Category Archives: Redundancy

Steel in Crisis: Restructuring for People

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Chris McLachlan, Leeds University Business School.

The construction of an industrial strategy for UK steel is essential. Within the debate over this requirement and as part of its development, it is important to have an understanding of what happens at plant level when restructuring and redundancy occur. A plant that is of key focus in the current steel crisis is Tata Steel’s long products site in Scunthorpe. The plant has undergone successive restructuring processes in recent years, with ‘Project Ark’ in 2011, ‘Path to Profit’ in 2013, and now the decision to sell the long products division.

Some 2,600 job losses have been announced over this 4 year period, which leaves the Scunthorpe site with approximately 3,000 employees. Since the divestment decision the security of the entire site has been under threat. The recent announcement of the potential sale of the long products division to UK based investment firm Greybull Capital provides hope for the Scunthorpe site, but for its employees a worrying period of uncertainty remains. This contraction of the UK steel industry workforce has, of course, been in train since the 1980s. Amidst the prevailing industrial context, the recent bout of restructuring is having profoundly negative effects on not only the lives and careers of individuals but also the communities affected by the restructuring. Banners at recent Save Our Steel events in Scunthorpe and Sheffield simply stating ‘HELP OUR TOWN’ (image below) are testament to the extensive impact of the current steel crisis. How might firms maintain their social responsibility to workers and communities in the face of these job cuts? Indeed, do organisations have a social responsibility for their employees?

Tata Steel Demo

At Scunthorpe, a notable step in attempting to develop a socially responsible approach to restructuring was the Project Ark process in 2011. This process was framed around a broader commercial strategy that reduced the volume of steel produced at the site, and further justified through a focus on producing higher quality, higher value added steel products along with a plan of investment in skills and training that sought to create a more flexible workforce. The consequence of this, however, was the announcement of 1200 job losses due the mothballing of the bloom and billet mill. The Project Ark strategy was a critical moment between Tata and the affiliated trade unions, as the job losses were essentially agreed by both parties to on the promise of future investment in skills and the broader commercial plan that promised to ensure the survival of the plant. Evidently, these promises were not upheld by Tata. At Save Our Steel rallies, senior union officials and MPs continue to bemoan the Project Ark process, with the subsequent Path to Profit process (500 job losses announced) perceived as a residual restructuring from the failures of Project Ark. Meanwhile, the HR team were rewarded for their efforts in managing the job losses, receiving an internal CEO award for their efforts in conducting a socially responsible restructuring process. Therefore, it is clear that Tata appreciate the need – the requirement, even – to ensure their restructuring practices are conducted in this way, with the process also being used as benchmark across the rest of their UK operations.

Tata claims a social responsibility to ameliorate the impact of these job losses for affected individuals and the local community. This commitment is laid out in its most recent Annual Report (2014-15). The socially responsible restructuring processes at Tata Steel UK have typically been characterised and managed through the avoidance of ‘hard’ (compulsory) redundancies – through redeployment practices such as cross-matching affected individuals in vacant positions internally – a close working relationship with the trade unions, and the provision of basic employability support in CV writing and interview training for those made redundant. As long as people who wish to leave do so voluntarily, this allows those wishing to remain to take up alternative employment within the organisation. The joint management-union goal of plant survival, has always been the key rationale underlying these processes. Amidst the prevailing industrial context the threat of restructuring within Tata seems more imminent than ever. The announcement of more job losses (18.1.16) at Tata UK’s Port Talbot site is clear evidence of this. In this context, the sustainability of this socially responsible approach to restructuring is subject to increasing amounts of pressure. The coming negotiations between Tata and its trades unions will prove historically significant not only for the fate of the Scunthorpe site but for the UK steel production more broadly. The feet of steel workers are being held firmly to the blast furnace fire.

Up to £6m has been pledged by UK Steel Enterprise (a CSR-based subsidiary of Tata that supports steel areas affected by restructuring) and the government to aid regeneration and job creation in Scunthorpe, along with another £3m aimed at funding retraining for affected individuals. Supportive measures like this, however important and in real terms quite limited, become devalued when CEO of Tata Steel Europe Karl Koehler claims that the long products division has no future beyond the end of the financial year. Moves like this further disillusion the workforce, creating a reluctance to engage with the range of support measures on offer. Additionally, recent changes in organisational structure in order to prepare the plant for being a ‘standalone’ business, then the subsequent decision to sell the division off, has put further pressure on the Scunthorpe plant to control costs and hence pressure on jobs. Given that previous restructuring processes have been necessarily framed around the survival of the plant, the imminent threats that these events pose bring into question any notion of a socially responsible approach. What is crucial in the negotiations around restructuring, job losses and sell off, is for Tata to continue to engage with trade unions in order to ameliorate, and where possible limit, the amount of job losses so as to ensure the process is conducted in a socially responsible fashion.

Chris McLachlan is a PhD student at Leeds University Business School and a member of the Centre for Employment Relations, Innovation and Change.