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The influence of Corporate The influence of Corporate management on HRMmanagement on HRM

How to create the right workforce for the steel industry.How to create the right workforce for the steel industry.

Peter JoustraPeter Joustra26-04-0726-04-07

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Internationalization of the Steel Internationalization of the Steel IndustryIndustry

The steel industryThe steel industry stands on the eve of a stands on the eve of a major internationalization and globalization major internationalization and globalization wave. Concentration leads to a high number wave. Concentration leads to a high number of eye-catching international acquisitions of eye-catching international acquisitions and mergers. Other industrial sectors such and mergers. Other industrial sectors such as ICT, telecommunication, textile, as ICT, telecommunication, textile, automotive, oil were already confronted with automotive, oil were already confronted with major concentration in earlier days. Steel is major concentration in earlier days. Steel is a latecomer.a latecomer.

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Specific aspects of the Steel industrySpecific aspects of the Steel industry

The process of internationalization and globalization has just recently The process of internationalization and globalization has just recently started, since 1990, and comes in full swing since the beginning of the started, since 1990, and comes in full swing since the beginning of the 21st century.21st century.

Globalization of firms is triggered by globalization of key customer Globalization of firms is triggered by globalization of key customer segments like the automotive industry and global suppliers of segments like the automotive industry and global suppliers of resources.resources.

The role of capital markets has become more important by the process The role of capital markets has become more important by the process of privatization of the steel industry since the 1980s. State ownership of privatization of the steel industry since the 1980s. State ownership of steel assets was predominant in the steel sector until very recently.of steel assets was predominant in the steel sector until very recently.

The steel industry has not been able to pay the cost of capital across The steel industry has not been able to pay the cost of capital across the economical cycles. Again until very recently. A second reason of the economical cycles. Again until very recently. A second reason of the growth of the capital markets interests.the growth of the capital markets interests.

Recently the environmental issue of global warming plays an important Recently the environmental issue of global warming plays an important role. Steel plants are major CO2 producers.role. Steel plants are major CO2 producers.

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General aspects of General aspects of internationalization (1)internationalization (1)

The predominantly neoliberal character of the globalization The predominantly neoliberal character of the globalization process, resulting in the dominant role of shareholders process, resulting in the dominant role of shareholders value and financial markets. value and financial markets.

The exaggeration of the globalization of production. Most The exaggeration of the globalization of production. Most MNCs remain closely linked with their home bases, and MNCs remain closely linked with their home bases, and nation states still play a dominant role in the nation states still play a dominant role in the internationalization process.internationalization process.

The almost defenceless position of labour as a result of The almost defenceless position of labour as a result of limited or no international cooperation of organized labour. limited or no international cooperation of organized labour.

Growth in market-based economies an important factor for Growth in market-based economies an important factor for internationalization and globalization. Most important internationalization and globalization. Most important growth in the so-called BRICs: Brazil, Russia, India and growth in the so-called BRICs: Brazil, Russia, India and ChinaChina

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General aspects of General aspects of internationalization (2)internationalization (2)

The arguments and serious concerns of the anti- globalization The arguments and serious concerns of the anti- globalization movement. They will often be expressed in the ideas and policies of movement. They will often be expressed in the ideas and policies of non- governmental organizations (NGOs).non- governmental organizations (NGOs).

The different contempory forms and faces of modern capitalism, The different contempory forms and faces of modern capitalism, resulting in so-called “economical models”: Anglo-Saxon model, resulting in so-called “economical models”: Anglo-Saxon model, Continental Europe model, Asian model, etc. The most used general Continental Europe model, Asian model, etc. The most used general term of this aspect is “divergent capitalism”.term of this aspect is “divergent capitalism”.

Role of regional, national and international institutes. Attempts to Role of regional, national and international institutes. Attempts to regulate international markets via institutional frameworks.regulate international markets via institutional frameworks.

First attempts to come to international regulations and standards: UN First attempts to come to international regulations and standards: UN Global Compact Rules, OECD-Corporate Governance Principles, ILO Global Compact Rules, OECD-Corporate Governance Principles, ILO standards, WTO rules, Kyoto Protocol, etc.standards, WTO rules, Kyoto Protocol, etc.

The environmental issue in general.The environmental issue in general.

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The road for SteelThe road for Steel

Does steel really have to follow the too well Does steel really have to follow the too well known path of other industries in the past, known path of other industries in the past, with the too well known possibilities of with the too well known possibilities of failures and mistakes of international failures and mistakes of international mergers and acquisitions (M&As)? mergers and acquisitions (M&As)?

Success rate: 10 %Success rate: 10 %

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Necessity for a better performanceNecessity for a better performance

There is a direct link between corporate There is a direct link between corporate governance style of a company and HRM governance style of a company and HRM policies.policies.

What will be the corporate governance style What will be the corporate governance style of Steel Companies in the near future?of Steel Companies in the near future?

What style will create a motivated and stable What style will create a motivated and stable workforce?workforce?

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The attitude of modern young The attitude of modern young personnelpersonnel

The ambitious generations seem to be replaced The ambitious generations seem to be replaced by a new generation , the “milennium generation”.by a new generation , the “milennium generation”.

Limited interest in career. Grown up in “quality Limited interest in career. Grown up in “quality time” and used to freedom and fun now. time” and used to freedom and fun now.

Growing interest in part-time jobs. Stimulated by Growing interest in part-time jobs. Stimulated by the phenomenon of “working couples”.the phenomenon of “working couples”.

Preference to work for a company with a Preference to work for a company with a sustainable image. This means for steel: Get away sustainable image. This means for steel: Get away from the “dirty” image. See policy IISI.from the “dirty” image. See policy IISI.

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How to create “fun and freedom”?How to create “fun and freedom”?

Transparency on HRM rules re Transparency on HRM rules re careerpatterns and personal growth careerpatterns and personal growth opportunitiesopportunities

Respectful approachRespectful approach Have a say in the organization and job Have a say in the organization and job

interpretationinterpretation Transparent targets of the organization and Transparent targets of the organization and

the companythe company

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HoweverHowever

Recent trends in Corporate management Angle Recent trends in Corporate management Angle Saxon style ( “machine bureaucracy”): rigid control Saxon style ( “machine bureaucracy”): rigid control systems (Sarbanes Oxley,a quackery legislation) , systems (Sarbanes Oxley,a quackery legislation) , rigid hierarchies, short term interests. rigid hierarchies, short term interests.

Resulting in short term orientation on own contract Resulting in short term orientation on own contract and own opportunities.and own opportunities.

Resulting in short term employment contracts.Resulting in short term employment contracts. Resulting in non-performance. 70-90 % of Resulting in non-performance. 70-90 % of

companies is not able to fulfill the chosen companies is not able to fulfill the chosen strategies.strategies.

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Flexibility!?Flexibility!?

Short term, flexible contracts seem to be Short term, flexible contracts seem to be trendy and OK. Even the European trendy and OK. Even the European Commission talks about “flexisecurity”.Commission talks about “flexisecurity”.

But Steel as part of the “Old Industry” is But Steel as part of the “Old Industry” is different from new industrial sectors.different from new industrial sectors.

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Innovationmodel SteelInnovationmodel Steel

““Routine” innovationmodel dominant in “old Routine” innovationmodel dominant in “old economy”: step-by-step product economy”: step-by-step product improvement based on long term improvement based on long term experience/knowledge.experience/knowledge.

Need for continuity and long term contracts. Need for continuity and long term contracts. Tension between call for flexibility and need Tension between call for flexibility and need

of the Steel Industry.of the Steel Industry.

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Tension flexibility for the workforceTension flexibility for the workforce

Tension flexibilty for new generation.Tension flexibilty for new generation. Less flexibility within the company as a Less flexibility within the company as a

result of the “working couple” situation. result of the “working couple” situation. Relocation of employee more difficult than in Relocation of employee more difficult than in the past. Less interest in long hours and “go the past. Less interest in long hours and “go for it!” jobs. for it!” jobs.

Less flexibility anyhow based on disbelieve Less flexibility anyhow based on disbelieve in the fancy atmosphere of the flex-story.in the fancy atmosphere of the flex-story.

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Chance/necessity for the Steel Chance/necessity for the Steel Industry.Industry.

Create more long term employment Create more long term employment opportunities.opportunities.

Create a strong “insiders” segment for the Create a strong “insiders” segment for the necessary continuity necessary continuity

““Outsiders” ( Shareholders, topmanagement Outsiders” ( Shareholders, topmanagement and flex workers at the bottom) don’t form a and flex workers at the bottom) don’t form a solid base for the company. They come and solid base for the company. They come and go. go.

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Performance.Performance.

Long term employement should be based Long term employement should be based on loyalty and trust, two necessary on loyalty and trust, two necessary ingredients for a well performing company. ingredients for a well performing company.

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Corporate management style Corporate management style consequences.consequences.

Loyalty and trust ask for a transparent Loyalty and trust ask for a transparent management style, and a high involvement management style, and a high involvement of employees in the company policies on of employees in the company policies on strategic investments and technology.strategic investments and technology.

The coming M&A stream will form a threat The coming M&A stream will form a threat on transparency and involvement, given the on transparency and involvement, given the one-sided orientation on shareholders value.one-sided orientation on shareholders value.

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Short term / long term.Short term / long term.

On the short term the damage of M&As can be On the short term the damage of M&As can be compensated. High sales prices will cover a lot of dirt.compensated. High sales prices will cover a lot of dirt.

On the long term the Steel Industry will loose the interest of On the long term the Steel Industry will loose the interest of the new generation of employeesthe new generation of employees

Unless it takes the interests of the new generation Unless it takes the interests of the new generation seriously, and embarks on long term employment policies seriously, and embarks on long term employment policies as describedas described

And unless it broadens the base of decision-making in And unless it broadens the base of decision-making in M&As to other stakeholders and areas other than financial M&As to other stakeholders and areas other than financial control. Areas like HRM and culture.control. Areas like HRM and culture.