Chaparral 1 Running Head: CHAPARRAL
Chaparral Steel: Then and Now
Ed Howard Demetria Jennings Andrea Perseghin Jonathan West Virginia Commonwealth University Organizational Learning ADLT 623 – Fall 2009 Dr. Terry Carter
This paper will outline the organizational learning cycle of Chaparral Steel as presented in the late 1990s and changes to this cycle since the company was acquired in 2007. Chaparral Steel has been acquired by Gerdau Ameristeel, a company in the Gerdau group, a multi-national conglomerate. According to Glen Carlyle, Plant Manager, Gerdau bought Chaparral Steel “… because of its effectiveness and productivity” (2009). It is difficult to find any scholarly articles written after 1999 about Chaparral Steel, Gerdau Ameristeel, or Gerdau. The data presented in this summary is comprised from a brief conversation with a plant manager of a former Chaparral Steel, now Gerdau Ameristeel, plant in Texas. Information presented was also gathered from analyzing the Gerdau Ameristeel and Gerdau websites. Attempts to obtain further information, including a plant tour, were denied by Gerdau Ameristeel’s Public Relations department. Widespread generation of information Many case studies and articles have been written in the late 1990s about Chaparral Steel’s practices which support organizational learning. Based on information from 1999, Chaparral Steel’s organizational learning cycle supports the widespread generation of information through both external and internal means (Dixon, 1999). External sources include sending organization members to meet with suppliers and competitors, and a plan for supervisors to spend time in other organizations including competitors. Employees were also encouraged to develop relationships with universities. Internal sources include allowing managers to spend up to $10,000 to experiment new processes/practices which are conducted on the production line rather than in a lab. The company also established a 3.5 year apprenticeship program registered with the U.S. Department of Labor and hired employees based on their learning potential. An unusual aspect of the apprenticeship program was that the instructors were selected foremen who rotated in from the floor of the factory to teach. This helped to create a high level of credibility
Chaparral 4 for the education program on the factory floor. It also motivated the instructors to be more effective because they saw the results of their teaching on the job (Leonard-Barton, 1992). The pay scale was based on employee skill accumulation as well as performance, which was consistent with encouraging employees to participate in various training sessions and the apprenticeship program (Dixon, 1999). According to Chaparral Steel’s 2002 website, some of these practices were still being employed. At that time, the company name was Texas Industries Chaparral Steel (TXI). The website states that TXI partnered with external stakeholders, including customers, to improve customer support offered by the company (TXI, 2002). Listed under the heading “TXI Organizational Environment,” the company promotes the following: • • • • “fosters a work environment that will interest, challenge and motivate employees. continually integrates all business units to achieve a one company philosophy. implements new systems and technology to increase flexibility and responsiveness. encourages empowerment, decision-making, planning and innovation by all employees.” (TXI, 2002)
These goals are consistent with the company’s organizational learning cycle as described in 1999. Based on this information, it would appear that Chaparral Steel continued to value its employees’ ideas. Limited information is available regarding the Gerdau group’s management of Gerdau Ameristeel which Chaparral Steel became a part of in 2007. However, in a brief phone interview with the plant manager in Midlothian, Texas, a former Chaparral Steel employee who continues to work for Gerdau, the 3.5 year apprentice program has been reduced to a one year classroom program under Gerdau. He said that the workers are not as well prepared and more training has to be done on the job. There is still cross-training and Gerdau tries to give employees responsibility so they can “run the place” (G. Carlisle, personal communication, September 22,
Chaparral 5 2009). According to the Gerdau organizational website employees have access to information, although specifics of what information is accessible were not provided (Gerdau, 2008). Gerdau Ameristeel supervisors are interconnected between facilities in all locations by videoconference to exchange knowledge and ask questions (Salgado, 2007). Gerdau Ameristeel continues to interact with customers of Chaparral Steel to improve customer service (Salgado, 2007). According to Carlisle, factory operators continue to travel with sales people to see installations and meet customers. There is also travel to other plants as part of learning and the effort to innovate, although most of this travel is to Gerdau plants, there are over 20 in the United States. He also said that in the current economic times, competitors are less willing to allow visits to their plants (G. Carlisle, personal communication, September 22, 2009). Integrate new information into the organizational context Chaparral Steel integrated information in the late 1990s by assigning every employee to rotate shifts as well as having cross trained employees, such as security guards obtaining training to complete data entry assignments. Chaparral Steel also promoted the uninterrupted flow of information rather than information batching practices. Locating information on the integration of information in Gerdau Ameristeel is limited. According to the Gerdau group’s website, the company focuses heavily on employee training and development which the company feels leads to “employee practices of expanding areas of activity, new interfunctional tasks, participation in work groups and research in new areas” (Gerdau, 2008). These practices could lead to integration of new information although not explicitly stated.
Collectively interpret information
Chaparral 6 Chaparral Steel designed its facilities to foster collective interpretation. There was no assigned parking, one dining facility, and all employees were salaried. Chaparral Steel relied on employee honor in keeping their time. There were no time clocks and no vacation or sick day tracking. The plant layout was intentionally designed to facilitate the flow of knowledge through accidental meetings. For example, by placing the locker rooms in the headquarters buildings, line workers and administrative employees were in close proximity at least twice a day which encouraged the sharing of information across all levels of employment. Spontaneous meetings in hallways exchanging information were frequent and considered a norm. The strategy of keeping the number of employees in the plants at less 1000 contributed to everyone knowing each other and an easier flow of information. There was even an expression on the floor of keeping ‘the flow’ of information in a similar way to keeping the flow of steel in production. It was considered essential to success (Leonard-Barton, 1992). The Gerdau group website is limited in what information about specific company practices are shared with the public. Gerdau Ameristeel’s CEO, Mario Longhi stated in a 2007 interview that the company wants “common knowledge in terms of what they [employees] define as success” (Salgado). Authority to take action on the interpreted meaning Chaparral Steel allowed employees the authority to take action within the company’s clear operating objectives (Dixon, 1999). The operators were given the responsibility for keeping their respective processes and equipment in advance of the leading edge of technology Progress was considered everyone’s business. Potential improvements were put into action immediately with no wait for management approval. Rewards for improvements in process and innovations were given to teams and not individuals. Ninety percent of the problems were solved on the
Chaparral 7 factory floor through spontaneous meetings and joint problem solving without ever making it to the morning meeting (held among all shift members to discuss problems) (Leonard-Barton, 1992). Chaparral Steel also had a bonus system that was linked to profits and the majority of employees held stock in the company. The company allowed employees to act on ideas and considered mistakes part of risk taking (Dixon, 1999). Gerdau Ameristeel has organized a group of employees to develop a strategic plan for the future (Salgado, 2007). This can be interpreted as action based on a collective meaning as the employees selected to develop the company’s strategy would need to integrate ideas from across functions to develop a plan which could be acted upon. According to Carlisle many decisions are still made on the floor of the steel mill. The factory is still considered a ‘learning lab’ where new processes or equipment is tested by the operators next to the present process/equipment on the floor and innovation is encouraged (G. Carlisle, personal communication, September 22, 2009). In summary, although Chaparral Steel has been acquired and is now part of Gerdau Ameristeel, based on information available, some elements of the organizational learning cycle are present. Carlisle said that many practices established under Chaparral are still in place and that they are still in the process of “marrying the two cultures.” Learning is still important. Many people who worked for Chaparral continue to work for Gerdau as there were no major layoffs. However, what was formerly Chaparral Steel is now part of Gerdau Ameristeel and following the Gerdau Business System (GBS). “They bought us, we did not buy them. So, we’re fitting into their system” (G. Carlisle, personal communication, September 22, 2009)
Chaparral 8 References (2002, November 24). TXI Corporate Culture. Retrieved from • http://web.archive.org/web/20030313205720/www.txi.com/default_3.tpl? id1=1&id2=7&id3=32 (2008). Gerdau - Our Culture. Retrieved from http://www.gerdau.com/carreira/cultura-e-climanossa-cultura.aspx Dixon, N.M. (1999). The organizational learning cycle: How we can learn collectively. (2nd Ed.) Brookfield, VT: Grower. Leonard-Barton, D. (1992). The factory as a learning laboratory. Sloan Management Review, Fall 1992, 34, 1; p. 23-32. Salgado, B. (2007). Learning from others. Manufacturing Today, July/August, 44-52.