There was an incident, many years ago, that perfectly encapsulated the skills Michael Lerman brings to the family business, Steel Warehouse Co. Inc.
The South Bend, Ind.-based flat-rolled service center company had just come out on the losing end of a pursuit of a major contract, a turn of events that was greeted with predictable despondency throughout the organization. Except in Lerman’s office.
Rather than pout, or curse the fates, Lerman went back to work. He wanted to know just why Steel Warehouse had failed to land the deal, and how to prevent such an unfavorable outcome the next time. He contacted the jilting customer, inviting it back to the company’s South Bend headquarters to explain the decision-making process and where and how Steel Warehouse had come up short.
He followed that up with meetings with the team members, exploring how they could be better prepared the next time such an opportunity presented itself.
“He cares if we don’t get the work, and he wants to know why. He wants to figure out how in the future we’re going to solve these issues,” says Billy Lerman, the company’s executive vice president of operations and Mike’s nephew.
But the incident didn’t just represent Mike Lerman’s inquisitive nature, problem-solving mindset, attention to detail and junkyard dog mentality. It also showcased his foresight. Because two years later, that customer had an issue with the supplier it chose over his, and Steel Warehouse belatedly got the contract.
Over the past two decades, Steel Warehouse has been landing a lot of contracts, and President Mike Lerman is often the man behind the deal. For his dedication, respect in the industry and hard work in helping guide Steel Warehouse to a place among the largest service center companies in North America, Lerman is the choice for the 2019 Metal Center News
Service Center Executive of the Year.
Each year, MCN
honors a leading executive whose career and business strategies serve as a model for the rest of the industry. And Mike Lerman and Steel Warehouse are indeed worthy of emulation, demonstrating that profitable growth and impeccable integrity walk hand in hand in the metals distribution sector.
Lerman becomes the 23rd recipient of the Executive of the Year award, and second in his family. His brother Dave, now the chairman of the operation, was the 2004 honoree.
Over the past 15 years, Steel Warehouse has experienced remarkable growth. In 2004, the company had annual sales of less than $300 million, employing fewer than 600 people in seven stocking locations. This year, the company ranked as the 14th largest service center in North America with $1.2 billion in 2018 revenues, operating in 14 locations and employing more than 1,100.
Mike Lerman is a big reason behind the growth, handling any number of responsibilities since giving up teaching to join the family business in 1972. He found his niche in sales, though his role expanded dramatically a few years later.
“When my dad died in 1975, everything was on my shoulders and I had to turn more things over to Mike,” Dave Lerman recalls. “He’s taken everything I’ve asked him to do, and without that kind of support, we couldn’t have grown like we have.”
The organization that exists now is not just much larger, but much different. Steel Warehouse previously had a top-down matrix type organization, with single individuals in charge of various departments for the entire company. Now, the operation runs more of a business unit system of management.
“We still have some corporate responsibilities, but a lot of the profitability responsibilities have been pushed down to the business unit managers,” Mike Lerman says.
Of course, the confidence that those individual unit managers will operate within the Steel Warehouse structure did not arrive fully formed. “Mike has educated most of those people on how we take care of customers and how we have the right amount of steel,” Dave says. “He’s put our culture out there in every one of those organizations over time. We were in more of a position to decentralize.”
The relationship between the other entities and the parent company is not a one-way street. “There are business tools and processes that Billy developed in Mexico that he brought back here. It’s not just South Bend out, but best practices,” Mike says.
Keeping the individual business units performing at their best and contributing to the company is crucial. “I learned this term called ‘negative synergy.’ If somebody is doing something lousy in one of the units, it can hurt you throughout. Having people who understood what we wanted to do and buying into it was a better way of doing business than we had before,” Mike says.
Additionally, the company has expanded beyond its origins in other ways. Steel Warehouse now operates two joint ventures, which was a business model it hadn’t previously employed. It’s also grown internationally, with operations in both Mexico and Brazil.
On the other hand, the company remains true to the roots of the business Nathan Lerman founded in 1947 in a few crucial ways. Despite its size, Steel Warehouse is still a flat-rolled carbon steel service center, choosing not to expand into other materials or other types of steel product. “Our father always said, ‘Don’t mess with stainless. We’re not jewelers,’” says Gerry Lerman, a company vice president.
Likewise, Steel Warehouse is not following the lead of many service centers with forays further downstream. All their material is flat when it leaves the facility (which allows for some sales of plate product).
One thing that makes Mike Lerman so effective is the ability to deliver the larger picture objectives to the company as a whole, while never missing the small things that can save money or find new business.
“Even though he’s had senior level positions within the company for decades, he is very much involved in the details of the company. That includes a job-by-job analysis of profit and loss and understanding all the different aspects of the business,” says Randy Parsons, the general manager of the South Bend location.
Billy Lerman echoes that assessment. “Mike is extremely diligent in terms of finding out all of the relevant facts, trying to figure out the best solution for a particular customer. He goes into great detail when evaluating things. He doesn’t act like a big shot delegating. He wants to know, and he challenges everybody to do that as well.”
To Mike, an area where this attention to detail is most crucial involves the topic that is central to the company’s fate – the steel product. “We have a tremendous investment here in equipment, but the largest asset we have is inventory, and that’s the most volatile. The pickling line and leveling line are not going to change in value like the steel. And that’s what we’re relentless in.”
That relentlessness stretches down to Steel Warehouse’s customer base. “Our customers often say to us, ‘What can we do to be a better customer?’ We tell them, you have to be a partner in forecasting. We’re going to be on you, challenging you, involved in questioning the forecast.
“They know we’re doing it for their good as well as ours,” Mike says.
Mike Lerman balances this doggedness, or perhaps supports it, with a soft-spoken nature that quickly wins over suppliers and customers. “His biggest single strength is his people skills,” says brother Dave. “The people who work for him love him.”
Parsons says one area where those skills are on display is how he treats the employees under him. “We’re in a business where everybody is rushing around, and when somebody makes a mistake, that’s highlighted. We have a tendency to forget when sometimes people want to hear they’ve done something good. Mike is one of the best I’ve ever seen at telling people they’ve done a good job. It’s something I’ve tried to do, but it doesn’t come as naturally to me as it does to Mike.”
In the last few years, Steel Warehouse has gone the extra mile in showing appreciation to their employees through the launch of Activate, a health clinic for its employees in South Bend. The clinic provides free screenings and other services, plus free and reduced prices on prescription drugs. Use of the clinic has resulted in early detection of certain health risks before they became bigger problems, while also getting good results on smoke cessation and other wellness efforts.
The trick to effective implementation of the clinic was getting employee buy-in, convincing labor that the effort was not to glean confidential health information from them, but a service that keeps them healthier, while also reducing long-term costs to Steel Warehouse that can arise if certain risks go unattended.
“It started out not so well supported, but now we have 100 percent participation,” Mike says. “Every single employee has gone there. The medical staff has done a great job building trust.”
The Lermans are equally motivated to provide support for the people beyond the warehouse walls. The company is heavily invested in the larger South Bend community, through contributions to the United Way, local hospitals and other organizations. They’re also committed, as a family, to supporting the smaller Orthodox Jewish community in the city.
“For us to live in a community, we have to have the basic institutions available to us. You need a school, a synagogue, you need institutions of higher learning. It would be hard to go to a small town in Iowa that doesn’t have the basic things, kosher foods, things of that nature,” he says.
“We have spent part of our profits making sure those institutions exist. It’s something we feel responsible for. Frankly, if it comes to working extra hard and making a little more money, that’s an extra scholarship or money for an extra person who has his hand out,” Mike says.