How Business and Employees Can Both Win: Chaparral Steel
by Dr. David I. Levine
Chaparral Steel, a joint venture of Texas Industries and Co-Steel, was created in 1973 to produce a wide range of products at a low cost. To do this, the company began with only four layers of management. Decisionmaking authority was placed where it would
be most effective, and traditional job barriers were eliminated. All 935 employees are considered part of the sales department and are authorized to handle any quality, billing, credit, or shipping request. The plant has been redesigned so that all sales
functions are located in one customer service center, which is easily accessible to all employees. Every employee is salaried. Pay is based on individual performance, company profits, and skills learned. Chaparral has a compulsory annual educational sabbatical
program that requires employees to visit customers, premier companies, and universities worldwide to learn new processes and technologies. As a result, Chaparral's production employees were able to produce and test a new casting technique that
drastically cut costs and cycle time. Chaparral has achieved the fastest per-ton production time in the world. The high-performance management practices fit well with Chaparral's strategy of selling high-quality products with rapid delivery. Operating with such
efficiency, Chaparral could invest $65.4 million in capital expenditures and repay $58.4 million of debt over a three-year period without issuing any additional debt.
Note: This example was drawn from Department of Labor, Office of the American Workplace, Road to High-Performance Workplaces (1994).
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