Chuck Hansen, President

 

 

 

 

 

 

RETAINING EMPLOYEES IN A TIGHT MARKET

New Steel Magazine, January 1998

by Chuck Hansen

Many executives in the U.S. are finding themselves without the people they need to run their business.  The steel industry is no exception.  How did this come about so rapidly after years of downsizing at U.S. companies?  It's happening for a number of reasons:

  • Unemployment is 5 percent, the lowest level in eight years, the Bureau of Labor Statistics says.

  • In November 1997 alone, 105,000 jobs were created across a variety of industries; in 1996, 1.5 million new jobs were added by small businesses

  • Economic growth is up by 4 percent, inflation is only 2.5 percent, and consumer confidence is high

  • A 20% drop in the birth rate a generation ago has produced a shortage of new workers entering the labor pool.  Meanwhile, more than 50 percent of the 4,000 managers polled recently by Management Recruiters International plan to increase their staff sizes.

Labor shortages are occurring in every industry at all levels.  The steel industry has been operating at virtually full employment for nearly three years.  At the same time, a dozen or so greenfield mills are being built or started up recently -- mills that must be staffed by personnel from existing mills.

Steelmakers are under pressure not only to find qualified workers, but also to retain the ones they currently employ.  This is due to the high cost of turnover and to the difficulty they have replacing valuable employees.

Unfortunately, most of the big mills abandoned the use of meaningful incentives to keep their workers during the 1970's and '80's; while these measures have made a comeback during the '90's, their use is limited.  On the other hand, minimills have been very innovative in using these incentives.  Production-oriented incentive pay often is such a large percentage of the employees' W-2's that many of them would not consider leaving their present employer at incentive pay time.  A worker earning an $80,000 annual paycheck might be receiving $35,000 from the base salary and $45,000 for reaching productivity goals.  Managers are given incentives to exceed goals while improving team productivity safely and efficiently.

Retention tactics that have made an increasing impact on other industries are slower to take hold in the steel industry.  But they are becoming more popular.  Flex time is well received at steel mills.  To get and keep needed workers, some employers are going to compressed workweeks, such as four 10-hour days.  Part-time schedules and work-reduced hours to accommodate working parents also are viewed as valuable incentives by workers.

Replacing traditional sick days with time off banks by adding three to five days annual leave also is successful.  A side benefit to this plan is that is encourages a drop in absenteeism, although it's no replacement for good management.  Absenteeism always is lowest where employees want to work.

The most important issue facing workers in the steel industry today possibly is security.  Workers have been driven to become represented by the United Steelworkers in order to eliminate the old cycle of hiring and laying off.  But some of the more successful minimills voluntarily run their mills without layoffs because they realize that it's to their advantage to retain their workers.  Minimills also are empowering their employees by handing off responsibility to them.

Workers usually stay or leave because of the way they're treated.  Most employees prefer to stay where they are; it's just human nature to hang on to what's comfortable.  But they will leave because of what they consider inadequate pay and benefits or a lack of recognition or opportunity to advance.

The keys to a successful strategy for retaining employees are:

  • Have a planned approach

  • Value the people in the organization

  • Invest in the employees

  • View retention as a long-term strategy

If the traditional steel mill is to operate successfully and profitably, it must heed the realities of the job market today so that it can continue to survive tomorrow.