Chaparral 1

Running Head: CHAPARRAL

Chaparral Steel: Then and Now

Ed Howard

Demetria Jennings

Andrea Perseghin

Jonathan West

Virginia Commonwealth University

Organizational Learning

ADLT 623 – Fall 2009

Dr. Terry Carter

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This paper will outline the organizational learning cycle of Chaparral Steel as presented

in the late 1990s and changes to this cycle since the company was acquired in 2007. Chaparral

Steel has been acquired by Gerdau Ameristeel, a company in the Gerdau group, a multi-national

conglomerate. According to Glen Carlyle, Plant Manager, Gerdau bought Chaparral Steel “…

because of its effectiveness and productivity” (2009). It is difficult to find any scholarly articles

written after 1999 about Chaparral Steel, Gerdau Ameristeel, or Gerdau. The data presented in

this summary is comprised from a brief conversation with a plant manager of a former Chaparral

Steel, now Gerdau Ameristeel, plant in Texas. Information presented was also gathered from

analyzing the Gerdau Ameristeel and Gerdau websites. Attempts to obtain further information,

including a plant tour, were denied by Gerdau Ameristeel’s Public Relations department.

Widespread generation of information

Many case studies and articles have been written in the late 1990s about Chaparral Steel’s

practices which support organizational learning. Based on information from 1999, Chaparral

Steel’s organizational learning cycle supports the widespread generation of information through

both external and internal means (Dixon, 1999). External sources include sending organization

members to meet with suppliers and competitors, and a plan for supervisors to spend time in

other organizations including competitors. Employees were also encouraged to develop

relationships with universities. Internal sources include allowing managers to spend up to

$10,000 to experiment new processes/practices which are conducted on the production line

rather than in a lab. The company also established a 3.5 year apprenticeship program registered

with the U.S. Department of Labor and hired employees based on their learning potential. An

unusual aspect of the apprenticeship program was that the instructors were selected foremen who

rotated in from the floor of the factory to teach. This helped to create a high level of credibility
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for the education program on the factory floor. It also motivated the instructors to be more

effective because they saw the results of their teaching on the job (Leonard-Barton, 1992). The

pay scale was based on employee skill accumulation as well as performance, which was

consistent with encouraging employees to participate in various training sessions and the

apprenticeship program (Dixon, 1999).

According to Chaparral Steel’s 2002 website, some of these practices were still being

employed. At that time, the company name was Texas Industries Chaparral Steel (TXI). The

website states that TXI partnered with external stakeholders, including customers, to improve

customer support offered by the company (TXI, 2002). Listed under the heading “TXI

Organizational Environment,” the company promotes the following:

• “fosters a work environment that will interest, challenge and motivate employees.
• continually integrates all business units to achieve a one company philosophy.
• implements new systems and technology to increase flexibility and
responsiveness.
• encourages empowerment, decision-making, planning and innovation by all
employees.” (TXI, 2002)

These goals are consistent with the company’s organizational learning cycle as described in

1999. Based on this information, it would appear that Chaparral Steel continued to value its

employees’ ideas.

Limited information is available regarding the Gerdau group’s management of Gerdau

Ameristeel which Chaparral Steel became a part of in 2007. However, in a brief phone interview

with the plant manager in Midlothian, Texas, a former Chaparral Steel employee who continues

to work for Gerdau, the 3.5 year apprentice program has been reduced to a one year classroom

program under Gerdau. He said that the workers are not as well prepared and more training has

to be done on the job. There is still cross-training and Gerdau tries to give employees

responsibility so they can “run the place” (G. Carlisle, personal communication, September 22,
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2009). According to the Gerdau organizational website employees have access to information,

although specifics of what information is accessible were not provided (Gerdau, 2008). Gerdau

Ameristeel supervisors are interconnected between facilities in all locations by videoconference

to exchange knowledge and ask questions (Salgado, 2007). Gerdau Ameristeel continues to

interact with customers of Chaparral Steel to improve customer service (Salgado, 2007).

According to Carlisle, factory operators continue to travel with sales people to see installations

and meet customers. There is also travel to other plants as part of learning and the effort to

innovate, although most of this travel is to Gerdau plants, there are over 20 in the United States.

He also said that in the current economic times, competitors are less willing to allow visits to

their plants (G. Carlisle, personal communication, September 22, 2009).

Integrate new information into the organizational context

Chaparral Steel integrated information in the late 1990s by assigning every employee to rotate

shifts as well as having cross trained employees, such as security guards obtaining training to

complete data entry assignments. Chaparral Steel also promoted the uninterrupted flow of

information rather than information batching practices.

Locating information on the integration of information in Gerdau Ameristeel is limited.

According to the Gerdau group’s website, the company focuses heavily on employee training

and development which the company feels leads to “employee practices of expanding areas of

activity, new interfunctional tasks, participation in work groups and research in new areas”

(Gerdau, 2008). These practices could lead to integration of new information although not

explicitly stated.

Collectively interpret information

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Chaparral Steel designed its facilities to foster collective interpretation. There was no

assigned parking, one dining facility, and all employees were salaried. Chaparral Steel relied on

employee honor in keeping their time. There were no time clocks and no vacation or sick day

tracking. The plant layout was intentionally designed to facilitate the flow of knowledge through

accidental meetings. For example, by placing the locker rooms in the headquarters buildings, line

workers and administrative employees were in close proximity at least twice a day which

encouraged the sharing of information across all levels of employment. Spontaneous meetings in

hallways exchanging information were frequent and considered a norm. The strategy of keeping

the number of employees in the plants at less 1000 contributed to everyone knowing each other

and an easier flow of information. There was even an expression on the floor of keeping ‘the

flow’ of information in a similar way to keeping the flow of steel in production. It was

considered essential to success (Leonard-Barton, 1992).

The Gerdau group website is limited in what information about specific company

practices are shared with the public. Gerdau Ameristeel’s CEO, Mario Longhi stated in a 2007

interview that the company wants “common knowledge in terms of what they [employees]

define as success” (Salgado).

Authority to take action on the interpreted meaning

Chaparral Steel allowed employees the authority to take action within the company’s

clear operating objectives (Dixon, 1999). The operators were given the responsibility for keeping

their respective processes and equipment in advance of the leading edge of technology Progress

was considered everyone’s business. Potential improvements were put into action immediately

with no wait for management approval. Rewards for improvements in process and innovations

were given to teams and not individuals. Ninety percent of the problems were solved on the
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factory floor through spontaneous meetings and joint problem solving without ever making it to

the morning meeting (held among all shift members to discuss problems) (Leonard-Barton,

1992). Chaparral Steel also had a bonus system that was linked to profits and the majority of

employees held stock in the company. The company allowed employees to act on ideas and

considered mistakes part of risk taking (Dixon, 1999).

Gerdau Ameristeel has organized a group of employees to develop a strategic plan for the

future (Salgado, 2007). This can be interpreted as action based on a collective meaning as the

employees selected to develop the company’s strategy would need to integrate ideas from across

functions to develop a plan which could be acted upon. According to Carlisle many decisions are

still made on the floor of the steel mill. The factory is still considered a ‘learning lab’ where new

processes or equipment is tested by the operators next to the present process/equipment on the

floor and innovation is encouraged (G. Carlisle, personal communication, September 22, 2009).

In summary, although Chaparral Steel has been acquired and is now part of Gerdau

Ameristeel, based on information available, some elements of the organizational learning cycle

are present. Carlisle said that many practices established under Chaparral are still in place and

that they are still in the process of “marrying the two cultures.” Learning is still important. Many

people who worked for Chaparral continue to work for Gerdau as there were no major layoffs.

However, what was formerly Chaparral Steel is now part of Gerdau Ameristeel and following

the Gerdau Business System (GBS). “They bought us, we did not buy them. So, we’re fitting into

their system” (G. Carlisle, personal communication, September 22, 2009)

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References

(2002, November 24). TXI Corporate Culture. Retrieved from •

http://web.archive.org/web/20030313205720/www.txi.com/default_3.tpl?

id1=1&id2=7&id3=32

(2008). Gerdau - Our Culture. Retrieved from http://www.gerdau.com/carreira/cultura-e-clima-

nossa-cultura.aspx

Dixon, N.M. (1999). The organizational learning cycle: How we can learn collectively. (2nd Ed.)

Brookfield, VT: Grower.

Leonard-Barton, D. (1992). The factory as a learning laboratory. Sloan Management Review,

Fall 1992, 34, 1; p. 23-32.

Salgado, B. (2007). Learning from others. Manufacturing Today, July/August, 44-52.