INDUSTRY POLICY: by Anthony CappelloNews Weekly
Jobs for life: the Nucor approach
, April 22, 2000
A job for life, pay averaging $US100,000 per year including productivity payments, and worker participation - that is how leading US steel maker, Nucor, operates. It has never had to downsize a worker for lack of work or because of structural change.
Sixty Minutes recently reported on the company which is one of America's largest steel manufacturers with more than $3.5 billion in annual sales. In the report entitled "Jobs for Life: but pays cuts for all", Richard Carleton noted that while BHP and Telstra lay off staff in the thousands to remain competitive, Nucor refuses to sack staff when times turn tough.
The reason for the success of Nucor is its philosophy which rewards its employees with a compensation program directly linked to productivity and a commitment to maintain opportunities for the people who are doing the job today.
Nucor traces its origins to the car manufacturer Ransom E. Olds, who founded Oldsmobile and Reo Motor Cars. The company, through a series of transactions, became Nuclear Corporation of America (Nucor). However, in 1965 Nucor faced bankruptcy and began to restructure by appointing Ken Iverson and Sam Siegel as President and Vice-President.
This new management led Nucor to build around its profitable operations, which were its steel joists operations in Florence, South Carolina, and Norfolk, Nebraska.
Management then consolidated its two basic businesses. Vulcraft is a steel joists company which is America's largest producer of steel joists, and girders. Nucor produces steel sheets, bar angles, light structural carbon and alloy steel.
Nucor is committed to locating its facilities in non-urban locations. In doing so, it has been able to establish strong ties to its local communities. Nucor have located in states that are committed to maintaining business growth.
However, Nucor has a commitment to remain union free.
Nucor has an organisational structure that is decentralised consisting of only five layers: Chairman, Vice-Chairman and President; Vice-President, General Manager; Department Manager; superisory, professional; and hourly employee.
This allows a streamlined command of the business with each facility operating as an independent business. Lines of communication are also kept in an informal but efficient manner. Employee relations are based on four principles:
1. Management is obligated to manage Nucor 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. (Nucor has yet to lay off a single worker due to lack of work).
3. Employees have the right to be treated fairly and must believe that they will be.
4. Employees must have an avenue of appeal when they believe they are being treated unfairly.
Another incentive of the Nucor philosophy is its performance-based Compensation for Goal Oriented People, where employees are covered under one of the following compensation plans:
First, a Production Incentive Plan, where employees directly involved in manufacturing are paid weekly bonuses on the basis of production. Most Nucor employees are covered under this system.
Second, the Department Manager Incentive Plan has department managers earning bonuses based on the return of their facility.
Third, the Non-Production and Non-Departmental Incentive Plan is paid to those who do not fit in either of the above, including accountants, receptionists and clerks. This works by a portion of pre-tax earnings which are placed in a pool that is divided among the officers in bonuses that are 60% stock and 40% cash.
Nucor's egalitarian approach aims to eliminate distinctions between management and hourly employees as much as possible. Senior executives do not enjoy company cars, corporate jets, executive dining rooms or executive parking places. All employees have the same holidays, vacation schedules and insurance program. This is all part of the commitment in fostering a teamwork approach this is a crucial component of Nucor's business.
In today's climate of downsizing, Nucor remains strongly committed in not laying off employees when business is down and its success is measured by its 6,000 employees who keep Nucor a leader in the US steel industry.