South-Western - Management  
The Art of Motivation
Topic Motivation
Key Words Motivation, empowerment, engagement, compensation practices, bonuses
News Story 

Nucor Corp., a steelmaker in North Carolina, has a workforce of 11,300 nonunion employees that are renowned for their levels of engagement and their dynamic approach to work. The company's performance has led to 2005 sales of $12.7 billion, up from $4.6 billion in 2000. The company shipped more steel last year than any other company in the world. Their success stems from their unique culture which has a flattened hierarchy and emphasizes empowering front-line workers.

Employee motivation at Nucor is built on talking to employees and listening to them, taking a risk on their ideas, and accepting the occasional failure. The company CEO flies commercial, does without an executive parking space, and talks in a plain style that helps him to connect with his workers, in spite of his Ivy League pedigree.

Compensation practices at Nucor are part of what makes their motivation techniques so unique. Their pay system is the most daring element of the company's model. Bonuses tied to the production of defect-free steel can triple the average steelworker's pay. Nucor gave out more than $220 million in profit sharing and bonuses in 2005. The average steelworker at Nucor took home $79,000 last year. On top of that, they received $2,000 bonuses and an average of $18,000 in profit-sharing. Bonuses are calculated and paid every other week. Bad work is penalized too, under the system.

Pay disparity is also less at Nucor than at other companies. The typical CEO makes more than 400 times what a factory worker takes home. Last year, Nucor's CEO collected a salary and bonus only about 23 times the average steelworker. The CEO's pay is tied to the company's performance just like that of the workers. Paul Hodgson, senior research associate at the Corporate Library, an expert in the field of compensation who rarely has anything good to say about CEO compensation called Nucor's system a "best practice."

Executive pay is aimed at team building. The bonus of a plant manager depends on the entire corporation's return on equity. So, there is no glory in winning at your own plant if everyone else is failing. Because of this, there is teamwork and offers of help from one plant manager to another and a "we're all in this together" mentality.

Pay is a part of the motivational culture at Nucor, but it is certainly not everything. There is a healthy competition among facilities balanced with idea-sharing and cooperation. Plant managers regularly set up contests for shifts to try to outdo one another on a set goal, generally related to safety, efficiency, or productivity

As Nucor continues to grow, Nucor employees have found ways to use their entrepreneurial sprit to innovate and remain profitable. For example, the Crawfordsville plant can't make sheets as wide as some of Nucor's other mills, so workers there began to focus on types of steel that are harder to make and more profitable. Now, the plant can make 160 different grades of steel. As Ladd Hall, general manager of the Berkeley plant, tells visitors as he tours his plant at 5:30 a.m. on Saturdays before going home for breakfast with his children, all the rhetoric in the world is meaningless, it is the unique people at Nucor's mills and their drive to succeed that makes this company such a success story.

Questions
1.

Give an example of an extrinsic reward and an example of an intrinsic reward used to motivate employees at Nucor.

2.

What are some examples of team building methods used at Nucor?

3.

What is it about Nucor's compensation approach that prompted Paul Hodgson to refer to it as a "best practice"?

Source "The Art of Motivation," BusinessWeek Online, May 1, 2006, pNA.
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