How Nucor Steel Rewards Performance and ProductivityBy: Gregory P. Smith
Nucor Steel, with 7000 non-union employees and nearly $4.5 billion in sales, is one of the few remaining steel companies in the U.S. To remain competitive in its industry, it focuses on two clear goals: building steel manufacturing facilities economically, and operating the facilities productively.
To achieve these goals, Nucor has streamlined and decentralized management and allows each plant to operate as independent business units. Only four layers of management exist: Chairman, Vice Chairman and President; Vice President-General Manager; Department Managers; supervisor/Professional; and hourly employees. Only 22 employees eight managers and 14 administrative employees work in the corporate headquarters. Senior executives do not have company cars, dining rooms, executive parking spaces or corporate jets. Everyone from the janitors to the CEO has the same basic but generous benefits plan.
Department Managers also have base salaries that are lower than what other plants pay. But they qualify for an annual bonus based on their plantís ROA that varies from 0 to 82 percent of their salary. They get an additional bonus based on the weekly production of their crews of 100-200 percent of base salary.
Senior officers have one compensation system. They do not get profit sharing, pensions, bonuses or retirement plans, and their base salaries are also set below industry averages. They receive one annual bonus based on the return of shareholders equity above certain minimum earnings. Paid 60 percent in stock and 40 percent in cash, the bonus ranges from 0 to several hundred percent of salary.
This unique way of rewarding productivity keeps Nucorís productivity high and its absenteeism at a low 1 to 1.5 percent a year. Employees see a direct correlation between what they do and their paychecks a major incentive, and a key strength of the program. In fact, this program prompts such high performance that employees were refusing to take time off. The company began forcing them to take time off by giving employees four extra days off a year. Even so, only half their employees use their four extra days!
© Copyright 2001 Gregory P. Smith
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