Case Overview

NSC stands for Nippon Steel Corporation. It is the worlds largest producer of crude steel, it was industry leader then & 2.5 times larger than its nearest competitor. Yawata Steel & Fuji Steel merged together & gave birth to Nippon Steel Corporation. The reputation of the company was such that if anyone had been hired by NSC then he was considered to be in an elite group. The wages and benefits provided by NSC were best among Japan and they had a very efficient strategy of Manpower management. Thats why they were able to be a top steel manufacturer in that time, when the technology was not very effective as now a days. As we all know that each & ever Company has to go through a crisis situation, NSC is not exception to it. In 1973 the Oil Shock of that year pushed the industry into a recession. The relationship with the Labor Union was also not good; strikes were a common thing occurred at that time. Though the overall cost of operation is increasing day by day NSC still did not start to trim its huge workforce until 1977. In 1979 where 70500 people were just enough to meet its project, they saw they has 3500 excess workforce. Their main strategy to decrease this huge excess manpower was to retirement on the age of 55. To make this situation worse, in 1979 the government announced to increase its retirement age from 55 to 60 to all its civil servants. As, it has just made good relation with its union federation, NSCs union which was the leading steel union federation start to push NSC to increase its retirement age, which will start to increase its operation cost for once again. So, a crisis situation occurred and they feel that how they will manage and trim the huge workforce to cut down their operating cost.

Organization Overview
Nippon Steel was created by the merger of two giants, Yawata Iron & Steel and Fuji Iron & Steel. Beginning in early 1981, however, the company cut production and saw a sharp decline in profit that fiscal year. Forced to close furnaces, the company exhibited a typical Japanese economic aversion to layoffs, opting instead to offer standard retirement enticements but also less conventional schemes such as a mushroom cultivation venture that used the surplus heat created by steel furnaces to temperature control a fecund fungi complex.

History of Nippon Steel Corporation Company Nippon Steel Corporation

Name Industry Founded Headquarter s Key People Products Employees Subsidiaries Website Steel March 31, 1970 Tokyo, Japan Akio Mimura, Representative Director & President Steel, flat steel products, long steel products, wire products, chemicals 59,183 (2011) Nippon Steel Engineering Nippon Steel Materials www.nsc.co.jp

Year History of Nippon Steel Corporation 190 The state-owned Yawata Steel Works began operation (present Yawata 1 Works). 190 Wanishi Iron Works of Hokkaido Coal Mine & Ship Co. started 9 operation (present Muroran Works) 193 Japan Iron & Steel Co.,Ltd. was founded through merger of Yawata Steel 4 Works with Wanishi Iron Works, Kamaishi Mines, Mitsubishi Iron, Fuji Steel, Kyusyu Steel and Tokyo Steel. 195 Japan Iron & Steel was dissolved. Yawata and Fuji Iron & Steel Co., Ltd. were 0 formed. 195 Hikari Works of Yawata Steel began operation. 5 195 Tokai Iron & Steel Co., Ltd. was established. 8 Yawata Steel constructed the Tobata Steelworks. 196 Sakai Works of Yawata Steel began operation. 1 196 Kimitsu Works of Yawata Steel began operation. 5 196 Tokai Steel became Nagoya Works of Fuji Steel. 7 196 Yawata Steel absorbed Yawata Steel Tube Co., Ltd. 8 197 Yawata Steel and Fuji Steel merged to form Nippon Steel 0 Corporation.

Management Principles
1. To Continue to be a Trusted and Responsible Member of Society 2. To Continuously Challenge Ourselves to Develop and Improve WorldLeading Technologies 3. To Always Try to Change Ourselves so that we can Deal with Future and Attain Further Development 4. To Realize a Group Full of Vitality by Developing and Empowering People

Business Strategy
The organizations business strategy is a set of objectives, plans, and policies for the organization to compete successfully in its markets. The business
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strategy defines what an organizations competitive advantage will be and how this advantage will be achieved and sustained. Priorities On Quality Flexibility Cost-cutting Speed

Business Strategy at Nippon steel corporation

Mission
Provide value to Employees

Competitive strategy

Retain the employee & hold market position

Workforce Strategy

Limited investment in technology

Fair HR Practice

Stabilized market demand so investment is also stagnant Ability to supply the needed items in the volumes required for the markets as they develop. Meet with growing customer needs. Producing quality product Employee participation in decision making Co-operation among workers Greenfield facilities which indicate new workers are trained through existent workers Introducing cost cutting through careful management and efficient work methods Limited investment in equipment because equipment could not provide sufficient return Sometimes invest in new technology to compete with other growing industry and maintain market position.

HR Strategy
Recruitment and Selection: A flexible, skilled work force was a central component of NSCs HR strategy, because of its unique recruitment process NSC was viewed as one of the Japans most progressive employers. In Japanese society, being hired by NSC was viewed as having been elected to join elite group. Although its recruiting right people for the right job it also minimize hiring needs through scale economics and rationalization. Training and development: NSC is a labor oriented industry; here they heavily rely on its work force for process improvement. They provide both on the job and off the job training. Managers viewed blue-collar workers more as technicians than labors. Furthermore, management began extensive efforts to improve interpersonal relations and communications between management and employees. The concept of self managed teams were introduced where groups of blue-collar workers work together after hours to solve problem or develop efficient work process. Performance ManagementNSC had a reputation of being one of Japans best-managed firms and its performance management system was also superior; they implemented the U.S concept of Senior foremanship that allow performance evaluation by the management as well as by the immediate boss. Also, a new pay system was devised there that replace the seniority based payment system by performance based incentive system. That means best performer gets the benefit more than low performer. Its wages and benefits were among the best in Japan, NSC sponsored its own sports team and club tours and trips and social events. The compensation package also includes performance bonus transfer benefits and other remunerations. Separation NSC had always tried to provide employment until retirement for each employee it hired; normal retirement age was 55 years. NSC did not begin to trim its work force untill1977. They believe NO one need to be laid off. They may transfer employees to another mill or run under capacity but try their best to retain the workers they have. Here comes the biggest challenge for the company IS IT TIME for the company to change its HR policies?

Labor Relation Strategy

Changes after world war
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Nippon steel had faced difficulties during post war period, labor union and communist influence was in its peak. Confrontations took place between still companies and communism influenced labor unions that are against of rationalization and layoff and asking for large wage increase while companies are facing slack demand and spiral cost.

A shock for industrial development : Declaration of strike During 1950s to 1959 company faced an increase problem of strike and lock out; in 1959 there was a massive strike of 49 days again no wage increase policy. That long strike forced steel industry to find an alternative solution that should be efficient and effective.

Introduction of one offer to reduce strikes In 1959 the tradition of one offer was developed by the steel industry was the response for labor strikes. One offer means a single response to union demand which union has never been able to improve through negotiation or strike. This offer explained carefully to the work force, was usually a fair offer in managements eyes and applies to both blue and white-collar employees

Moderate type of leadership Like any other organization Nippon Steel corporation was also facing its transition to some new philosophy of leadership, they revised their policy and allows blue collar workers promotions into management. The union leadership was regained by the modern thinkers that reduced the influence of communism new position of senior foreman was created to ensure blue-collar labors participation in management (similar to the U.S foremen system)

Proactive approach To avoid future strikes and lockouts the management starts to work with union, they often meet with union to maintain industrial peace. They have placed a greater importance on anticipating problems and solving them before they arise.

Excellent relations with labor union after initial turmoil

Both the union and management know that they must reach agreement because a development and success is a two way relationship between them. After 1959 the number of strike began to decline after 1965, Nippon Steel experienced no more strikes.

SWOT Analysis of Nippon Steel Corporation.

Strengths of NSC 1. Broad business areas: NSC has a broad business area which is very useful condition for large corporations. Also it does its business in all the country and also expanding its business outside of country. 2. Technological Competitiveness: NSC is well equipped with latest machines which help it to produce more. 3. Strong market position: It is the largest company of its market. Its nearest competitors are far behind it. 4. Research and development capabilities: NSC has a permanent facility for continuous research and development. 5. Best employer in Japan and providing best wages and benefits in its industry. 6. Secured employment. 7. Geographic diversification.

Weaknesses of NSC

1. Dependence on steel market dynamics. 2. Concentration of Operations. 3. Fluctuating margins. 4. Huge number of employees.
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5. Reduction employees by retirement. 6. Stagnant Steel demand. Opportunities of NSC 1. Realization of Global Corporate Group: The Nippon Steel Group is constructing a setup that can dynamically meet the needs of each expanding market and thereby increase its global marketing strength in order to meet the needs of customers throughout the world. 2. Expansion of operations 3. Plans to increase the annual production capacity 4. Industry leader 5. Adoption of emerging technologies 6. New plan to expand the business in other countries. 7. Strategic alliance with other companies inside or outside country. Threats of NSC
1. Consolidation in the global steel industry. 2. Natural disaster. 3. Rising environmental concerns. 4. Weakened financial future. 5. Clinching contract. 6. Volatile raw material price. 7. Necessity to shut down mills due to lack of demand.

Problem Identification
NSC was the combination of two largest and second largest steel firms in Japan. They merged to improve the operating efficiency and international competitiveness of Japanese industry.NSC was viewed as one of Japans most progressive employer. It considered as a best-managed company in Japan and provided best wages and benefits to employees. But we know that sky is the limit. So that by the time being NSC started to face some crucial problems to maintain its this renowned image. These were:

 1973 recession due to oil shock: NSC faced great demand lacking

and export obstacles. After oil shock they tried to overcome the loss but the growth was not like the before as from 1965 to 1973.for a while they tried to keep up output by exporting at a high rate. But EEC restricted this path through their import quotas and US by their trigger price mechanism. For that NSC again had to rely primarily on the Japanese domestic steel market for growth whereas there steel demand was still stagnant.
Protest against rationalization and lay-off: Under the condition of

rapid inflation and mounting unemployment NSC union started to protest against rationalization and layoffs. They started to demand for wage increase which was not possible for the steel companies because they were facing slack demand and spiraling cost, so as result confrontation occurred.
Excess of 3500 employees: Excess of 3500 personnel was a big

burden for NSC as its financial condition was going downward. With fringes and bonuses these excess personnel was costing 50 million per day. Moreover NSC had to pay interest, tax, miscellaneous expenses along with the cost of excess personnel. Which were expected to stabilize at 250 billion a year but these expenses was running at 350 billion a year. Whereas its shipment projection was not up to the mark and steel demand was stagnant. Thus this excess personnel created a critical problem for NSC
Necessity to shut down mills due to lack of demand: NSC always

acted to stabilize the market. For that it held back its investment despite aggressive investment by other competitor. Because steel demand was not growing fast that time and overcapacity threatened to be a real problem. So that to reduce fixed cost and work force level NSC decided to shift their production and thus necessity to shutdown several rolling mills had emerged. Competition was stiffer due to Govt.s emphasis to help smaller steel makers who specialize in smaller production runs, special shape and custom orders t gain market share at the expense of the majors. These problems were further complicated by:
Pressure

to increase retirement age: In 1979, government announced to increase the retirement age of government employees from 55 to 60 years. Where the standard mandatory retirement age throughout the civil service and most of private industry had been 55 up to that time and private companies preferred to pay employees a lumpsum retirement bonus of 5 to 12 million. For that most retirees could not afford to retire at 55 because of their less capability of supporting themselves when they stopped working. So NSC union had pushed hard
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for retirement at 60 as they knew the company was in tough financial condition, so they used the public opinion in favor of them. Thus NSC had fallen under the pressure to increase the retirement age.
Transfer of personnel became more difficult: It was because

transfer between mills did not mean better pay or a promotion because sometimes pay falls due to loss of shift premium or change of job content. Blue-collar worker were not reluctant to learn new jobs if they were assigned to them. They always felt downgrading of their working conditions and wages in this regard. Moreover employees became habituated and familiar to a place where they have been working for longer period of time. Thus they were opposed to uprooting their families, selling their homes and leaving their friends.

Alternative solutions
When NSC planned to shut down 4-5 rolling mills in full swing and also faced the problem of increasing the retirement age to 60 as like as the government organizations then the manpower planners had to examine the various solutions of these problems. Several alternatives for increasing retirement age was an immediate move to retirement at 60 moving back the retirement age one year at a time waiting several years and moving to retirement at 57, then to retirement at 60 four or five years later moving to retirement at 60 in two or three years staying at retirement at 55 We have already discussed that NSC has excess 3500 workers so to determine match between manpower requirement and personnel available planning needed across five decision areas: Anticipated personnel outflows The major sources of personnel outflows were Turnover (historically one half of 1% each year) Retirement (approximately 1500 workers retires per year in current time period) Promotion (approximately 200 blue collars are promoted to white collar employees)
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Rationalization It includes the number of people available minus the number required for operation which equals to number of people actually required for operation or excess people.

Hiring In that time, Nippon Steel Corporation had more employees in their payroll than they needed. So, they had to reduce hiring more employees. So, they already started to reduce hiring and at some time later they totally stopped hiring employees. But it was not so simple. If they dont employ new employees then young and energetic workforce would not be formed. So, they need to follow a steady hiring that would provide a best further balance, flexibility and manpower age structure.

Stopgap placement measures To assign excess blue collar workforce to reduce costs and give the employees meaningful tasks NSC had five alternative ways

Career Training: NSCs each blue collar worker received, on average, five years of training during his career. This gave NSC the option of accelerating up to 200 men in a year. Loaning workers: At that time the steel industry of Japan was in a slump but the automobile industry was booming. So, NSC was sending some of their employees to work at a major Japanese auto company. At a time 400 men could be loaned, but men did not like leaving their friends and families for several months. Restructuring: It allows NSC to redefine the services performed by its subcontracting firms so as to cut back on payments to them and provide jobs for its excess workforce. Transferring Personnel to new venture: NSC could transfer up to 100 workers to start a new subsidiary or new venture.

Other short-term / long-term adjustments to work force

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If NSC had excess personnel it wished to keep on the payroll who could not be absorbed by stopgap measures, such personnel could be assigned to Make work projects to keep them occupied In tough situations, lay-offs, early retirement, and discharge had been used Voluntary retirements

Alternatives for reducing Employment costs The mangers of NSC emphasized on cutting employee costs instead of personnel costs. Employment costs per employee could be reduced by the following means:
Saving wages

There will be no further increase of wages. It might result in the moderates being voted out, danger of breakdown of management-union relation Fringe benefits removal A 10% cut in the fringe benefit could save a lot of cost of NSC. The result may be an impression that NSC was cheap Retirement bonus cuts When NSC is providing longer work life then retirement bonus could be cut off and money could be saved. But union relations could be affected due to this step.
Seniority wage increase reduction

There will be no increase in the seniority based wages. But it may be difficult since depended on whether retirement age was moved back

Implementation and implications:

The implementation implication of NSC is, to develop a manpower plan that would be acceptable to workforce and the union, to maintain operating efficiency and morale which will meet the companys financial restraints as well as employees interest. For the betterment and operation of NSC the authority tried to bring a change that best suit with the workforce regarding
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manpower, retirement plan and implementation strategy. NSC headquarters normally asked to concerned functional department in each of the eight steel works for its proposal as to what should be done. At headquarters the proposals were consolidated into two or three plans and the resubmitted to the various steel works, which selected the plan they liked best. The decision for retirement would have long-run implications for either the financial health of the firm, or its industrial relations policies, or both. The recommendation came from different parts of the firm would affect the wages and retirement age for the managers who made the recommendations, since NSC had a policy of extending benefits on by the union to management personnel. There were different viewpoint and different recommendations from the workforce and different functional department. Rather, it was a major consideration for management how to present and implements a new plan or strategy along with relevant facts that cover positively all parts of the organization. In fact, the management was in a dilemma whether to inform the employees about to new plans and strategy or not to do this. Finally, Mr. Somemori opted for a strategic decision that will be accepted by all and maintain financial health and good industrial relations.

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