Evraz has put its faith in alchemy to change its culture

17.12.2010 — Analysis

The Russian prosecutor general has accused Evraz Group of poorly managing their work operations and causing tragic injury to their staff. Rostekhnadzor has found a lack of manufacturing oversight in many other companies in the mining and metallurgical industry, confirming a correlation between the culture of production and the rate of workplace injury. Experts have assured this columnist for "RusBusinessNews" that Russia will not be making any innovative breakthroughs as long as its industrial facilities look like dirty workshops from the time of Louis XIII.

In November of 2010, there was an explosion at the Nizhnetagilsky Iron and Steel Works OJSC (part of the Evraz Group), which took the life of one person and injured three other workers. An inspection revealed gross safety violations - the company's workers were welding in an area filled with coal dust, which ignited. The prosecutor claimed that manufacturing oversight at NISW is unsatisfactory and charges could be brought against those responsible for the tragedy.

The Urals office of Rostekhnadzor, having inspected many companies, claimed that manufacturing oversight in the mining and metallurgical industry is a mere formality that does not take into account the particular characteristics of these businesses. The managers who are responsible for this oversight do not have even the most basic contact with the experts who supervise the technology of the production process. No division of rights and responsibilities has been worked out between them and the existing guidelines have long been outdated. Is it any wonder that the workers at NISW without a second thought started to weld the chute that empties coal onto the conveyor belt? Experts claim that this sort of attitude toward their work results from the overall production culture tolerated by the owners and managers at Evraz.

Melik Mori, the executive director of Pervouralsky Novotrubny Zavod OJSC (part of the Chelyabinsk Truboprokatny Zavod), claims that injuries at their company started to decline once the owners began a fundamental reconstruction of PNZ. A modern finishing center was introduced in 2009, which produces up to six thousand sections of casing pipe and production tubing, including those intended for the export market. Despite the fact that the facility houses production lines to thread and temper pipes, there are no piles of shavings, soot, or dirt to be seen, nor are the floors covered with oil or petroleum residue. Cleanliness and order, says Melik Mori, create a sense of discipline among the workers. They don't throw their tools and cigarette butts just anywhere - in fact, they don't smoke at all while at work.

At the new Pervouralsky Novotrubny Zavod OJSC steelmaking facility, which is currently being tested and put into operation, they don't hire smokers at all. Before each shift change begins, employees undergo a blood alcohol test. According to information from the company's press office, hiring was taken very seriously there. There were twenty applicants for every open position. They hired people with two or three areas of expertise, sometimes drawing workers from other regions of Russia. During the selection process, they paid attention not only to applicants' bad habits, but to future employees' physical and mental health. Those relocating from other cities were offered temporary housing, and meanwhile, PNZ is continuing to building its own houses and apartments, which workers may rent at reduced prices. In order to attract the best employees from across the country, they recently decided to build a residential complex with shops, a kindergarten, etc.

The company brought in designers who changed the appearance of the manufacturing buildings and grounds. The administrative and amenity facilities underwent changes as well - they even opened steam rooms. Naturally the employees were duly appreciative of this improvement in the production culture. PNZ's press office claims that thanks to a four-stage hiring process, the steelmaking complex has created a professional, disciplined team, half of whom have a college education.

No detail is small enough to overlook in industry, say experts. For example, the Uralsky Optiko-Mekhanichesky Zavod OJSC (Ekaterinburg) devotes serious attention to the landscaping on its property. Thirty people are employed to care for the lawn and flowerbeds, which the directors of some plants believe to be an unaffordable luxury during a time of economic crisis. Vasily Rassokhin, UOMZ's first deputy general director, thinks otherwise. The company's image begins to take shape at the factory doors. A typical example is that after a heavy snowfall buried Ekaterinburg in drifts one Sunday, UOMZ's staff had a hard time getting to work on Monday. But at their workplace they found perfectly cleared roads and sidewalks. The company's maintenance staff had finished their job in time. Details like this are what make up a production culture.

Aleksandr Petrov, the minister of industry and science for the Sverdlovsk region, believes that order and cleanliness not only create a sense of discipline in a workforce, they encourage a new way of thinking, allowing employees to produce high-quality goods and compete on global markets. He doesn't think it's possible to create high-tech products without a culture of attention to technical details, but local businesses still have some work to do in this area.

Aleksandr Starikov, the chancellor of Ural State Academy of Architecture and Arts, claims that the idea of a production culture is still poorly understood in Russia and thus, little is invested in it. According to him, expenditures on production culture account for 0.2% of GDP in the US ($29 billion), but only 0.01% of GDP in Russia ($100 million). Russian entrepreneurs feel too free to interpret the idea of a production culture anyway they like. They spend 71% of their resources on communications, 33% on packaging, and only 18% on industrial design.

A.Starikov thinks that production culture has to be viewed from a larger perspective, with an equal amount of attention devoted to packaging, marketing, architecture, human resources, and a culture of attention to technical details. The USAAA chancellor thinks that businesses' current attitude toward industrial design and marketing is an obstacle to innovative production. Russian President Dmitry Medvedev has challenged companies to solve this problem, although currently his directive is aimed only at state-owned businesses.

Experts claim that there are very few designers working in Russian industry. They move abroad because there is so little demand for their skills at home. Graduates of the Ural Academy of Architecture, for example, work at Toyota, which invests 4% of its sales profits into research and development and design. Developed countries have a long-established relationship between the creativity of engineers and investments made in the cultural environment, where future designers and builders are "incubated."

But in Russia, it is considered unprofitable and a burdensome to support these so-called bohemians. For example, in September of 2010 the very same Nizhnetagilsky Iron and Steel Works refused to finance the jazz combo NISW-BIG-BAND, which was created "under the company's wing" in 1991. This music group had a direct role in creating a sense of workplace culture for those in the steel industry, and it had an effect on employees' attitudes toward their jobs. But the company's management decided that metallurgy and jazz were incompatible. Obviously, the managers at Evraz Group have their own philosopher's stone, with which they are planning to alchemize their staff's mentality. They have their work cut out for them - as philosophers say, culture is primarily the cultivation of oneself.

Vladimir Terletsky