March/April 1991
To be successful, businesses must not forget the significance of human resources. Here's how one company has emphasized the importance of its personnel.
By Dennis E. Beach
Dennis E. Beach is vice president of administration for Chaparral Steel Co. (Midlothian, Texas).
When I was in management school, a professor drummed into our young heads that business success was really very simple. All you had to do was organize the three M’s: money, materials, and manpower.
Today, 35 years later, after trying a variety of sophisticated management systems advanced by behavioral scientists, I’m convinced that simple is best, and the three M’s are where management must focus its attention to accomplish business objectives.
Keeping an eye on the first two M’s comes naturally to most managers. Attention to the third M--manpower, however--is sometimes easy to neglect, despite its equal importance.
Historical Attention
Since its inception, Chaparral Steel Co. (Midlothian, Texas) has focused on its employees as a strategic tool--and seen positive results from that commitment. Before starting up the company’s scrap-based steel plant, our executive group met repeatedly to determine how we could best meet our goal of being the international low-cost supplier of quality steel products. The answer seemed to fall into three strategies: to be on the cutting edge of technology, to be the easiest steel company with which to do business, and to develop the human side of the enterprise.
All three rely on careful attention to manpower. Cutting edge technology requires people who not only can operate new equipment, but who can operate equipment that is continuously renewed. In addition, to make technology work, it is necessary to have well-trained employees who can select and develop technology as well as operate equipment efficiently. To be easy to do business with necessitates well-informed employees throughout the company. And developing the human side of the enterprise calls for an executive commitment to personnel relations.
Chaparral has made proper selection of employees a priority. In addition, we’ve found that an important element in employee selection is involvement of the immediate supervisor, which ensures a high level of interest in the success of the individual being hired.
Previous education, training, and job experience are part of the selection criteria at Chaparral, but they are not the most important criteria. Instead, emphasis is placed on personality attributes that promote applicant success in a participative work environment.
Finding people that fit the company’s personality needs is a significant hiring consideration because of Chaparral’s personnel structure. As part of the company’s marketing strategy, teamwork is required among sales, service, product scheduling, credit, and shipping personnel. Each geographic area is service by a team whose duties include administrative and customer calls. All employees, in fact, are considered members of the sales force, and it is not unusual for production employees to call on customers. Furthermore, the quality control department is responsible for selling special bar quality steel in addition to their traditional production quality assurance duties.
Even within departments, teams play an important role. Production teams, for instance, are each headed up by a leader who is expected to make decisions based on input from other team members. The leader hires, disciplines, and terminates employees, in addition to planning work schedules, ordering materials, and communicating goals and results to other team members. The teams are supported by lean managerial staffs that assist with administrative details and offer advice and counsel.
One of the responsibilities of these teams is to create training tools that can be used by new employees as part of their indoctrination or by employees with more Chaparral experience as a device to update or improve existing skills. All jobs in the production and maintenance areas, for example, are described in a series of safe job procedures that were developed by employee teams. Such employee-created safety training tools not only help demonstrate to workers their worth to the firm, but also have helped to create an impressive company safety record.
Blurring Distinctions
Teamwork and sharing responsibility are part of a bigger corporate commitment to minimizing symbolic differences between management, production, and maintenance employees. For example, all employees are salaried; there have never been time clocks. Free coffee is provided to everyone and there are no assigned parking spaces.
The physical design of the plant encourages interaction among all employees. Executive management practices an open-door policy and is required to spend time in the production areas of the plant and to be highly accessible and visible to all employees.
Communication is a vital part of this strategy. Therefore, supervisors are required to hold periodic meetings with their employees to discuss financial aspects and corporate goals of the company, as well as specific department goals and achievements.
Keeping Up-to-Date
One of the most important facets of Chaparral’s personnel development plan is its continuing education program. Although many might refer to it as a “training program,” that term seems to imply a situation in which the company is mostly active and the employee is mostly passive. With our continuing education program, personnel at all levels are required to enhance existing abilities and learn new skills, a strategy that demands a higher level of involvement and commitment by employees than the word “training” implies.
Continuing education has been an integral part of our participative management approach since the company’s startup in 1975 and is revised and modified as needs evolve. The program not only helps to make employees more competent, but also promotes their feelings of competence. And when employees feel competent in their jobs, they convey those feelings to others, which can be a form of recognition.
A sabbatical program for first-line supervisors has always been a part of the continuing education program and has proven to be immensely successful. This program relieves selected supervisors of day-to-day duties for a period of up to two years. During this time, supervisors on sabbatical are assigned total management--including budgetary, manpower, and material responsibilities--of a special project. The program gives employees the opportunity, on a temporary basis, to demonstrate performance at a higher level of responsibility than usual.
A variation of the sabbatical program is offered to production and maintenance employees. Called the “vicing” program, the scheme allows such personnel to become vice supervisors, who replace first-line supervisors on sabbatical. Vice supervisors are given all the authority and responsibility of the supervisors they replace. The vicing program has been a key tool for selecting and developing superior new supervisors over the years.
A more formal approach to supervisory education is currently under development along the lines of a matrix system. Under the program, department managers will be able to design specific education programs for each of the supervisors working with them. Each program can be tailored from a list of classes that might include public speaking, finance for nonfinancial managers, and motivational topics.
Employee compensation, of course, is also essential to ensuring success through manpower. At Chaparral, compensation is comprised of three elements: direct salary, benefits, and profit sharing. Starting salaries are based on what is being paid in the marketplace for inexperienced labor, with maximum salaries based on the highest rates being paid for production and maintenance personnel in the general geographical area. In any case, direct salary usually makes up 70 percent of compensation, while benefits and profit sharing each carry about 15 percent of the total.
All employees receive 40 hours of pay for any week in which they work a portion of the time; illnesses and injuries are covered by a disability income program.
There is no limit to the size of periodic salary increases, but employees must earn each increase by successfully completing appropriate educational courses in an assigned time period.
Observing Results
We have seen concrete positive results of our commitment to the third M.
Morale is described as “excellent,” with quality of supervision, fair employee treatment, opportunities for advancement, and rate of pay the most frequently cited explanations. Absenteeism is low--only 2 percent of hours worked--and turnover has averaged less than 10 percent over the last three years. In addition, the company’s reputation is one of the best among the local communities because employees spread the word to their neighbors.
Satisfying and developing employees has also ensured quality at Chaparral. As the only U.S. structural steel mill to have received the Japanese Industrial Standards certification--a Japanese national quality designation--we point to the intense efforts of our employees as vital to attaining that certification.
All of these are the result of several tenets that have guided Chaparral in developing its human resource potential:
Hire very bright people and treat them like adults.
Treat employees like owners of the company.
Remember that employees are entitled to financial information about the company.
Push decisionmaking to the lowest competent level and assure that each level is competent.
Focus on problem solving, not placing blame.
Remember that work is fun and a sense of humor keeps it that way.
Know that education creates entrepreneurs.
Keep in mind that change is constant and presents opportunities.
Finally, remember that all employees can contribute to the success of the company and must be recognized for their efforts.•
To be successful, businesses must not forget the significance of human resources. Here's how one company has emphasized the importance of its personnel.