Public Interest or Vested Interest
Robe River Revisited
On 31st July, 1986 the majority shareholder in the
Robe River Joint Venture, Peko-Wallsend, exercised
its responsibility for the joint venture by taking
certain actions to terminate work practices by employees
and to institute a policy of 'work as directed by management'.
The actions taken, and the subsequent events during
the course of the next six months, drew considerable
public attention to Robe River and to some of the people
involved. It is timely now, four years later, to look
at what has resulted from those actions, and what broader
conclusions can be drawn about industrial relations
Let us first of all look at the material facts relating
to this major iron ore exporter, before 31 July and
since. Figure 1 shows the production levels
achieved in each year (April to March), compared to
the rated capacity of the plant. Figure 2 shows
the productivity per employee Figure 3 shows
the incidence of industrial disputes.
With continuing improvement in methods of work, shipments
have recently been at a rate of 30 million tonnes per
year, and work is in hand to increase to 36 million
tonnes per year. Productivity per award employee can
now be as much as four times that being achieved before
31st July, 1986.
Figure 4 shows the number of lost-time injuries
over a number of years. In the year in which action
was taken by management, 1986, this accident rate peaked
at 147. In 1990 it was 22! Furthermore the cost of
workers' compensation is only a fraction of that incurred
In other words, productivity has been increased enormously
hand-in-hand with dramatic improvements in safety.
These results fly in the face of the intense political
and union criticism that management sought production
at the expense of safety.
Further improvements to both productivity and safety
are continuing to be made.
Of course the rapid increases in tonnages shipped
to export markets---effectively doubling in four
years---would not have been possible without the
willingness of the overseas customers to take the increased
Iron ore markets were very depressed in 1986, and
continued to be depressed into 1988. Increased tonnages
could only be sold if the customers were assured of
quality, competitiveness and reliability. Robe River
has a low quality ore which cannot economically be
improved. Before the actions were taken in July, 1986
Robe River had lost money, and could have been expected
to incur further losses. Whatever reliability it showed
was at the expense of heavy costs of shipping delays.
Robe River was actually losing markets by its poor
As soon as the customers could see that the new management
policies were working, and that cost reductions had
made Robe River very cost competitive, and that control
of industrial relations would give greater reliability,
orders for shipment increased rapidly despite the depressed
market and the natural disadvantage of low quality
The position was then dramatically improved, from
loss of markets to rapid growth of deliveries to double
their previous levels.
Let me remind you of the other circumstances existing
when Peko acquired majority ownership and ultimate
management responsibility six months earlier, in January,
The Western Australian government and the existing
Robe River management team, were concerned to advise
Peko to 'make no changes'. Without Peko suggesting
that any changes were needed, or contemplated, there
arose a fear that Peko would make changes (unspecified!).
It was said quite plainly by the existing management
that to make any change would bring disaster!. It was
asserted that such was the delicacy of the relationship
with the unions that any attempt to change could only
lead to a worse situation.
From whatever sources, it had become fixed in the
minds of the State government and the management that
Peko would try to make changes. The phrase 'Peko paranoia'
was coined by an Industrial Relations Commissioner
to describe the apprehension on the part of the unions.
For my part, while wanting to improve the performance
at Robe River I was far from clear as to what should
be done. All the advice to do nothing only raised my
curiosity to find out why there was such concerted
advice to do nothing, and gave me further reason to
believe that there was much to be put right at Robe
As the months went on, with more information about
the unworkable industrial relations climate, and the
deteriorating production performance, we came to suspect
that, as commonly happens, the new owner Peko was being
tested for weakness. For Peko not to step in would
have been judged as weakness, and we could then expect
further deterioration as the 'rorts' multiplied.
The events of the ban on critical maintenance at Easter,
1986 and the Power Switch incident on 28th May, brought
home most forcibly the appalling state of affairs.
When the Peko team sent to Robe River in June 1986
reported not only the list of 284 restrictive work
practices compiled by the site management, but also
the pleas from staff for Peko to do something to end
the anarchy, it was clear we could wait no longer.
Not only were we already losing our markets on the
margin of our contracts, not only were we tolerating
an intolerable management industrial relations scene,
but we were facing the need for very large capital
expenditures just to maintain our present (unprofitable)
volume of production. We knew very well that with better
working methods the existing equipment could give the
production levels needed, and that the move to a new
mine site could be delayed and planned more effectively.
We knew that if we had continued as we were, we would
be asking boards of directors to approve these large
capital expenditures in the face of lack of profitability
in a depressed market.
As responsible ultimate managers of Robe River, we
had to find a better way.
The existing management had, with the best will in
the world, spent about all its time reasoning with
the unions for better performance. In Peko, with a
35 percent joint venture interest, we had already had
nearly three years watching these futile negotiations.
We had no reason to believe that a Peko team could
achieve more from further negotiations of the same
form. We had every reason to believe that such further
negotiations would be taken as a sign of weakness.
We decided to take the unusual step of removing the
senior Robe River management team from their positions,
and replacing them with a Peko team whose members were
attuned to the way we had kept other Peko operations
alive when union demands would have closed them.
Some members of the existing Robe River management
team had made it plain to me personally that only they
could handle Robe River's problems, and that Peko's
attitudes and methods were quite wrong. That made it
easier for me to conclude that we should make a complete
change of the 'management culture'.
We wanted the Robe River staff and award employees
to see immediately that we were not blaming the individual
employees. We were putting that heavy responsibility
on the senior management. 'There are no bad soldiers
---only bad officers'.
We believed that the removal of the senior management
would show the unions and the employees that we were
very resolute to achieve effective change. We were
not prepared to let the need for change drift along
inconclusively as had happened in the past.
When the Peko management team took over, the future
manning of the operations was assessed, and 189 voluntary
redundancies were requested from the total award workforce
of nearly 1,200. The unions immediately threatened
that anyone accepting the very generous redundancy
package would 'never get another job in that union
in Australia'. Although many wanted to take what would
have been about one year's pay, no-one to this day
has done so. In the event 530 left within three months,
of their own accord. Management had assured the workforce
that any further reductions beyond 189 would take place
by not replacing people who left. Robe River had no
intention of penalising the workforce.
When some weeks later the award workforce was dismissed
(temporarily) it was in response to a wrongly-given
Order from an Industrial Relations Commissioner. However
it was to be some time before that wrong Order could
be appealed and withdrawn.
After four years it is still very apparent that the
subsequent onslaught against Peko and Robe River by
politicians and union officials, with their great influence
on the media, has left many Australians troubled that
Peko did something 'wrong' at Robe River. Many senior
members of the business community and of the Liberal
Party seem to be of that view, although they are invariably
people who have evidently not troubled themselves to
find out the facts.
It is tempting to reach the conclusion that it is
fashionable to decry Robe River in order to keep on
good terms with those who had a deep interest in opposing
what we did. Furthermore at Robe River we had exposed
the weakness of Australian management by dismissing
the previous management as a first step. Having exposed
that weakness, and having succeeded so dramatically
in improving Robe River's performances on all counts,
Robe River now stands as a very public indictment of
those managements of Australian industries who condemned
As each year the performance improves further, and
the publicity is continuing to refute the earlier allegations
of wrong-doing by the Peko-appointed management, the
more egg appears on the faces of our detractors; and
they do not like it.
It is my view that this evidence of management weakness
is at the very heart of Australia's poor economic performance.
Business, particularly big business, simply will not
stand up for itself against the forces of big governments
and big unions. So much of business 'leadership' is
in fact no more than a commercial bureaucracy, acting
without the conviction of responsibility which owner-managers
cannot avoid without immediate peril to their own pockets.
Much the same can be said about many politicians on
all sides of the political arena. It is my view that
Australian senior management and politicians are both
naive about, and afraid of, industrial relations.
This adverse feature of the Australian economy is
strongly reinforced by the existence of the
immense bureaucracy of industrial commissions and tribunals,
all of whom have a vested interest in the status quo.
In the aftermath of Robe River many people have claimed
that it was part of a watershed, along with Dollar
Sweets, SEQEB, Mudginberri etc. My own view is that
the forces opposed to change have closed ranks again,
and that in fact very little has changed. The present
adverse economic conditions may force more change as
businesses struggle to survive. However unless radical
changes are made to cut away that enormous proliferation
of vested interests known as the Industrial Relations
Club, there will continue to be many more losses than
gains to the Australian economy. At best, changes will
happen after much damage has been done---in my
view that damage is utterly needless. Robe River proves
the point magnificently.