Reference no: EM132628545

CASE: Rio Tinto: Redesigning HR

Rio Tinto is a mining and minerals company headquartered in London. The multibillion-dollar company employs over 98,000 people worldwide and operates in more than 60 different sites in over 50 countries.

When the 2008 global recession hit it was clear that a reduction in workforce would be necessary for the company to survive, and 14,000 employees and contractors were let go. HR had been involved in the initial business discussions and understood that the reduction in force (RIF) was necessary. For the first time, Rio Tinto's HR used a coordinated approach globally. Previously, executives and HR directors in the individual business units would have all approached the downsizing differently. But this time with a common approach, the downsizing took place in an efficient, ethical, and sensitive manner, using regional severance policies and a comprehensive database and measurement tools to track the impact of the redirections. High-potential leaders and people with critical skills were identified and were moved around internally to retain them. Managers were trained to help the "survivors" stay focused. Previously the process would have taken two or three times as long it was estimated, and employee engagement and morale would have taken a much harder hit.

Rio Tinto had undertaken a strategic analysis and reformation of the HR functions before the RIF that made the favorable results possible. The analysis looked at HR functions for both effectiveness and efficiency. All HR functions needed to be delivered at a lower cost while maintaining quality. Previously most HR professionals would have spent their whole career in one plant. Today they move across product groups, locations, and assignments fostering a more consistent culture. A senior HR council to provide leadership and guidance was started. This helped with a consistent HR philosophy that supported policies and standards for the whole company.

Efficiencies were achieved by using more digital processes and adding self-service tools for employees.

Bringing together disparate HR departments across multiple business units increased speed and lowered costs. Further, the company moved from a defined benefit pension plan to a defined contribution plan to conserve cash through reduction in long-term pension liabilities.

Rio Tinto feels that using their human capital better, organizing teams, developing talent, and supporting innovation and creativity can help make the company's people a source of potential competitive advantage. The company's HR professionals gained new skills relative to helping productivity in the workforce. The value of a 1% to 2% increase in productivity far outweighed the entire cost of the transformation of Rio Tinto's HR function.

1. How did Rio Tinto's revamping of HR help with minimizing the potential problems with the reduction in force? What role would an HRIS (also called a Human Resource information system) have to play in managing an RIF?

2. Without a consistent philosophy, policies, and approaches to reduction in force (or any other disruptions in the future) what would the likely reactions from employees be?