Severstal NA CEO Leading Culture Change

It began with a call from Severstal Russia the Friday before Labor Day weekend 2013. A call came into Saikat Dey’s Severstal Dearborn office asking if he would take the job as CEO of Severstal NA beginning that following week. Nine months later I found myself sitting in his office asking him about the culture of the company at that point in time and what he saw as his priorities in his new position.

He told me that they had a very dedicated workforce with a very talented crew of people. The Company “Heard them but they didn’t listen to them. The result was the employees felt jaded.”

The first step was to surround himself with the “most diverse and youngest team in the steel industry…The second step was to build trust, transparency and a sense of ownership.”

He maintained his original office which he said with a wave of his hand “faces the parking lot,” and he and the other managers now walk the plant and talk to the employees. He told me, “There is no ivy tower here, no 61st floor office, no private elevator…” He went on to tell me that he started a blog and has a feedback line. The employees have access to the ear of the head of the company.

One of the goals was to build a sense of pride in the company. One of the first things he did was to remove the executive perk of a private parking garage which was connected to the executive offices and, instead, turned it into a basketball court for the employees. It wasn’t just any basketball court. It soon hosted the first SNA Games basketball competition as the various groups within the company formed teams and competed with one another. The executives had their own team called “New Kids on the Block.”  The winner of the Dearborn tournament played the winner of the Columbus plant in a home and away series. The security guards at the front desk were very proud that they had a team and that they were able to compete.

We had unusual access to the Severstal team over a two day period since we were conducting one of our Steel 101 workshops in Dearborn and Severstal hosted a tour of the Dearborn facility. We also had a number of Severstal employees in various job functions attend our workshop. What we found was after just nine months Saikat Dey is well respected and someone the company is comfortable following.  From those with whom with met and spoke, we found that the sense of trust, transparency and a sense of ownership were becoming real for the employees of Severstal North America.

Besides changing the culture, Mr. Dey is well grounded in the understanding that the company needs to also focus on those areas of the business which make them money and identify those areas where they don’t. “It is a shame to have the newest car on the block and not know how to drive it,” is how he explained it to me.

The company was profitable during the 1st Quarter 2014 and is currently operating at full capacity at both the Dearborn and Columbus mills.

Where does Mr. Dey feel flat rolled steel price direction will be from here? “I hope it [higher prices] last for a long time. But I am concerned about a possible bullwhip effect.” The bullwhip effect being you get a big push to higher prices which is then followed by an almost immediate and sharp drop in prices.

We spoke about there being some confusion as to whether this up cycle was strictly supply side driven or are there improvements in demand which are also supporting the market. If demand is stronger than what many economists believe, then Mr. Dey believes there is a 50/50 chance prices will remain at current levels. Time will tell if this market is strictly supply constrained and the bullwhip effect will come into play or demand will dictate a calmer course for market pricing.