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Nucor

HRSM 3150 Note: this draft is for class discussion, only. It is not to be reproduced or cited without permission of the instructor.

Introduction

Nucor Corporation became one of the most successful organizations in American

industry during the past four decades. It defied the odds and the pundits in proving that a well-

managed U.S. firm can achieve world class productivity and quality by performing

manufacturing work in the United States.

On April 2, 2008, Nucor announced that for the third time in four years, it had appeared

on the Business Week 50 which ranks high performing organizations based upon the rate of

return on investment and sales growth over three-year intervals. It was ranked number one in

2005 and number four in 2007, despite the more difficult economic conditions it faced during

that year. ( www.nucor.com )

Nucor continued to expand during the past four decades while many of its domestic

competitors went bankrupt, were acquired by foreign companies, or had to cutback operations.

Sales increased steadily over the years from $21 million in 1966 to $16.6 billion in 2007 as it

gradually moved from a small, mini-mill operation to one of the largest steel producers in the

United States. On the Fortune 500 list, it moved up from number 161 in 2006 to number 151 in

2007. The company was number 297 as recently as 2003. The total return to investors in 2007

was 12.9 percent. Its annual growth rate from 1997-2007 was 19.4 percent. In 2007, Nucors

revenue of $16.6 billion was the second largest among domestic steel producers (U.S. Steel was

number one with $16.9 billion). ( www.fortune.com , 2008)

Values and Culture

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The strong culture that evolved at Nucor was largely a result of the leadership of Ken

Iverson (1965-1999) and his successors. According to Browning (2002) important business

values that became cornerstone to the culture and were instilled in the organization included the

ability to embrace change; egalitarianism with emphasis upon the importance of all employees in

an environment without boundaries between management and workers; pay-for-performance for

all employees; a no-layoff policy with pay cuts before dismissals when business slowdowns

occurred; focus on building shareholder value; and a no-frills approach to management with a

very lean corporate team. These values formed the basis for a culture where employees at all

levels were treated with dignity and respect.

Management at the workplace level used a leadership style that reinforced the cultural

values of egalitarianism and open communication. For example, at Crawfordsville, Indiana,

Cold-mill Manager Kevin Young walked through the mill every day speaking informally with

employees, discussing problems and coordinating communication between operations. He felt

his job was to be accessible while letting the employees put their effort into their jobs. He stated,

There is no difference between management and peoplewe all run the place. (Kuster,

1995)

Human Resource Management Practices

Human resource management and employee relations policies at Nucor focused

on employee empowerment and were based upon four principles:

1.) Management is obligated to manage the company in such a way that employees will

have the opportunity to earn according to their productivity; 2.) Employees should feel

confident that if they do their jobs properly, they will have a job tomorrow; 3.)

Employees have the right to be treated fairly and must believe that they will be; and 4.)

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Employees must have an avenue of appeal when they believe they are being treated

unfairly. ( www.nucorfastener.com )

Managers were asked to maintain close relationships with employees on a daily

basis because people were considered the most important resource in the company. This

was in contrast to the situation in many organizations where worker short-term interests

were usually a far lower priority than the concerns of shareholders and executives. When

the short-term interests of employees, shareholders and executives conflicted, it was often

the former whose job security was threatened. Employees in many organizations believed

their employers would pay them as little as possible, regardless of what they produced

and no matter how much their work earned for the company. (Iverson, 1997) Such

thinking was not conducive to high productivity and quality.

The company used a team-oriented work system where employees were paid

weekly bonuses based upon the production of their work groups. The pay system created

peer pressure for each employee to perform well and was tied to attendance in some

locations. Team members thus had an incentive to develop new employees to maintain

or improve bonus levels and prevent reductions. ( www.nucor.com )

According to Nucor ( www.nucor.com ), employees were covered by one of four

performance-related compensation systems, including the Production Bonus Group, the

Department Manager Bonus Group, the Non-Production and Non-Department Manager

Bonus Group, and Senior Officers. The Production Bonus Group included production

supervisors with production and maintenance employees and each employee received the

same bonus. Bonuses could average 80-170 percent of the base wage. Teams were given

feedback on weekly progress toward production bonuses, and they did not have earnings

limitations. ( www.nucor.com )

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There was a painsharing program implemented by management which helped

the company get through difficult times without layoffs or facility closings. When times

were tough, the workweek was cut to four-days or three-days with the average workers

earnings reduced by 25 percent. However, managers were also asked to carry the load

with department heads reduced by up to 40 percent. Additionally, general managers and

officers were earning 56-60 percent less than previously. ( www.industryweek.com ) The

pain was shared.

The company had an egalitarian approach to employee benefits. Senior executives

did not have company cars, corporate jets, executive cafeterias and restrooms or special

parking privileges. The profit sharing, college scholarship, stock purchase plans,

extraordinary bonus and service award plans were not available to executives but were

offered for all other employees. All employees received the same medical, dental,

disability and life insurance plans, holidays and vacations. There was a college

scholarship or vocational training plan for the children of all workers where a student

could receive $2500 per year for up to four years of college or training in a vocation.

(www.nucorfastener.com )

The company emphasized a spirit of teamwork. Annual employee dinners were

held at each facility in groups of 25 to 100 at a time to foster communication and

feedback. Employees had a chance to discuss problems relating to scheduling, equipment,

organization and production. They were like town meetings with a free and open format.

The only restrictions were that comments remained business-related and did not involve

personalities. Headquarters managers also met in February, May, and November of each

year with general managers of divisions to review the performance of each organization

and to develop plans. ( www.nucorfastener.com )

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There was emphasis upon maintaining positive employee relations in all operations. The

company had a grievance procedure that permitted any employee to seek a review of a grievance

if they felt the supervisor did not provide a fair hearing. A grievance could move further to the

General Manager, and if the employee was still not satisfied with the outcome, it could be

appealed to the corporate headquarters for a final determination. ( www.nucorfastener.com )

Employees had the right to fair treatment with an avenue of appeal.

According to Iverson (1997), when an employee at Hickman, Arkansas, was

asked why Nucor had no unions, he said: Theyre just not needed. The pay is top-notch.

No one has been fired without cause. There are no layoffs. Nucor listens to its employees.

We dont need union mediators. We dont need divisiveness. We all work together. We

can talk among ourselves and work out our own problems. Perhaps the most revealing

aspect of his comments was the emphasis upon we.

Strategy

Nucor and its affiliates consisted of Steel Mills and Steel Products Segments that

produced a wide variety of steel products principally from scrap by utilizing electric arc

furnaces, continuous casting, and automated rolling mills. It used recycled steel scrap and other

metallic products which were melted in electric arc furnaces and poured into continuous casting

systems. The firm also had rolling mills that converted billets, blooms and slabs into rebar,

angles, rounds, channels, flats, sheet, beams, plate and other products. The primary customers

for its steel mills were manufacturers, steel service centers and fabricators. The company sold 92

percent of its steel mill production to outside customers and used 8 percent internally by its

divisions. ( www.nucor.com )

Nucor was the first mini-mill steel company to prove that mini-mills could make flat-

rolled steel which had previously been made only by the big steel companies. This created a

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large new market for the company. It also was the first to apply thin-slab casting (which had

been determined impractical by the large steel companies), and the first to produce iron carbide,

an energy efficient substitute for scrap metal. (Iverson, 1997)

Nucor had a very lean organizational structure with only 3 layers of management in each

division: General Manager, Department Manager and Supervisor/Professional, in addition to the

hourly employees. The firm emphasized a streamlined chain of command that permitted each of

the division general managers to operate their organizations as independent businesses. This

lean organizational structure with decentralized authority enabled the company to serve

suppliers, customers, employees and others more expediently. ( www.nucor.com )

Nucor was a low-cost producer with a commitment to quality, service, and competitive

pricing. It became a leading producer of quality steel and steel products with continuous

innovation, modern equipment, dedication to the customer, and continuous productivity

improvement with a highly motivated workforce. ( www.nucorfastener.com )

Nucor-Crawfordsville

One of the most important steel plants in the history of the United States was

opened by Nucor at Crawfordsville, IN, in 1988. It was an 800,000 ton, $265 million

dollar mini-mill facility that would implement new technology to produce flat-rolled steel

in a mini-mill (a steel plant that made steel from scrap with an electric arc process as

opposed to the large, cumbersome, and more expensive blast furnace approach that had

been used for many years by the larger, Basic Steel companies). Crawfordsville was

very important because if it were successful, Nucor could make flat-rolled steel which is

the largest steel market in the United States. Flat-rolled steel is used in a wide variety of

products from cars to appliances. (Noe, et al, 1996)

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Nucor was the ability to align human resource practices, organizational culture and

strategy.

Nucor Case Questions:

1. What are the important values/culture of Nucor?2. What are the important HR practices?3. What are the strategies?4. Why has Nucor been so successful over the past 4+ decades?5. Describe the selection system at Nucor-Crawfordsville. Why was it successful?6. What Best HR best practices described earlier in this course have been implemented by

Nucor? Discuss.

Sources

(2008) www.fortune.com . (accessed 9/21/08)

2002) How Nucor upgrades governance while preserving a unique corporate culture. Aninterview with Peter C. Browning, Non-executive Chairman of Nucor Corporation.

Directorship. 25 (3), pp. 2-4. (1997) Iverson, Ken. How Nucor works. New Steel. 13 (11), pp. 56-61. (1995) Kuster, Ted. How Nucor Crawfordsville works. New Steel . 11 (12) pp. 36-47.

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(2005) www.nucorfastener.com . (accessed 4-18-05) (2008) www.nucor.com (accessed 9/21/08)

(2002) www.industryweek.com . Executive WordPutting Employees Pays Off. (6/1/02)

( 1996) Nucor: Selecting High Performers. Noe, et al, Human Resource Management 2e, Boston:McGraw-Hill.

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