On Wednesday, David Thompson will attend the annual meeting of his old company, Teck Resources Ltd., and there will be celebrations – for Vancouver-based Teck is 100 years old this year. Mr. Thompson has loomed large in its history, having served almost three decades as a senior manager, including as chief executive officer during the last four years of his career. The Harvard Business Review honoured the British native as one of its outstanding "legacy CEOs," not only for guiding Teck during his four-year tenure up to 2005, but also for leaving it in good shape for his successor. While Teck has gone on to new adventures (crisis and comeback), Mr. Thompson turned his managerial savvy to being a change agent in B.C. health care. Having helped turn around the big regional health-care system, Vancouver Coastal Health, he has pioneered the concept of patient-focused funding as volunteer chair of the B.C. Health Services Purchasing Organization.
First let's talk about mining. If you were a CEO in the midst of this commodity turbulence, how would you react?
Probably cowering under my desk or something.
What about a strategy?
I assume we are in the late stages of the cycle, but you can also be wrong by being right too early, so I wouldn't do anything dramatic. You should have been already building cash, and I would accelerate that. I would cut discretionary spending – I hope I would have already done it in the annual budget, rather than panicking, say, three months later. Discretionary spending means things such as exploration and overhead – all these things that get added on in a boom.
And you should have a plan where you know where your weakest mines are. If prices were going down 10 to 20 per cent … you say, 'Can we run mine X or not? What would be the best configuration?' You have to have been doing that thinking already. And this [price decline] is not going on forever. You don't want your people to go into a Chicken Little approach, because, after all, all times in mining are good times; it is a case of figuring out how to make the best of where you are.
So there are opportunities?
Almost every major mining company in the world has fired its CEO and hired a new one. This is a good time because the first thing these new guys do is evaluate the mine portfolio. Where are the jewels and the weak ones? They are of an open mind because they are not the people who discovered the mines. You can approach them and say, 'If you ever want to do a deal on mine X, we are quite prepared to look at it.' If they want to sell, they know there is at least one buyer out there.
[At Teck], we always had a list: Who are the best juniors to do a deal with? And meet with them – take them out to lunch. Neither go into a panic nor assume this is purely temporary. You never know.
So you are not cowering under your desk?
I'm not totally pessimistic. My view is the world is actually growing and the next four years might be better than this four years, maybe not country by country, but globally. We're probably through the worst and there may be growth left. You might have a cycle that is quite modest.
Were you instrumental in creating the modern Teck?
It was a team – including Norman Keevil [who has voting control and is now chairman], Bob Hallbauer [the late CEO of Cominco, which Teck controlled and later absorbed] and myself. It was good because Norman is a natural optimist and you need that in mining. I am a naturally risk-averse person, and Bob Hallbauer was a realist, and so it worked out pretty well. When all three of us thought something was pretty good, it probably was, and it usually turned out it was.
Norman was CEO for 20 years before I was, and so he should get equal credit or more. And he is very creative. I might say, 'It can't work,' but then it becomes a case of: 'What if try it this way or that way to make it work?'
Then you faced a different kind of turbulence when you eliminated the deficit at Vancouver Coastal Health?
Actually, [VCH] eliminated it, and not the conventional way, which is to slow things down and reduce costs. They did it the normal business way … through labour scheduling and a whole host of things. They were doing it after I left, too.
So is it possible to bring private-sector tactics to the public health-care system?
I think so, but as a business person, I believe the fundamental problem is the way the health system is funded in Canada. Many of the politicians think a dollar is a dollar, and if you give [hospitals] a certain number of dollars, things get done. If you give them more dollars, they do more. But we [at the purchasing organization] come at it from a different basis: How do you lower your unit costs [costs per procedure]? You get value for money by driving unit costs down.
With the old system of block funding, you would get a finite amount of money and were told to get on with it. The only real stick [for the government] to use is, 'Don't get into a deficit,' like Vancouver Coastal did. If you get into a deficit, there are real problems, but otherwise it's a case of manage as best you can. That means the bottom line is more important than the patient.
What do you bring to the management game?
You try to focus on what the real priorities are, and persuade others that those are the correct priorities. Then, you try to end up with an implementation plan that you think is going to work – that is not too big or too small but just right to do the job. It's a matter of, 'This is our objective and this is how we get there.'
Is it the same for private and public sector?
It is the same in both, but it is particularly vital for the public sector, because in the private sector you already know what your objective is. You are trying to make money for shareholders and everyone is talking the same language. The board knows the objectives and that this is what they have to do. [At Teck] we knew we had to get stronger in coal to survive in that market and when we saw a rival trying to take the key mine in the area, we had to fight back. So you know where you are. But in the public sector, that is not so clear at all.
It is a big adjustment for business people coming in to the health sector. All of us know that in terms of unit costs, if your competitors are way below you, you've got a real problem. Here they abandoned unit costs, and they don't use it for decision making.
Did you approach the challenges at VCH like a private-sector manager?
I tried to, but the first thing you learn is health is extremely complicated and there are a lot of unforeseen circumstances. … Don't go in all gung ho, but instead, listen and learn. Go out in the field often; go to clinics and hospitals, and listen. And it is too big an area to try to do everything – it goes all the way from public health and swimming pools to palliative care and hospices. … The problem was bigger than just VCH; it was how to make the system more responsive to what it is supposed to be doing in the first place.
Think of it this way: When you are in the private sector and you ask what the customers want, you think quality, availability and price. And in health care, what does the patient want? The patient also wants quality, access to the system and value for money. They are practically identical [in goals]. So how come these two systems operate on a totally different funding basis? … There is something fundamentally wrong with a funding system that is not permitting managers, who have the ability, to actually do the job.
What do you hope is your legacy?
It would be a sustainable funding system, when dollars follow the patient in order to provide a high quality of patient service, where you improve patient access through shorter wait times, and you produce value for money for the taxpayer.
After six years in the health system, what is the big thing you have learned?
If you bring in pay for performance – what we call patient-focused funding – you are really saying that the money is following the patient. Whoever treats the patient gets paid, and those who don't treat him or her don't get paid. And you can see that reflected in our annual report. And now, it is about how you get the other elements of management system to align properly with that principle.
Chairman, B.C. Health Services Purchasing Organization, Vancouver
Born in London, England; 74 years old
Bachelor of science in economics, London School of Economics
After school, joined Ford Motor Co. in Britain. Later took a job with Air Products and Chemicals Inc.
Moved to South Africa for a job in the mining industry.
In 1980, was recruited by the Keevil family to join Teck Resources Ltd. Served as chief executive officer from 2001 to 2005, when he retired.
Chairman of Vancouver Coastal Health from 2007 to 2010.
Appointed chair of BCHSPO in 2010