First Nation members who made themselves equal to the opportunities could expect to go to work. This meant hiring members wherever possible. Kitsaki went to considerable effort to find qualified candidates and to put together training programs so members would qualify. What we didn't want to create was the expectation that anyone was entitled to a job by virtue of being a member of the First Nation.

Likewise, we made sure the agreementAgreement: any explicit, signed document that is negotiated and includes mutual concessions or limitations placed on both sides. Examples are Negotiation AgreementsNegotiation Agreement: an early agreement in the mining process, likely to occur in the Exploration Stage, which would outline the basis of the relationship between the Aboriginal group and the mining company and how the relationship will evolve if the mine moves forward. , Exploration Cooperation Benefit Agreements, Socio-Economic Participation Agreements. expressed our long-term intention to have Aboriginal managers. There was no time schedule, however. Management is challenging and requires great skill. Management talent cannot be expected to develop on a schedule set at the time of a Heads of AgreementHeads of Agreement: a non-binding summary of the main issues on which the parties intend to base an agreement. or Shareholder AgreementShareholder Agreement: a legally-binding document which describes the mutual obligations of the parties to a Joint Venture.. Therefore, I recommend that Aboriginal management always be included as an aim and as an intent, but never as a scheduled requirement.

Over the years, the First Nation realized that if profit was a priority, they had to be particular about management. It is possible to find or to train competent Aboriginal management, but it will certainly take time.

Finally, remember that good intentions pave the road to hell. Be sure to back up good intentions about training with money. Earmark a specific percentage of your annual profits or operations budget to training. In the case of the trucking venture, we set aside at least 1%, which is a good rule of thumb. It may not be adequate in specific circumstances, however.

Management Internship Programs

If you want the JV to build Aboriginal management capacity, internship programs become another matter for negotiation. This discussion can be tricky. Your intended partner may well resist the whole idea. They may consider it a drain on time and energy that will make it more difficult to make decisions quickly and flexibly.

To overcome this resistance, be realistic about the demands of management and about the size of the current pool of internship candidates. Specify the skills and attitudes a management intern must have. Specify the level of performance s/he must attain at the different levels of a demanding training process. Specify the responsibilities that the intern would assume at each level of this training process.

In some businesses, the training process could take years. Good management does not grow overnight. In a longer term JV it makes complete sense to capture this benefit. If your JV is short-term, however, you will have to pursue management development very deliberately in order to achieve your goal.

A small mine may operate for only 3-7 years. That is a very short time frame for JVs based on the mine’s downstreamDownstream: downstream business refer to suppliers of products and services such as exploration, production, processing, product development, technical services, marketing and sales that supply the mine but are not owned by the mine. opportunities. It may be very difficult to negotiate provisions for management development within such a short time frame. In this case, the experienced partner may not necessarily be interested in investing in management development.

To ensure that a transfer of key skills takes place, the ADC has to pin down its partner's training responsibilities at the outset. A training syllabus could be drafted. It should indicate how the training program will be implemented over the various phases of the project, including the skills to be transferred. It also should detail which member(s) of the Aboriginal community will be the trainee(s) and who is to do the training.

Other Staffing Issues

The leeway you grant the manager in appointing other staff depends on how familiar you and your partner are with the business sector. If it is new to your partner, be watchful, no matter how experienced that partner may be in other businesses.

If the business is one that your partner has done before and done well, you can usually take their staffing recommendations at face value as well as their methods for costing contracts and what not. Just be sure to scrutinize their track record and to familiarize yourself with industry standards.

If the business is similar to one that your partner knows, but has new constraints or circumstances, it’s a different story. Examine your actual staffing needs very carefully. Leave management lots of flexibility, but be ready to closely monitor staff costs and performance from the board level. Make sure you can find out exactly what you're getting from each staff position. Be careful about the authority you give the manager to commit funds, to make purchases, and to borrow money. Know the “approval levels” current in the industry, that is, the dollar amounts at which management requires board approval for a decision.

The agreements you reach about management can be written into the Shareholder Agreement, or they can be put in a separate management agreementManagement Agreement: an explanation of what the Joint Venture management should report to whom, when and how. These reports will include audits and descriptions of management performance, as well as financial matters related to compensation, performance standards, etc. or contract. Personally I favour the idea of a management contract. It is far easier to change than a Shareholder Agreement if circumstances warrant. Changing a Shareholder Agreement can be nearly as sticky as changing the Canadian constitution.

See the “Issues in Joint Venture Management” below, p. 6-41.