How’s Your Bench?
During the lean years of 2001 and 2002, O’Neal Steel Inc. did little to replace employees who retired or moved to other fields. It reduced the need for layoffs.
But President Bill Jones realized by 2003 that the Birmingham, Alabama-based company would soon be short of talent in some areas, thus unintentionally limiting growth prospects and potentially faltering in customer service.
“I think we’ve done fine,” Jones says, “but not without situations where we’ve stretched some people fairly thin.”
O’Neal Steel is typical of metals companies that need to replenish their ranks. Strapped employers weren’t able to hire much in the early part of the decade, and promising talent headed for faster-growing and more lucrative industries. Now, not only have the industry’s fortunes changed, but a generation of baby-boomer managers is nearing retirement age, and that means years of expertise soon will be gone. That demographic certainly increases the urgency for companies to step up their recruiting efforts. The good news for recent graduates is that opportunities abound in the metals industry.
Executives aren’t treading the familiar path of posting want ads. Some companies have turned to universities to recruit promising young talent, offer scholarships and fund research. They also are trying different approaches to groom the next generation of management from within.
“I think there are limitless opportunities in our industry,” Jones says. But that’s a message that hasn’t necessarily filtered through to the job-seeking public. “Very few people grow up and go to college and think, ‘I can’t wait to get into the steel industry. I can’t wait to get into the metals industry,’’’ Jones says.
THE BAD OLD DAYS
After its visible retrenchment in the early 1980s, the metals industry hasn’t been an easy sell to students and graduates starting careers. Indeed, there was no need. Employment in primary metal manufacturing dropped to 435,000 in 2004, a decline of 174,000 from 1997 and 226,000 from 1992, the U.S. Census Bureau’s Annual Survey of Manufacturers shows.
“The industry has never been glamorous,” says Robert W. Knopik, a former executive with Inland Steel Industries who now is managing director of Leadership Search Group, an executive search firm in Barrington, Illinois.
Metals industry recruiting started to falter in the 1980s. By the 1990s, technology and telecommunications emerged as top career choices. With college costs soaring and families forced to borrow to pay, graduates headed to more lucrative lines of work. In 2001, the last year for which there are statistics, there were 930 bachelor’s degrees awarded in materials and metallurgy engineering, compared with 43,000 degrees in computer science, says the National Science Foundation.
“The industry lost a lot of the A-level talent to opportunities to make more money in other industries. We were left with a lot of B and C talent,” Knopik says. “You’re not going to run a company successfully on C-level talent.”
Now, while many strive to reverse that trend, others ignore it at their peril. “I think people have put their head in the sand over this,” Knopik adds. Many companies are quick to invest in searching out new markets or purchasing top-notch equipment, but “they don’t spend a lot of time on human capital. It is sort of an afterthought.” In fact, James J. Drury, III, founder and managing partner of Chicago-based recruiting firm James Drury Partners, and former vice chairman at Spencer Stuart, says he is yet to see an upturn in recruiting for senior-level metals executives. He places just two or three metals executives each year, compared with 20 to 25 executives at consumer goods companies.
BOOMERS OUT THE DOOR
No new talent in the door and a lot of seasoned talent out the door is the situation now facing metals executives. Baby-boomer managers will start to retire over the next 10 years. At the same time, they make up a disproportionate percentage of the workforce.
Workers aged 55 and above will constitute 26.6 million workers (nearly 17% of the workforce) in 2010, compared with 18.2 million workers (about 13% of the workforce) a decade earlier, Bureau of Labor Statistics data shows. “When companies look at the number of employees age 55 and older, it can be frightening,” Jones says.
The retirement of boomers means a loss not just of manpower, but also of detailed institutional knowledge, from metallurgy to the competitive landscape and customer preferences.
Paul Winsauer, vice president for human resources at A.M. Castle & Co. in Franklin Park, Illinois, recalls that when business started to boom in 2004, “we looked down the bench, and there were only two players to put in.” An exaggeration of course, but Winsauer recalls there were holes in sales, product management, operations and supply chain, and that supervisors in the rung below weren’t yet experienced enough to be promoted.
Considering the small pool of talent with metals experience, executives have stepped up college recruiting and have looked outside the industry.
BACK TO CAMPUS
Many companies have moved their focus to getting talented young people in the door. When the metals industry pulled back from colleges, some universities moved from metallurgical to material science programs, while others dropped metallurgy entirely, says David Sutherland, president and CEO of IPSCO Inc. in Lisle, Illinois. Because “the industry had developed such a bad reputation,” if a student were being recruited for two comparable jobs, he or she would take the one in the industry with the better reputation, Sutherland says.
Now, the push is on to polish the metals industry’s image. IPSCO, for example, is forming partnerships with schools that have co-op programs where students spend a semester at one of the company’s facilities. O’Neal Steel offers scholarships at the University of Alabama at Birmingham in the Department of Materials Science and Engineering. And Nucor Corp. recently endowed a $2 million chair at the University of Missouri-Rolla to support steelmaking research and provide students with all-expense-paid trips to its facilities so they can get a firsthand view of the industry.
Kent Peaslee, professor of metallurgical engineering at the University of Missouri-Rolla, is an industry champion who spent 13 years in the steel industry, last working as general manager of technical services at Bayou Steel in LaPlace, Louisiana. Even then, he struggled to find metallurgical engineers, so he returned to teaching to educate students for metals industry jobs.
He says that during the dot-com era, the metallurgy program lost students to computer courses, but the number of freshmen and sophomores now studying metallurgy is on the rebound. The university typically graduates 20 to 25 metallurgical engineers a year compared with the teens before the recent upturn.
“We need to refill the pipeline,” Peaslee says, who notes that the university must forge partnerships with the metals industry strong enough to survive bad times.
In the continuing economic boom, every student has multiple job interviews with companies ranging from steel to oil to aircraft. With job offers for graduates with bachelor’s degrees from the metals industry coming in at $50,000 to $60,000 a year, plus signing bonuses, “that makes it really easy to sell,” Peaslee says.
Olympic Steel Inc., of Bedford Heights, Ohio, expanded college recruiting to augment experienced hires with young talent, says Maureen Mason, vice president of human resources.
“We’ve got a good story to go to college campuses to tell,” she says.
This fall, executives plan to travel to colleges to recruit spring graduates and will target campuses near its facilities that offer degrees in computer science; business administration; industrial, mechanical and metallurgical engineering; and safety and environmental management.
Olympic not only wants to fill openings, but also take into account the skills that will be needed in two to three years. To compete in the world market, “we’ve got to bring in the best,” Mason says.
Along with metals-sponsored scholarships, internships give students a taste of an industry they might not otherwise consider. The company gets to size up the prospect’s personality and leadership potential. Kirstie Spain, who will graduate in December from the University of Alabama at Birmingham with a degree in industrial distribution, has worked at O’Neal for nearly a year through an internship program. She has been exposed to a range of departments and is now traveling to see O’Neal’s operations in other parts of the country.
“This seems like a good place to start a career and stay with one instead of changing industries,” Spain says.
Since 2005, companies have been looking for experienced general managers, sales managers and vice presidents of sales—critical positions responsible for driving revenue. “I think there is much more emphasis on experience and ability than there is on youth” in those particular positions, Knopik says.
Castle, Winsauer says, began recruiting from outside the industry for middle management positions. Passion, enthusiasm and intelligence are the qualities needed. “We can teach them our business, but we can’t teach them to be good managers,” he says.
Recruiting seasoned executives from rival companies can be costly. It may involve a $20,000 salary premium or a perquisite such as a car. The premium may be worth it—a manager from outside can bring in fresh ideas and new ways of doing things. But there also is the risk that an outsider may be rigid in his or her own style, or won’t fit with the culture. It’s crucial to determine if a new recruit can grow within the organization.
“It’s not just a matter of finding someone to fill a position now, but making sure it’s the right person for that position five years from now,” says Ken Bardach, who oversees executive education seminars for MSCI members as associate dean and the Charles and Joanne Knight distinguished director of executive programs at the Olin School of Business at Washington University in St. Louis. Recruiting management involves “doing the right things to have the right person at the right place at the right time.”