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Forging the Ferriola years

May 31, 2017 | 08:00 PM | Jo Isenberg-O’Loughlin

Four-and-a-half years into his tenure as Nucor’s chief executive officer and in the wake of two legendary top executives, John Ferriola is addng his own unique chapter and special stamp to a legacy unrivalled in Steeldom.

Looks can be deceiving. To the casual observer, the two-and-a-half years that passed since AMM last visited the office of Nucor’s chairman and CEO in Charlotte, N.C. would seem to have left little evidence of the deepening imprint on the country’s largest—and arguably most successful—steelmaker of what will come to be viewed as the “Ferriola” years.

The oil painting of a team of American bison driving through shoulder-high drifts of snow still hangs on the wall and the “pinky” ball sent the Brooklyn native by a childhood friend bearing the hand-written message “Remember where you came from” hasn’t moved from the bookshelf.

Inside and around the organization, however, John J. Ferriola is moving and, in the process, building on and adding his own unique chapter and special stamp to a legacy most consider unrivalled in Steeldom. Preceded by two formidable top executives—Daniel “Dan” R. DiMicco, and the legendary F. Kenneth “Ken” Iverson—Ferriola was named chief executive officer in January 2013 and added chairman to his title following DiMicco’s retirement January 1, 2014.

In the intervening three-plus years, Ferriola has seen his share of both challenges and change. Some—a worldwide steel capacity glut—are frustratingly familiar and seem intractable. Others—a new administration and attitude in Washington—are encouraging.

“The same-old, same-old is the problem we have as an industry,” the  career-long steel executive said. “It is the same challenge we have at Nucor and that we have as an industry. And that’s overcapacity. That really hasn’t changed at all.

“What might be new is the success we have been having with the trade laws,” he allowed. “And the impact that has had on our industry and, frankly, on our economy. We have had a lot of success working in Washington to get the trade laws better enforced.

“If you look at 2016 compared with 2015, there was about a 15-percent reduction in steel imports,” he noted. “That is a significant improvement.”

Ferriola sees no improvement, meanwhile, on the global overcapacity front, dismissing China’s repeated pledges to bury its obsolete steelmaking capacity as a “bunch of baloney.

“We call it smog-and mirrors,” he quipped, referring to Beijing’s massive and much publicized pollution problem. “What is so amazing is you saw articles coming out of China all year long reporting plans to cut capacity. And then CISA (the China Iron and Steel Association), by their own count, came out at the end of the year and said they were up by a tiny bit.

“The point isn’t they were up just a tiny bit,” Ferriola argued. The point is they were supposed to be down. And they’re not. They are not addressing the issue. And at some point, they are going to have to because of the environmental concerns.”

A degreed electrical engineer, Ferriola began his career at Nucor in 1991 as manager of maintenance and engineering at the steelmaker’s Jewett, Texas bar mill after spending the previous 17 years in various operating and management positions at the former Bethlehem Steel. In the 26 years since joining Nucor, he has served in a series of increasingly responsible positions across the steelmaker’s now more than 200-facility front.

Stops along the way include stints as general manager of the company’s Grapeland, Texas joist fabrication facility (1995), and as vice president and general manager at both the Norfolk, Neb. bar mill (1995) and breakthrough Crawfordville, Ind. flat-rolled mini-mill (1998 to yearend 2001). Ferriola was named an executive vice president in Jan., 2002 and Nucor’s chief operating officer of steelmaking operations in Sept. 2007.

Over the years as he navigated up the corporate ladder, Ferriola has made countless decisions, none of them tougher, he reflects today, than those involving his 24,000 co-workers or “teammates” in Nucor parlance. “When we say our teammates are our most valuable asset, we mean it,” he emphasized. “You don’t need to look any further for proof than our no-layoff practices.

“The toughest decisions I have had to make as CEO involve our teammates and personnel-related issues, whether they deal with succession planning or taking disciplinary action in response, for example, to a safety violation,” he said without a hint of hesitation. “The absolute toughest thing I do is getting involved if we have a fatality.

“Mergers and acquisitions, those decisions come and go and are not easy,” Nucor’s top executive acknowledged. “But the truth of the matter is they are money, they are equipment, they are not people.

“If the person who sits in the CEO’s office at Nucor doesn’t tell you that the toughest decisions they make every day involve their teammates here at Nucor, that person doesn’t belong in the CEO’s office,” Ferriola said simply. “I believe if you asked Dan DiMicco that question, he would answer the same way. I know if you asked Ken Iverson that question, he would answer the same way.”

Calling on the perspective that comes after occupying the CEO’s office for four-and-and-a-half years, Ferriola acknowledged that serving the position has had a marked influence on both his professional and personal life. “I don’t know anyone who could be in this job that it really doesn’t change,” he said.

“You change the way you think. It becomes much more global, much more holistic. And it certainly takes away some balance in your life. It is a demanding job,” Ferriola acknowledged. “Anyone who aspires to this job needs to recognize that you have to work hard to keep balance in your life. But the balance will shift.”

Give or take a Sunday morning and counting business dinners, Ferriola’s work week typically runs in the 65- to 70-hour range. “And that’s just in the office or in the building,” he pointed out. “You really don’t stop thinking, no matter whether you are in the office or at home. People laugh because they get e-mails from me all hours of the day and night.”

An early riser, Ferriola wakes up at 5:15 A.M. “That is just the way it is,” he said, attributing the habit to his days in the mill.  By 7:00 A.M. he is typically at his desk, either at home or in the office and some 13 hours later returns home and “usually does a little bit of work” before watching a favorite TV show or turning to a novel.

Ferriola, the son of a New York City policeman and avid reader, admits to being a big fan of murder mysteries. “I pride myself on being able to figure out who the killer is before I get to the end of the book,” he says, adding that burying himself in a good book is one diversion he calls on to help balance his business and personal life. “Because when you are reading, you are focused on the story,” he explained. “It separates your mind.”

Plain speaking with a tendency to underscore the message he is delivering at any given time with a telling anecdote, Ferriola describes the deepening imprint of his almost five years in the CEO’s seat as “kind of like that old wedding tradition. I would say it is something old and something new.

“One of the things that is great about our company is it is constantly changing and growing. It is great to be that way,” he said.  “But it is a double-edged sword. It insures the success of the company in the long run but it creates challenges that some of our competitors may not have to deal with.”

The old? What hasn’t and definitely won’t change throughout the Ferriola years are the practices and principles that have set Nucor apart from the beginning, it’s core culture. “The focus on our team, the focus on continuous improvement, the focus on bonus systems to incentivize behavior we are looking to achieve, the focus on those bonus systems being paid across teams to foster the concept of teamwork, none of that has changed,” Ferriola emphasized. “That’s all still the same.

“But because of our size and changes in the world around us, we had to do things differently too,” he explained. “And probably one of the biggest changes, one implemented working with the team, has been a shift from focusing only on operational excellence to one that focuses on operational excellence AND commercial excellence.

“This is not a shifting of expectations. It is an expansion of expectations,” Ferriola emphasized. “We are not giving up operational excellence because we have got to become more commercially excellent,” he is careful to point out. “We are going to maintain and improve the level of our operational excellence while we continue to improve our commercial excellence.”

The chief driver behind the need to make the shift is what amounts to a virtual sea change in Nucor’s competitive environment, both in terms of market players and the Charlotte, N.C.-based steelmaker’s one-time huge advantage in the cost and availability of raw materials (ferrous scrap) and its’ technology base.

“First of all, several Nucor teammates have left and started companies in the image and likeness of Nucor,” Ferriola said. “You’ve got Steel Dynamics Inc., you had SeverCorr that then became Severstal, and now you’ve got Big River Steel,” he runs through the list.

Add to that the elimination of millions of tons of integrated steelmaking muscle in the U.S. and the proliferation of faster and more flexible electric furnace-based melting. “As a nation, we have gone from a couple of steel mills that used scrap to produce steel to one where 70 percent of the steel made in the U.S. today is melted in electric furnaces,” Ferriola noted.

“One of Nucor’s largest advantages was access to available scrap and it was very cheaply priced,” he elaborated. “Same thing with energy. Back in the 60’s, 70’s and 80’s, power companies were looking to build new plants so they wanted a heavy, industrial base load. We fit that bill. So, we got good, 20-year contracts.”

All that has changed, of course, and with that came the need to rethink Nucor’s commercial model. “In the past, because we had such an advantage in raw materials—namely scrap and electrical energy—our marketing plan was if the mill isn’t full, drop the price ten dollars a ton,” Ferriola said. “Still not full? Drop it another ten dollars. Because we had a hundred-dollar gap, we could do that.”

Another very basic factor driving the need to reinvent Nucor’s commercial model was growth, both its’ own and that of its’ customer base. “We have customers who buy 12 different products from us from 20 different locations,” Ferriola noted. “If we had the old commercial model where every plant conducted business on its own, we would confuse the heck out of the customer and there would be so much overlap. We had to change what we did.”

The result of that mandate is what Nucor’s CEO describes as “a very effective way to market our products and work
together as more of a single team.” Changes implemented as part of the remake range from “the way we pay” to the establishment of an enterprise account manager, “one individual who represents all of our products to a customer,” Ferriola explained. “So, whatever the product and wherever it comes from, the enterprise account manager is the point person. The customer has only one person to go to,” he emphasized. “And that has been very effective for us.”

Another initiative that promises to earmark Nucor’s Ferriola years is a sweeping digitalization project keyed to address the changing demographics of the steelmaker’s customer base as well as exploit the latest available technology to provide top management with dynamic decision-making tools.

“When you look at the spectrum of buyers we have today, you’ll find we still have some who want to fax in orders, some who want to call in orders, some who send in paper orders, and ones that want to do e-commerce,” Ferriola observed. “And now we’re getting people who don’t want to do any of that. Instead they say I want to tell Echo, order me 500 tons of 2 x 2 x 1/4-inch-angle from the Jewett plant and deliver it to my plant in Grapeland, Texas. And it happens.

“We’re not there yet. And there’s a lot of work just to set up the basic digitalization,” Ferriola acknowledged. To get there, Nucor named former executive vice president Joseph Stratman chief digital officer (CDO) a newly created position. “And we charged him with digitalizing the company with two objectives in mind, one external, one internal,” Ferriola said.

Dubbed NextGen, the project was launched eight to twelve months ago and is being implemented by an internal IT team. “The goal externally is to get us to the point where our customer base can use digital technology so easily to order product from Nucor that we have a competitive advantage in the marketplace simply because we are easier to do business with,” Ferriola noted. “We’re miles ahead of most of our competitors on e-commerce, and that’s great. But the next step is full digitalization,” he added.

Internally, the goal is to collect, mine, organize and dynamically present top management the information they need to know to make informed decisions.  “As our company gets bigger and bigger and we have more and more products, the amount of data we collect to understand how the business is running grows exponentially,” Ferriola commented. “To be able to put and present that data in a way that gives me what I need to know to make decisions is another task in and of itself.

“I want to have data that is easily converted into information that can easily be converted into knowledge,” Ferriola shared his wish list. “I don’t want books like this any more,” he said pointing to a stack of notebooks on his desk. “I want dashboards that are updated constantly that tell me what is going on all day, every day in the business in a way that I can understand and use to make good decisions, strategic decisions for the company.

“So, the role of the digitalization is twofold,” Ferriola summarized. “It is external with our customer base and internal with data management to help us make better decisions. Those are two large initiatives that I believe will take many years to fully implement.”

And it appears Ferriola, 64 expects to benefit from the full implementation of the digitalization drive he set in motion. “I anticipate being around for quite a bit of time yet,” he said. “But, you know, one of my favorite sayings is man plans, God laughs.

“In my mind, there is a timeline,” he acknowledged. “Am I going to share it? No. “But I think in any leadership role, there is a natural bookend. If you leave before a minimum date, you really haven’t had a change to effect change. But is you stay past a certain timeline, Ferriola cautioned,” you begin to believe your own thoughts so strongly that you don’t listen.”


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