Wednesday, April 26, 2006

Rich rewards for extraordinary worker efforts at Nucor

This afternoon I read a fascinating article, ‘The Art of Motivation’ by Nanette Byrnes on Businessweeks Innovation website. It's all about Nucor the American steelmaker. Nucor's 387% return to shareholders over the past five years tops the performance of almost every other company in the Standard & Poor's 500-stock index.

Businessweek reports that what makes this rust belt industry player a star, is that it “treats its workers like owners”. A key driver of worker buy-in to the com (pany and ongoing innovation is Nucor’s pay system. Almost every worker is paid relative to their performance or value contribution. Specifically a steelworker at a different mill company can clock up $16 to $21 an hour. The base rate for a Nucor worker is nearer to $10 and hour, but a production bonus for defect-free steel by a worker’s whole shift can deliver three times the average steel workers disposable income to the Nucor employee. The late F. Kenneth Iverson, founder of Nucor, summed up his then radical business approach “Employees, even hourly clock-punchers, will make an extraordinary effort if you reward them richly, treat them with respect, and give them real power.”

I found a fascinating case study published by Dartmouth College in 2000 which describes Iverson's employee relations principles which underpin Nucor's success. (PDF here)

Thoughts: With ageing baby boomers beginning to retire in bulk numbers from 2010, there is fertile ground here for companies looking to build employee motivation and retention strategies. And why is it that such powerful and innovative ideas seem so practicle and obvious in hindsight?

KEY WORDS: Business style; Alignment; Work

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