Upon enactment of the Law of Ukraine dated 14 July 1999 ? 934-?IV “On conducting economic experiment at the enterprises of mining & smelting complex of Ukraine”, there were created conditions for expanding production and improving financial and economic p

Кадры

PERSONNEL IS THE KEY

Alexander SERGIENKO, Head of labor & personnel
department with Metallurgprom association

Upon enactment of the Law of Ukraine dated 14 July 1999
№ 934-ХIV “On conducting economic experiment at the enterprises of mining &
smelting complex of Ukraine”, there were created conditions for expanding production and
improving financial and economic performance of enterprises-participants of the
experiment.

This gave an opportunity not only to increase current
assets, but also to significantly renew production, improve dynamics of ratio of accounts
payable to accounts receivable, reduce arrears of payments to the budget, etc.

Improvement in labor indicators is an important factor as
well.

In the first half of 1999 average number of permanent
employees on payroll at metallurgic mills decreased by 2.3% as compared to 1998. After
economic experiment had been introduced, starting from the second half of 1999, the number
of employees was constantly growing, and in the seven months of 2001 totaled 256,100
people on the average, which is 12.2% up from the respective figure of 1999 (see the
figure).

The main reason for increase in the number of employees was
change in production structure, in particular, launching new objects, strengthening of
repair & maintenance services, manning of enterprises, including employment of youth
and young specialists, etc.

When the number of employees increased, enterprises
prevented reduction in output of commercial produce. Compared to the respective period of
2000, in the first half of 2001, output in terms of comparable prices grew by 12.3%. At
the same time, the number of employees in the main sphere of operation increased by 5.9%,
and output of commercial produce – by 17.6%.

It is worth mentioning that mainly young people, who
obtained new professional training and receive solid and regular salaries and social
benefits, are able to launch new technologies and new complicated programs for equipment.
If some measures aimed at employment of young people are not undertaken, the problem of
personnel may become quite acute.

It is known that manning level at metallurgic enterprises
has always been quite high. Average age of employees at metallurgic mills totals 41. In
terms of education, the structure of personnel is as follows:

14.5% of employees have higher education;

38.4% – secondary special education;

47.1% – general education (the older the employees are, the
higher is the portion of people with general education in this group).

The detailed data are shown in the table.

Many enterprises developed special programs for young
people, and organized training of young specialists on working places. Even though this
resulted in additional pressure on wages fund, the results were favorable. At present more
young people are going to metallurgic professional schools and higher schools, enterprises
organize boards of young specialists, conduct scientific and practical conferences and
contests of young managers, etc.

The aforementioned witnesses that future will bring
positive results, and in some time metallurgic mills will employ more young people with
high professional level, even though there are certain difficulties.

Today employees of a retirement age cannot be fired in
compliance with the law. Since income of retired people is very low, they are reluctant to
quit, which makes employment of younger people a very continuous process. Ilyich Iron
& Steel Works found a way to solve this problem. Analysis performed at this mill
showed that, as a rule, managerial positions are occupied by people of an older
generation. There are 10 thousand people in this group, which accounts for 18% of the
total number of employees, and this is too much. Therefore, management of the mill
addressed these older people with a proposal of transfer to other positions, which
correspond to their state of health, for example, positions of instructors for training
young people. The level of salaries at these new positions is quite high, so many veterans
understood the problem and decided to arrange their transfer to new positions, thus giving
young people more opportunities. In compliance with Youth-2001 program, which provided for
employment of 1,500 people till the end of year, as of 20 June, 880 people were employed.
It is worth mentioning that Ilyich Iron & Steel Works developed such programs in the
previous years as well.

The following enterprises are also developing annual and
long-term Youth programs: Krivorozhstal Iron & Steel Works, Dzerzhinsky Iron &
Steel Works, Zaporozhstal, Azovstal and other mills. These programs provide for employment
of young specialists and youth, which should account for up to 4% of the total number of
employees. Implementation of the aforementioned programs will create young and
high-quality engineering resource for main technological process stages, repair &
maintenance services and managerial structures.

Ensuring the workforce

According to the Project of national program of development
of Ukraine’s mining & smelting complex till 2010, output of iron was forecasted at
20 million tonnes, steel – 23.5-23.0 million tonnes, and finished rolled metal – 20.0
million tonnes (in 2000 output of iron already totaled 25.7 million tonnes, steel – 31.4
million tonnes, and rolled metal – 27.0 million tonnes). It was expected that
restructuring of the industry’s management, forms of ownership, technical re-equipment
and reduction in production volumes will call forth significant cut in the number of
employees.

Experience of the world economy witnesses that
restructuring of industrial enterprises inevitably leads to layoffs of the personnel.

In Ukraine, at the stage of the country’s revival, loss
of labor potential would be unreasonable, especially taking into consideration
deterioration of training and educational system and no conditions for employment, even
though there certainly exists hidden unemployment. For social reasons and in order to keep
qualified personnel, enterprises of ferrous metallurgy did not lay off excessive
workforce, and even did everything possible to keep their employees and increase their
number.

Taking into consideration that in the forthcoming years it
is planned to modernize production process, thus having cut labor expenditures for machine
maintenance, reduction in the number of employees is unavoidable. However, management of
enterprises, which will have excessive labor force as a result of the aforementioned
national program, is not going to fire anyone. It is planned to use this excessive
workforce in case new production capacities are launched or the old ones are expanded, and
also in manufacture of consumer goods, waste reclamation, agricultural production, etc.

To our mind, reduction in the number of employees will take
place mainly because of natural staff turnover; some employees will quit due to a number
of reasons, which include low wages, and, sometimes, big arrears of wages.

Wages

Before perestroika, metallurgist was one of the most
prestigious professions. In terms of the level of wages, metallurgy ranked the second
after coal industry.

Today the situation has changed. According to the data with
the State Statistics Committee of Ukraine, ferrous metallurgy – one of the basic
industries – ranks 7th or 8th in terms of this indicator after such industries as power
complex, oil, petroleum and gas industries, and banking and finance sector.

In order to duly renew the workforce, it is necessary to
ensure the level of wages, which would be equivalent to the cost of certain quantity of
consumer goods and services.

According to the latest estimates, some 50% of employees at
metallurgic enterprises do not receive adequate salary. Moreover, due to financial
difficulties, some enterprises have arrears of wages, which, as of 10 July 2001, totaled
UAH 38.8 million and equal two monthly wage funds.

Dynamics of average monthly wages and arrears of wages are
shown on the picture.

Social arrangements

Undoubtedly, improvement of welfare of working people is
one of the main tasks that face managers of enterprises. They are always paying attention
to such issues as finding funds for increasing the number of workplaces, taking care of
retired staff and youth, increasing income of employees, etc. Many enterprises acquired
agricultural enterprises, and organized processing of food produce in order to supply it
to their employees, and partly to cities and towns, at prices lower than the market ones.

Some portion of funds is allocated for residential
building, including funds for preferential credits for this purpose. It is understood that
issues of residential building, healthcare, preschool facilities, and recreation are
extremely important. That is why approaches to transfer of public utilities (camps,
kindergartens, sports facilities, etc.) to city authorities have been reconsidered. This
is a complicated process, however, in most cases decisions are taken in favor of working
people.

For instance, Makeyevka Iron & Steel Works, financial
performance of which is not good, transferred to the city unprofitable housing, preschool
facilities, etc. City authorities ensured dotations for service and maintenance of these
facilities in amounts that satisfy the needs of working people.

There was also registered a number of cases when public
facilities that were earlier transferred to the local authorities were transferred back to
enterprises. The basis for all that is a necessity of improving people’s welfare, and
both industrial enterprises and the state are working on that.

Issues of improvement in personnel development

These are, first of all, relaxation of social tension in
society and raising the level of life, including: