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Despite uncertain times, U.S. Steel CEO has faith

Surma thumbnailWhen John Surma first graduated from college, his goals were admittedly modest.

“My objective was to be able to afford snow tires and an FM radio,” Surma told a packed auditorium of Tepper School MBA candidates.

Now the chairman and chief executive officer of U.S. Steel, Surma still keeps himself grounded, living much as he did 10 years ago. In any of the last seven jobs he’s had, if they had been the last rung on the career ladder, he says he would have been satisfied.

“Money is not the reason to do leadership,” Surma said. “Leadership is something you have to have a feel for, and have some aptitude for … I don’t have any particular prescription for doing it successfully.”

Yet behind the self-deprecation lies a sense of resolution in Surma, the grandson of central European immigrants. He assumed the role of chief financial officer for U.S. Steel when it spun off from USX Corp. in 2002, was named president in March 2003, and became president and chief operating officer three months later.

It was a difficult time to take the helm; the company was running out of cash and patience, and labor relations were, in a word, “terrible,” he said.

“I would come to work in the morning in 2002 or 2003. I knew things were bad, and I was confident they would get worse,” Surma said.

Casting about for something upon which he could stake a leadership claim, he decided to make employee safety the company’s number-one guiding principle.

After measuring U.S. Steel’s OSHA reports against those of other companies, he realized that while they were near the top of their peer group, they were, overall, still an unsafe place to work. Research showed that companies offering safer environments were more robust.

The strategy worked: When safety became the top priority, hundreds of fewer employees were injured. In fact, in 2008, approximately 750 fewer people will have been injured than in 2003, says Surma. Not coincidentally, he added, the company is enjoying the four most profitable years in its history.

Safety measurements remain the first agenda item at every board meeting, he noted.

“If we don’t keep the leadership on it, we’ll begin to degrade,” he said.

Surma spoke as part of the W.L. Mellon Speaker Series, which gives students the opportunity to engage in high-level exchanges about strategy, world affairs, and other key issues with CEOs and leading business executives. The series includes student-only breakout sessions to encourage discussion with speakers in small-group settings.

During a question-and-answer session after Surma’s talk, an MBA student who identified himself as a former engineer shared that his former employer avoided Chinese fasteners at all costs, especially for critical applications, because they were prone to failure.

“Continue to do so,” said Surma, who said he worries about he worried about China’s tax policies on exports and his company’s ability to compete in a global market without a level playing field.

He also told students that working to control carbon dioxide emissions would be “among the biggest things you do in your careers.”

As with tax policies, the emissions conundrum requires much international negotiation, he noted.

“How does Europe say to China, ‘You reduce your emissions, and we’re going to keep ours where it is?’” he said.

He also worries how a company that has not done much hiring in the past decade or so will restart its recruiting process to replace what he terms a “lost generation” of talent.

“Our core human resource competency was getting people to retire,” he said, adding that he wants the company’s recruitment strategies to get up to speed in time to replace an exodus of retiring employees.

Though U.S. Steel just realized its best quarter in company history, forward projections are dampened by the anticipated effects of the credit crisis, said Surma.

“Everybody’s trying to preserve their capital,” he said. “We’re producing less, and our customers are taking less.”

But while the outlook is uncertain, U.S. Steel faces the future with some confidence, having just broken ground on a $1 billion coke works.

“That’s a tough decision to make in today’s environment,” said Surma. But he added that with projections of 1.5 billion tons of steel expected to be used in the world this year, “I do have some faith.”
 

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