April 2007- The lives of the employees at Olympic Steel, Bedford Heights, Ohio, are confined to "everyday drama" rather than filled with thunderbolts, great wars, harpies and the Minotaur. But when it comes to building its own legacy, the company creates a culture that focuses on responsibility from the very top right on down to the shop floor.
It may not be the stuff of lore, laid out in dactylic hexameter, but the comp;any has become successful by sticking to its main objective: to create continuous value for its stakeholders.
Olympic has more than 50 years of experience under its belt, focusing on the direct sale and distribution of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel products. The company started in 1954, says Michael Siegal, CEO, and moved to its first physical location in 1956. "It wasn't really until the 1980s that we started to expand beyond the single location," he says. "We took possession of the steel and outsourced most of the processing until about the mid-1980s with the transition of management from first generation to second generation. That second generation took a different model that said we had to be expansive in terms of our ability to survive and prosper."
As a result of this change, the company made its first acquisition and bought its first major piece of equipment in 1987. It continued to make a number of acquisitions in the late 1980s, adding greenfield sites, facilities, locations and equipment throughout the 1990s. "We started to grow the business substantially, to the point where we went public in 1994. We did a secondary offering in 1997."
Siegal says that as a public company "you have to do certain things in terms of discipline, and I would tell you in retrospect that all companies would probably be better off if they took a long-term approach. It's a mental discipline and a financial discipline."
Communication is just one part of keeping everybody on the same page. "We have a universal meeting every Monday morning," says Siegal. However, the companies are in touch every day because the market changes so rapidly.
"At the end of the day, the way you motivate cooperation between disparate universes is by tying everybody's compensation to the same base metrics," he notes. "At the senior levels of the company, it's not about the individual performance, it's about the performance of the company, which is the incentive base for the compensation."
Another backbone of the company is its values. "The way you bring a culture to your organization is by being consistent through various periods of time," says Siegal. "Every organization will have a value stream that it operates under. Some articulate them better than others. We believe in the values of this company and we choose to articulate them strongly and consistently. How we evaluate your performance as an individual will be predicated on what you did and how you did it within the framework of the values of Olympic Steel. You are equally responsible for doing what you say you are going to do and doing it within our values."
Siegal notes that it's important to consistently apply these values, adding, "Hopefully it filters down in your organization. It's a struggle, but it is a battle worth fighting."
Merging traditional and advanced technologies
The company offers both traditional service center processes, such as cutting to length, slitting and shearing as well as higher value-added processes such as blanking, tempering, plate burning, laser welding and precision machining of steel parts. "We're adding lasers all the time," says Siegal. "We've got some bending equipment that we're adding, as well as some CNC equipment. We're replacing some of our big pieces of equipment, such as cut-to-length lines, with newer equipment. It's a continual upgrade and an additional value."
One of the company's goals is to "increase the value of steel we send out on our truck. We own steel. We're an inventory company. We concentrate on our capital turnover. From that standpoint, as long as we're going to accelerate steel going out the door, we ask, "What's the maximum value we can attach to the steel?' What we've determined is that we can sell a piece for x amount or we can sell a piece for 10x." Under this model, Olympic isn't giving up the low-margin, high-volume business but instead blending the commodity steel with the value-added steel.
Siegal says that the upgrades give Olympic the ability to accommodate the needs of many customers. "Every day it's a question of being flexible enough to add value for the customer. Each customer has a unique desire for what he wants his suppliers to do." He compares this ebb and flow of work to an accordion. If customers are really busy, they send their overflow to Olympic, but if they're not busy, they pull it back in, making the company's flexibility paramount.
Excited about the future
That flexibility is a great asset in a constantly changing climate. "Whatever I tell you today I mean," says Siegal, "but tomorrow is a different story. It's an exciting time to be in the steel industry. We can see the opportunities for growth for us and the people that will succeed us in what I consider to be a terrific industry that went through a long declining period. But it's now on a long upward swing."
The future, however, is dependent on people, he says. "When you look around at an MSCI meeting, you don't see a lot of youth or diversity. Those are issues that we confront in this industry because in the last 20 years, it was very difficult to recruit people into this business. It's imperative to bring in fresh ideas and young people who are educated and who are excited to be part of the steel business. It creates motivation for us."
Once you have those good people, implementing strategies becomes easier. Steward is a word that you don't hear much in the industry today, but that's how Siegal views his role. From his perspective, stewardship goes far beyond the latest trend. "The global market gets a lot of publicity and headlines. It was popular to talk about e-commerce and a China strategy in the 1990s. There are fads that come along that we all have to have a strategy for. But if you don't add the current value on your everyday business to your current customers, you're not going to get there anyway."
Siegal says that the outside influences can be intoxicating. "It's like living in New York City. Everybody is driving around in limousines and drinking $200 bottles of wine. If you live in New York, you think that's reality. It's not."
The "Olympic perspective" is to have the objectives defined, articulate them and then perform to that standard. "We look at all the opportunities that we are confronted with. We understand risk management and understand that the volatility in this industry is rather profound. We're going to stick to our mission and stick to our objectives."
Those objectives include "committing ourselves to our employees and to our customers. Ultimately the shareholders will benefit. The future plan is to grow profitably but also manage risk. I think people lose sight of the fact that managing risk is still a big part of this business because the numbers get so big."
It's never just about the money at Olympic. "We want to create a meaningful return but we need to do that understanding our responsibility to the families and the communities that we represent. We have to do it with integrity, pride and the respect of the individual, understanding that we have the responsibility of stewardship to all our stakeholders . . . You ultimately have three stakeholders that matter: your customers, your shareholders and your employees." MM
By Lauren Duensing, from the April 2007 issue of Modern Metals.