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September 7, 2006

How’s Your Bench?

During the lean years, metals companies couldn't afford to replenish the management ranks. Now, with boomers nearing retirement, they have no choice.

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.

REACHING OUTSIDE

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.”

NURTURING TALENT TWO WAYS

Companies grow their own talent in one of two ways. They either nurture promising young candidates from the start of their careers or wait for the talented to rise to the top.

A grow-your-own company needs to provide good supervision and mentoring. “You need to give people a chance to succeed or fail,” says Ken Bardach, 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.

He advocates giving up-and-comers opportunities for education, either through in-house programs or courses at area institutions. Outside programs offer a cross-pollination of ideas, an opportunity to network, and an introduction to case studies and models that can help managers avoid costly mistakes.

$3 MILLION IN SAVINGS
IPSCO two years ago launched a Six Sigma program to boost productivity and competitiveness, and train young talent. Managers are assigned to the program full time for two years and are assessed to determine what experiences or skills they lack, Sutherland says. The company bridges those gaps through academic instruction or work at other plants.

Initially, the program started with three people—one representative from each of the steel plants IPSCO owned at the time. The program was met with rave reviews after the three were involved with projects that saved the company $3 million, says William Smith, corporate director of continuous improvement who heads the program.

In 2004, the program was expanded to six newcomers, and for 2005 and 2006, the program has involved eight new trainees—one from each tubular division and two from each of the operational steel plants. Participants can come from any discipline, including engineering, purchasing, administration, sales and operations.

The program begins with a five-month training course, and then the participants become involved with projects, not necessarily within their own discipline. The participants, called Black Belts, make presentations to senior managers, who get a view of the trainees in action, Smith says. Participants are reassigned at the end of two years.

Bill Brooks, a Black Belt who manages Six Sigma projects at IPSCO’s Mobile, Alabama, facility, says the program helped his problem-solving skills. The 37-year-old served in the National Guard during the Gulf War before getting an electrical engineering degree from Auburn University and then entering the steel industry after college.

The program “gives you step-by-step methodologies to look at problems and analyze data,” says Brooks, who has been at IPSCO for seven years and has been a Black Belt in the Six Sigma program for one year. Says Sutherland, “We are looking at the people who will be the next generation of senior managers.”

VALUE ON PERFORMANCE
In contrast, steel giant Nucor, based in Charlotte, North Carolina, doesn’t work to identify high-potential employees. “High performers really end up identifying themselves with the results they get,” says Dan Krug, manager of human resources and organizational development. “We basically put almost no value on seniority. We put value on performance.”

It’s a lean company where a sizable portion of income is performance-based (See “The Working Man’s Evangelist,” Forward, January/February 2006). “Everybody has a real job. Everyone is necessary. When you’re necessary, the team is counting on you to help the team,” Krug says.

In the past, Nucor was not as engaged with new employees, Krug says, but the company came to realize that a more active approach helped employees succeed. These days, employees go through an orientation program when they join the company. A mentor provides resources, answers questions and helps develop a customized plan for employee success, Krug says. If a person needs additional training, they may be sent to an outside source or to another part of the company. “Good people love the opportunity. They’re instantly happy, instantly engaged, instantly part of the team,” he says.

One who has thrived is Nathan Fraser, who started with the company at 22 after graduating from the University of Missouri-Rolla. He recently was appointed material handling manager in Decatur, Alabama. He studied metallurgy in college and looked at Boeing Co. and General Motors Corp. before visiting a Nucor plant. “I liked the atmosphere, the pace, the freedom to do different things.”
Fraser says that early in his career at Nucor, he was assigned a coach, whom he meets with once or twice a year and speaks with on a monthly basis. The human resources department surveys his boss and peers to gather feedback on how he is perceived to determine strengths and help him work on his weaknesses.

That’s appealing to Fraser, who is only 29 but can envision spending his career at the steelmaker. “I’d really like to retire with Nucor 25 years down the road,” he says.

 

COURTSHIP ON CAMPUS

 

Many metals companies are returning to college campuses for the first time in years to recruit promising young talent. While there are plenty of graduates in human resources, business administration and information technology, those with metallurgy degrees are in short supply and high demand.

Only a handful of schools continue to offer metallurgical engineering degrees, and many of those turn out a mere trickle of graduates each year—from as few as six or seven to as many as 40 or 45. Recruiters from a wide range of industries not limited to metals—mining, aerospace, automobile and energy—line up to hire these grads, who often enjoy multiple job offers with impressive starting salaries.

For the metals industry, “they’re trying to make up for a lot of hiring they’ve put off for decades. Now, all of a sudden, they’re trying to play catch-up,” says Anthony DeArdo, professor in the Department of Materials Science and Engineering at the University of Pittsburgh who has taught since 1975.

He urges companies to get involved with the universities, perhaps hosting Friday night pizza parties for undergraduates, for example. “You’ve got to get yourself out there. It’s like being in a singles bar.” The courting can be intense. At the Montana Tech unit of the University of Montana, companies often hire juniors for summer internships, then offer them full-time jobs while interns or at graduation. “They try to prevent having students go out and look for other jobs,” says Pete Knudsen, dean of the School of Mines.

Other companies try to attract would-be employees by offering fellowships and scholarships, or by funding university research. However, “we have difficulty finding enough U.S.-born graduate students to do the work,” says Jeffrey LaCombe, associate professor of metallurgical engineering at the University of Nevada-Reno.

Part of the problem lies in simply getting American high school students interested in the field, says Jon Kellar, chairman of the Materials and Metallurgical Engineering Department at the South Dakota School of Mines and Technology. “Recruiting high school students into metallurgy is challenging. They don’t have a clue what it is.”

Those who do choose metallurgical engineering can’t beat the job opportunities. At the University of Alabama, one student had five job offers, says Ramana Reddy, head of the Metallurgical and Materials Engineering Department. At the Colorado School of Mines, starting salaries last year ranged from $48,000 to $73,000, says John Moore, head of the Metallurgical and Materials Engineering Department.

The schools listed here have metallurgical programs accredited by ABET Inc., which evaluates and certifies college and university programs in engineering, applied science, computing and technology.

University of Alabama
Tuscaloosa, Alabama
Metallurgical Engineering
 
Colorado School of Mines
Golden, Colorado
Metallurgical and Materials Engineering

University of Idaho
Moscow, Idaho
Metallurgical Engineering

 
University of Missouri-Rolla
Rolla, Missouri
Metallurgical Engineering
Montana Tech of the University of Montana
Butte, Montana
Metallurgical and Materials Engineering
 
University of Nevada-Reno
Reno, Nevada
Materials Science and Engineering
     
University of Pittsburgh
Pittsburgh
Metallurgical Engineering
 
South Dakota School of Mines and Technology
Rapid City, South Dakota
Metallurgical Engineering
     
University of Texas at El Paso
El Paso, Texas
Metallurgical and Materials Engineering
 
University of Utah
Salt Lake City, Utah
Metallurgical Engineering