Sliding doors at Rio reveal BHP’s future – by Robert Gottliebsen (Business Spectator – February 26, 2013)

To understand what the Andrew Mackenzie era at BHP will mean for the Big Australian you have to delve deep into the folklore of Rio Tinto. The Rio Tinto folklore – which I am sure, is correct – never seemed that important until last week, when Andrew Mackenzie became BHP chief executive officer elect.

Yesterday, I showed how different Andrew Mackenzie is to the BHP CEO’s of the last half-century (Mackenzie’s clean break is bigger than you think, February 25) Now I want to tell the story from a Rio Tinto perspective because this remarkable Australian business tale starts with one of our most successful homegrown executives, Leigh Clifford, who joined Rio Tinto in Broken Hill in the early days of his career.

Rio Tinto has always looked at BHP’s ore bodies with envy. For example, BHP’s Mount Newman is a better iron ore body than Rio’s Hamersley. But Rio Tinto productivity and efficiency has always been ahead of BHP. Indeed, several decades ago it was Rio Tinto that tried to arrange a merger of the two iron ore operations because Rio believed it could transform BHP’s efficiency. And in those negotiations BHP was shocked at just how far ahead Rio Tinto was.

Its unfair and incorrect to attribute that productivity difference to one man, but a big contributor to moulding the high-productivity culture of Rio Tinto was Leigh Clifford who first transformed coal operations. Part of Clifford’s Rio Tinto strategy was to build much stronger bonds between workers and the company thus lessening the influence of unions. There is no doubt that Clifford’s role in the transformation of Rio Tinto was a big driver in him rising to become chief executive of Rio Tinto in London.

A few doors up from Rio’s office in London is BP, where Andrew Mackenzie was a rising executive. Clifford hired Mackenzie and they became great friends and must have often discussed the productivity differences between BHP and Rio in Australia.

Clifford gave Mackenzie the job of re-engineering one if the least productive parts if Rio Tinto – industrial minerals. Mackenzie did a superb job, substantially reducing the costs and eliminating duplication –exactly what he will do at BHP.

The events of 2007 changed Rio Tinto, BHP and Andrew Mackenzie. In April 2007, Mackenzie’s mate Leigh Clifford stepped down as Rio Tinto chief executive because he wanted to leave Rio before it was too late to do something else. He would also have known that a bid for Alcan was being considered. (Clifford went in to become chairman of Qantas where, with Alan Joyce, he is transforming the productivity of the company.)

For the rest of this column, please go to the [Australian] Business Spectator website: