Make Gold from Scrap
Nucor’s business is not new and sexy. In reality, it is just as rusty: melting steel to make new steel. What is amazing about Nucor is not the business they work in, but their results.
How does 387% sound to shareholders over the past five years? It is better than Amazon, Starbucks and eBay. Since the 1980s, it has grown into the largest steel company in America. In 2005, it increased $ 12.7 billion in sales, from $ 4.6 billion in 2000. Revenues were $ 1.3 billion higher than $ 311 million in 2000.
Their secret? This radical insight from their legendary leader F. Kenneth Iverson: Employees, even hourly clockworkers, will make an extraordinary effort if you richly reward them, treat them with respect and give them real power. Sounds like something we can learn from the service industry.
In a recent article by BusinessWeek:
“At Nucor, motivational art is about an unparalleled focus on the people in the front line of the business. It’s about talking to them, listening to them, venturing their ideas, and failing at the opportunity. “
Many people talk about empowering employees and paying for achievements, at Nucor it’s not just talk. Basic hourly pay at Nucor is about $ 10 an hour compared to other companies that average $ 16 to $ 21. But a bonus linked to manufacturing defect-free steel made by the employee’s shift could double the average at Nucor to $ 30. Bad work is also penalized. If a bad batch is caught before it leaves the plant, the shift loses the bonus on that group. If the defect is not caught before it reaches the customer, they lose three times the amount.
If you think this plan will only work with certain employees? Nucor has successfully applied it to various learned websites. They do not force new employees to switch to their new payment system immediately, they just start posting what the employee would have made. It does not take long for employees to claim the switch, even if production takes up at the facilities.
This is just one side of how Nucor runs its business. They also listen and take risks on employee suggestions, this is not some kind of place you should command and control. It is a place where people work together passionately, rewarded for their successes and experience the responsibilities of failure. Natural consequences.
Drivers are in the same compensation boat. The shift, the plant or the company are doing well, and they are getting bonuses to offset their lower than the industry standard salary. If things don’t go well, they feel the pinch.
It all makes sense and this venture definitely has the Midas touch.