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Lessons in HR Featured

9:43am EDT July 22, 2002

From the outside, Olympic Steel might just look like any other steel-servicing center.

It’s what’s inside the walls that separates the company from its competitors: its people. And it took Olympic Steel a while to realize that.

“When you come right down to it, we sell a commodity,” says Maureen Mason, director of human resources. “And what really make the difference are things like quality and on-time delivery. Those things are tied to people.

“We just needed some systems in place, a little bit more rigor around our processes and systems, to guide people in the business.”

To reach that point, Olympic Steel first had to create a professional human resources department — something the giant steel center had never considered.

Olympic Steel was started in Cleveland in 1954 by the Siegal brothers, Morris and Sol, in a rented building with 40 employees and no human resources department. Like many small businesses, the traditional human resources issues — hiring, payroll, benefits — were handled by a traditional HR executive.

The other side of HR, the strategic issues — people and policies — were handled by President and CEO Michael Siegal. Olympic Steel put its first personnel manager in place about 10 years ago.

Says Mason, “There was a manager identified who focused on those things as well as employee relations on a full-time basis.”

But that manager used a transactional approach, not a strategic one.

“The company got to a point, around January 1999, where it was very large and the executives had many other responsibilities,” says Mason, who was hired to fill the human resources role.

Siegal (son of one of the founders), who had handled many of the strategic HR issues up until that point, realized his attention was needed elsewhere in the business and reluctantly gave up the role. He enjoyed and “did a wonderful job of caring for the people issues,” Mason says.

But sometimes business gets in the way. In addition to growth through acquisition, Olympic Steel went public about six years ago and completed a secondary public offering in 1996. The company, which processes and distributes flat-rolled carbon and stainless products, now has revenues of about $600 million with operations in 13 locations nationwide.

For Siegal, the strategic issues simply became too much to handle.

“At the urging of the board of directors, they decided to bring in a professional HR director to bring a different perspective to the human resources organization,” Mason says. “(It wasn’t) to replace or to be another person doing transactional work, but it was to take more of a strategic look at the people of the business.”

Mason’s job, then, with the board’s blessing, is to focus the company’s HR department on issues such as training, development, restructuring compensation packages and even looking for the Olympic Steel’s next CEO.

The company recently rolled out the Professional Advancement and Career Enhancement program, designed to identify, develop and retain “high potential” managers. The PACE program is even part of the succession planning process, Mason says.

Maximizing people, the company’s most important asset, is the goal.

“That is what human resources is all about,” Mason says. “We function as a strategic business partner, and we look at the people of the business and we basically say how can we maximize their contributions to this business.”

Even with the backing of the top brass, Mason’s appearance rankled a few managers.

“There were certain leaders in the business that viewed human resources as personnel people,” she says. “There were some eyebrows raised when initially I showed up at some key strategic business meetings, where we were talking about our goals and objectives of the corporation.”

While those issues were quickly dealt with, not having the full support of management within an organization can be a problem.

“I have seen HR people not be effective in the business, because they don’t have the support of the top leadership,” Mason says. “They work for leaders that don’t understand the impact HR can make. When you’ve got a senior team that understands that people are critical to the business and they value human resources, then it can really be a partnership.”

Creating that understanding is the first thing a company must do before it moves from the traditional transactional HR model to the strategic model.

“My first recommendation is for a company to think about it from a strategic standpoint — how can I make my people a value-added difference in this business.? The HR professional comes to the business understanding the levers that can be pulled to make that happen — compensation, staffing, training and development.

“I think they have to look at it more broadly,” Mason continues. “What can be gained in the business by increasing employee productivity? Think of that bottom-line dollars and cents impact to the business. HR people, by really understanding risk management and benefits, we can negotiate.

“We can bring some very specific bottom-line dollars to the business by developing more cost-effective benefits packages, by developing new compensation mechanisms.”

How to reach: Olympic Steel, (216) 292-3800

Daniel G. Jacobs (djacobs@sbnnet.com) is senior editor of SBN.