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Scrap industry on slippery path by recycling executives

Keywords: Tags  Full of Scrap, Lisa Gordon


It is becoming more commonplace for metal recyclers’ employees to jump to competitors’ ships, making staff rosters as volatile as scrap prices. The leapfrogging isn’t a phenomenon of just the hourly worker pool, but stretches all the way to the boardroom.

For example, PSC Metals Inc., Mayfield Heights, Ohio, is now run by a former OmniSource Corp. executive, and Fort Wayne, Ind.-based OmniSource is headed by a former executive of Commercial Metals Co., Irving, Texas. A top gun at Sims Metal Management Ltd. shed his 40-year tenure at the company to join Hugo Neu Corp., New York, while a second Sims veteran is now helping to run the show at Schnitzer Steel Industries Inc.’s metals recycling business.

An industry dedicated to recycling materials apparently now has a penchant for recycling people. Years ago, young workers were hired, rose in rank and spent their entire career at a company; today, they have become disposable commodities.

Experienced workers aren’t leaving for a better paycheck, though. Studies indicate that the primary reason they exit is because they don’t like how they are treated and feel unappreciated. Employees who genuinely like their jobs aren’t looking for a new place to boot their laptop.

Increased ownership by publicly held companies, the evolution in employee benefits and the disintegration of small-town living all seem to be factors in the modern molting of company loyalty.

It is a little disconcerting to watch a company develop and foster its talent, only to see its investment enjoyed by a rival. The trend is partially due to corporate culture weighing on the ambitions of some executives who were driven to become successful by taking risks and chances. A decade ago, these scrap giants were privately owned or not part of a multinational corporation, and Wall Street is a different animal than Main Street.

Publicly held companies scooped up these assets, attracted to the profits and future potential that could be achieved by absorbing metal recyclers. Two publicly held companies purchased the assets of others in 2008, only to show the original owners to the door due to what they called irreconcilable differences. The walking papers made it seem as if the purchases were nothing more than insincere shotgun weddings to own the house and evict the builder.

At the same time, scrap companies’ margins are becoming increasingly constrained and operating in the red is the new normal. Perhaps it is time to place value on the intangible talent within a company.

Some executives who have jumped to another ship say that applying the Wall Street business model is a mistake. Forcing those who made their nest eggs by speculating and taking chances to conform to quarterly cycles might be like putting a glass slipper on a pig.

A recycler who has poached more than a handful of executives from publicly held companies said his recruits became frustrated and disillusioned as their status disintegrated from a respected name to a social security number. One broker said he threw in the towel because he didn’t like the changes associated with being publicly owned.

Relationships with customers and suppliers have long been a key to success, but corporate ownership doesn’t seem to recognize how vital these are to the earnings sheet. There are no benchmark criteria for the value of a worker. One recycler said new hires are merely given a pricing sheet to quote customers, with no emphasisÑor trainingÑon nurturing successful business relationships.

One privately owned scrap company executive said a shift in dynamics from defined pension benefits to 401(k) plans also has worked against motivating a worker to make a career at one place. With defined benefits, now regarded as expensive, the longer a worker stays the more it makes sense not to leave the company; with 401(k) plans, now widely used, an employee retains the retirement package if he moves on.

Whatever the reason, the struggling financial results of scrap companies might serve as a good incentive to think outside the corporate box and work to maintain high-performing workers.

When an employee changes companies it damages the morale of the rest of workers, who feel betrayed or abandoned by the defector. It also works to fortify whispers that a company doesn’t care about its employees.

And it is disruptive. Not only do employers face training costs, but replacement workers don’t bring immediate results. Just as it takes time to commission and bring a shredder up to its potential, the same can be said about new employees. Every job has a learning curve.

Employee turnover is a double-edged sword. It might be good to bring in new talent when the old guard has become too satisfied and comfortable, but it also has many drawbacks: It is costly in terms of the industry relationships the worker might take to the new workplace, gives the new company an in-depth perspective on the company the worker has left, and opens the door to other key employees being encouraged to make a switch.

With so much at stake, it might be time to appreciate those contributing to a company’s success on a daily basisÑwhether an hourly worker who never misses a shift or a senior manager. Quality employees are the company’s brain trust and need to be treated as such.


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