Welcome to the archives for NewsTalk, an IBJ blog published from November 2007 through December 2010.

What universities can learn from a steel mill

March 12, 2010

Steel Dynamics and Purdue University couldn’t be more different.

Steel Dynamics dumps scrap metal into huge buckets, melts it with intense jolts of electricity and squishes the resulting lava into bars and sheets. Hopefully at a profit.

Purdue discovers and educates. Some of its researchers even tinker with metallurgies used by companies like Steel Dynamics to make their profits. Others on its campuses teach students, while still others spread the information to the masses through its extension outreach. And don’t forget athletics.

But Purdue and other universities are now under the gun to cut costs—a gun that’s been pointing straight at the heads of manufacturers for decades. So, what, if anything, can universities learn from a company like Steel Dynamics, which must make money or perish?

One Steel Dynamics vice president thinks universities—any work place, for that matter—would see big changes by adopting a form of the profit sharing and bonuses that keep it competitive.

Glenn Pushis, who headed a Steel Dynamics mill west of Indianapolis at Pittsboro before being bumped up to heading the Fort Wayne company’s flat-rolled division, says nothing gets a person’s attention quite like their pay being tied to performance of the company.

While Pushis has a Purdue engineering degree, he’s quick to add that he has no further credentials to suggest improvements to a university. Still, he’s convinced that giving university employees at all levels incentives to cut costs would result in leaner institutions.

“Absolutely, it would,” he says. “It makes everyone think of it as their own company.”

Or university.

Pushis more than once has stumbled upon intense conversations between workers accusing each other of doing something bone-headed and denting everybody’s paychecks. More than half the $70,000 or so in average compensation of front-line workers is tied to profit sharing, stock options and bonuses.

Collegial? Not always. But effective.

What do you think? Universities are scrambling to cut costs as the state runs out of money. Purdue, for one, is looking to slash $67 million from its general fund of $800 million-plus. What should it do?

And how much waste is available for universities to cut? How far do they have to go before hitting muscle?

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