The Newport & District Metallurgical Society held its AGM and new Presidential address last night (24th Sep 2015) at Cardiff University. Stuart Wilkie has held many posts in Tata Steel, the last one of which was a short stint as MD of Cogent Power (my old company). Since the start of the year he has been given the task of running the Tata Steel Strip UK Hub in South Wales, namely Port Talbot and Llanwern steelworks, with approximately 4500 people.
The theme for his address was ‘Transformation & Tata Steel Strip UK’, showing with some detail, the process of business transformation they are currently undertaking and proposing for the next 10 years.
The primary purpose of this post is to get SOME of the observations, thoughts and ideas down while they’re still relatively fresh in my head. There are many more items that could be discussed.
The opening challenge showed us a graph illustrating the relative EBITDA (Earning Before Income Tax Depreciation and Amortisation) of competitors within Europe. Voestalpine (VA) were consistently at the top and positive (‘price high, sell well) and after a dip Tata sister plant in The Netherlands, Ijmuiden (IJ), had also reached similar levels. Strip UK had hit rock bottom in 2011 and remained there since. The question was how had IJ managed to climb back, and how could Strip UK learn from this.
There is a more cutting question of course: Why did a sister plant go through this process of fundamental improvement without it’s UK sibling noticing (or not doing anything about it), but we won’t dwell on that here.
It sounds like IJ had in fact gone through a fairly classic, logical consultant initiated, transformation programme, something British Steel, Corus and now Tata had already gone through on a number of occasions (remember T-Map ?), so what was different ? My impression was that this time the consultants had majored on significant behavioural and organisational change at grass roots and leadership level, hand-in-hand with all the ‘normal’ business improvement activity identified (from voice of the customer analysis to process improvement), in order to make the improvements and improvement culture stick or ‘sustain’. Importantly, a concentration of higher-value products was mooted.
Back to the Future ?
So what have Strip UK done ? Well, they’ve followed the same tack, admittedly (SW) ‘3 years after they should have done’ and got Stuart in to make it happen. The package is called ‘Delivering Our Future’. We were presented with the dense 110 page document of transformation information (fairly typical of McKinsey) with LOTS of great-looking analysis (I suspect at some expense !). It concentrates on: Cost of Liquid Steel, Maintenance, Customer Value, Operations Spend and Other (incl. Energy), in 41 projects, with £1.9Bn of investment (in kit) over 9 years.
The size of the prize ? Well the aim is to increase the EBITDA margin from 0 (zero, at best) to around £70-75/tonne. Supporting this was a re-concentration on and re-organisation around the ‘Trio’ of agents: Production, Technical and Maintenance – very much back to the future – and work on changing mindset (throughout the workforce). For instance, shift managers would be allowed to manage operations, and not spend half their time reporting to the senior managers in order to wait for permission. This leaves the senior mgrs to concentrate on the tactical aspects.
I’m in favour of this depth of analysis (I’ve been involved before, on a number of occasions and in different environments), but Strip UK have done this many times before, so it comes with the risk of ‘change fatigue’. There also the danger of ‘analysis paralysis’ and overloading the workforce with a raft of detailed information (hopefully story-telling) and initiatives. It sounds like it’s ‘being done to them’ not initiated by them. So much for ownership. All that info was difficult enough for me to take in (and I knew where they were coming from).
Thoughts & Questions
Has the ‘Tonnes Culture’ of UK Strip (particularly Port Talbot in my experience) really disappeared or is it likely to ? A behavioural move from ‘cost cutting’ to genuine ‘value generation’ would help.
Are people at the coal face, where the value is created (or can easily be destroyed) really valued themselves ? Again, deliberate mention by SW of ‘minimum wage guys’ in packing.
Is just canvassing 1600 middle-managers (yes 1600 !) viewpoints on the proposals indicative of the remaining hierarchical nature of this business ?
What happened to the OGSM projects from 2011 I wonder ? I suspect many of the process improvements suggested (or follow-ons) ended up in this document, so maybe just regurgitating well worn benefits.
In part 2 (not published yet):
Customer Value (for Valued Customers ?): Too little, too late ?
UK Steel – SW quotes ‘A Perfect Storm’; Tata pulls the plug on the project.
Not a great place to end the lecture.
16th October: With ex-Tata Steel facilities at Redcar closing and now, today, 1200 jobs likely to go at Scunthorpe, Dalzell and Clydebridge it looks like the ‘Perfect Storm’ has hit.
Will Port Talbot be allowed to ‘Weather the Storm’ this time round ?
18th January 2016: It appears that the perfect storm has made landfall in South Wales – at least 750 jobs expected to go in Port Talbot and another 3oo around the plot: Trostre in Llanelli, Llanwern in Newport, Orb ? From what I’ve heard this morning, this might just be the opening salvo, a warning shot, if you will, from Tata HQ.
That’s it for now. I’ll try to post part 2 when the dust has settled.