Enhancing Strategic Decision Making

at Nucor plants everyone wears green hard-hats except maintenance personnel who wear

yellow so that they can be easily spotted.

18

This approach appears transferable and the motivational effects contagious. Iverson recalls

when Nucor purchased a plant and immediately sold the limousine and eliminated executive

parking spaces in favor of a first-come, first-serve system. Iverson greeted employees on their

________________________________________

Page 18

Nucor Corp. and the U.S. Steel Industry / 18

way into the plant and recalls one employee who parked in what was the boss's reserved spot and

commented that the simple changes in the parking system made him feel much better about the

company he worked for.

19

Compensation & Bonus System Leadership by example can only induce so much behavior;

one of the more visible aspects of Nucor's culture is it's compensation system, particularly the

prominent bonus system. "Gonna make some money today?" is a common greeting on the plant

floor, and discussion of company financials is as common in the lunchroom as basketball scores.

The bonus system is highly structured, consisting of no special or discretionary bonuses. The

company is divided based on the production teams of 25-50 individuals who are responsible for a

complete task (such as a cold rolled steel fabrication line, for example). The group includes

everyone on that line from scrap handlers, furnace operators, mold and roller operators, even

finish packagers. Managers get together and, based on the equipment being used, set a standard

for production. This standard is known to everyone in advance and doesn't change unless the

company makes a significant investment in capital equipment. With the standard in mind,

employees make whatever changes they see fit to increase production. A bonus is paid for all

production over the standard and there is no limit as to how much bonus can be paid. The only

qualifier is that the production must be good - that is of sufficient quality for sale. No bonus is

paid for bad production. At the end of the week, all the employees on a particular line get the

same production bonus which is issued along with their weekly checks.

20

With bonuses, Nucor employees typically earn as much as their unionized counterparts in the

integrated plants. Weekly bonuses have, in recent years, averaged 100 to 200 percent of base

wages. Typical production workers earn $8 or $9 in base pay plus an additional $16 per hour in

production bonuses and averaged $60,000 in 1996 making them the highest paid employees in

the industry. Since Nucor locates their plants in rural locations, employee salaries are well above

the norm for any specific area, making Nucor jobs highly desirable.

Nucor also offers several other benefits to help motivate and retain employees. In the 1980s,

they shifted to a work week of four-12 hour days. Workers then take four days off, and then

resume another intensive shift - a practice borrowed from the oil industry. While this practice

results in a lot of expensive overtime - Crawfordsville alone paid out an extra half million

dollars in 1995 due to the compressed work week - management feel that the ensuing morale and

productivity gains pay for themselves. The company has also disbursed special $500 bonuses

(four times in the last 20 years) in exceptionally good years. They also provide four years worth

of college tuition support (up to $2,000/year) for each child of each employee - excluding only

the children of corporate officers.

Job Security

Listening to Nucor managers, it is difficult to determine which fact they

are most proud of - 30 years of uninterrupted quarterly profits, or 20 years since they have last

had to lay off an employee. Nucor locates in rural areas and there are often few other

employment opportunities, let alone other jobs at similar pay scales, so Nucor feels a strong

responsibility to keeping workers employed, even during economic downturns.

Popular impressions aside, Iverson is clear to note that Nucor does not have a no-layoff

policy. He cautions that Nucor will layoff employees as a last resort if the survival of the

company is at stake.

21

But during prior downturns, the company has chosen to ride out

slowdowns with their "Share the Pain" program involving reduced workweeks and plant

slowdowns instead of layoffs. What is most unusual with the program is the brunt of poor

performance is felt most heavily at upper parts of the organization, particularly as long-term

compensation is an integral part of the executive pay system. During a period of reduced demand

for steel, the plants reduce their operations. For line personnel and