Ethics and Culture
Nucor corporate
The case examines the organizational culture at Nucor and the way in which it led to the success of the company. The policies and mechanisms adopted by Nucor's management to encourage the productivity and profitability are also discussed.The case takes a close look at Nucor's recruitment, reward systems and the work culture. The case also discusses the various criticisms labeled against Nucor's HR policies.
Nucor – Workers’ Paradise
It makes an unusual cover for an annual report; instead of attractive photographs on the cover page, the company puts the names of all its employees on the front and back cover pages. The company is Nucor Corp (Nucor) - the largest producer of steel in North America.
Nucor is known for its culture and its commitment towards employees. In the age of downsizing and layoffs, Nucor has not laid off a single employee nor shut down any of its plants. It is also credited with not reporting loss in any business quarter for last 30 years (1972 - 2002). Both analysts and company sources attribute the company's success to its culture.
According to company sources, Nucor's recruitment process, reward system and work culture are responsible for the company's success over the years. The Nucor recruitment process focuses on employing people with the right frame of mind rather than people with relevant skill sets. The reward system at Nucor emphasizes fair pay based on productivity.
Further, Nucor also established a fair grievance redressal system which allows any employee to approach the management with his or her complaints. Analysts are of the opinion that Nucor is a perfect example of how a company's organizational culture can influence its performance.
Background Note
The history of Nucor dates back to 1899, when Ransom E. Olds (Olds) established a car manufacturing company called Olds Motor Works. After running Olds Motor Works successfully for seven years, Olds sold the unit in 1906. He established Reo Car Company (Reo), which manufactured trucks and buses in addition to cars. Reo stopped making cars in 1936 and by 1955 formed Reo Holding which merged with Nuclear Consultants Inc to form Nuclear Corporation of America (Nuclear).Nuclear was originally set up to manufacture nuclear instruments and other electronic gadgets, besides providing expertise in conducting radiation studies. While this business was profitable at the time, it failed to gather momentum. Nuclear then acquired a number of high-tech companies. The company however continued losing money till 1960, when it was acquired by a New York based investment banker.
Organizational Structure
Unlike most Fortune 500 companies which had around 8-10 management layers between the CEO and the employees, Nucor had only four management layers (Refer Figure I). Nucor sought to maintain lean staffing, minimal bureaucracy and a streamlined organizational structure. The most common joke at corporate headquarters was that with four promotions, a supervisor could become CEO.
When Nucor first approached $1 billion in revenues, pressure increased on Iverson to add more layers of management. The same happened when Nucor reached the $2 billion and $3 billion milestone...
Nucor's Success Formula
Nucor's management strongly believed that the company's success was mainly due to its culture and not technology. When asked about the secret behind Nucor's success, Iverson commented, "70% culture and 30% technology. The truth is, I'm not sure if it's 80 to 20 or 60 to 40 percent, but I'm certain our culture accounts for more than half of our success as a business."Recruitment
Nucor looked for people who could communicate frankly with others and work with minimum supervision.
Reward System
Nucor's employees were paid according to their productivity. Employees were given certain production goals, and their pay depended on realizing these goals. Though the hourly wages at Nucor were only $9 per hour compared to the industry average of $18 per hour, yet, Nucor employees earned more than their counterparts in the industry due to the company's reward system which linked pay with productivity. Commenting on the employees pay at Nucor, Jim Coblin, Vice President HR said, "The only reason to work here is to try to get rich. Money is important to our people."According to analysts, Nucor's incentive plans not only encouraged the employees to perform well at individual level but also encouraged them to excel at the team level as the incentive plans took the performance of the teams into consideration.
Nucor's incentive plans also resulted in healthy competition among the company's different plants. For instance, workers at Nucor's Hickman plant worked hard to break the production records of Nucor-Yamato plant. The internal competition among Nucor plants was one of the main reasons for Nucor's high productivity. Commenting on the competition among the mills, DiMicco said, "We encourage positive competition that isn't destructive. Everybody wants to have leadership [in the company]. It goes down to the employee level."
Work Culture
 Along with a good reward system, Nucor's management also focused on providing conducive work enviornment which fostered trust and teamwork among employees. Nucor empowered its employees to take decisions with minimal interference from the top management. Each plant operated as an independent business unit. The General Managers at Nucor plants were given considerable freedom to take decisions regarding sourcing of raw-materials, finalizing marketing strategies, finding customers, setting production targets and HR requirements. One of Nucor's General Managers remarked, "The beautiful part of Nucor is that we are not constrained.Headquarters doesn't restrict what I spend. I just have to make my contribution to profits at the end of the year." The general managers were expected to generate minimum of 25% return on assets under their control. The managers were also free to use new technology or processes. This encouraged employees to try out new processes and technologies. The management at Nucor made it a point not to punish mistakes and maintained high tolerance levels with regard to failures. For example, one plant manager utilizing his authority chose an induction furnace which cost $10 million. The new induction furnace failed to perform as per projections and broke down frequently. Subsequently, the manager decided to remove the induction furnace and go back to the electric arc furnace . When this decision was conveyed to the top management, the manager was not punished for wastage of $10 million but was supported in his decision to remove the induction furnace. Nucor always supported its employees and had never opted for downsizing or layoffs. However, from time to time Nucor's management asserted that, it would not hesitate to downsize if the situation so demanded. Questioning Nucor's Success Formula Not everyone agreed with Nucor's policies and culture. Some analysts pointed out flaws in Nucor's human resources policies. They felt that Nucor used its recruitment tests to weed out prospects who were sympathetic towards unions. Richard Preston, in his book, 'American Steel' wrote, "Nucor had put Hawley through a psychological test devised by a Nucor psychologist, one John Seres, out of Chicago. Nucor's psychological test, which Nucor gave to all candidates for jobs at the Crawfordsville project, was supposed to identify goal-oriented people, self-reliant people: Nucor material. The test also weeded out applicants who might sympathize with labor unions." If a general manager was appraising a major capital investment project he was also thinking about reducing his short-term income and consequently incentives. Analysts also felt that promotions came very slow. Many managers had occupied their current positions for a long time and Nucor had some problems in developing the skills of its first line supervisors. Commentary I chose these cases because I want to raise the issue of ethics and culture. But here I will discuss about the ethics and culture of the organization because my lecturer said that if the culture is vast and we have to take one pembahasn only. As already exist in theory in his book, Ernie Ernawan is about Culture and Ethics. It is described on: Understanding organizational culture according to Hofstede (1994), culture is the collective mental programs that differentiate group members from other groups. Although the culture is in the mind of every individual, he became crystallized in the institutions and the product of a community, which ultimately strengthens mental programs. Cultural Studies is a pattern of organizational beliefs, values, rituals, myths members wholeheartedly, that affect the behavior of all individuals and groups in organizations (Harisson & Stokes, 1992), adding also that culture affects most aspects of organizational life, such as how decisions are made , who makes them, how the profits were distributed, how people are treated, and how organization respond to their environment. After I studied the article and after I read the above theory so I will try to conclude and give my opinion about the article above. I think that Nucor is a company that already use the ethics and culture is good and right. Because the companies, especially in the work culture there in the country : Along with a good reward system, Nucor's management also focused on providing conducive work enviornment which fostered trust and teamwork among employees. Nucor empowered its employees to take decisions with minimal interference from the top management. Each plant operated as an independent business unit. The General Managers at Nucor plants were given considerable freedom to take decisions regarding sourcing of raw-materials, finalizing marketing strategies, finding customers, setting production targets and HR requirements. One of Nucor's General Managers remarked, "The beautiful part of Nucor is that we are not constrained. Headquarters doesn't restrict what I spend. I just have to make my contribution to profits at the end of the year." The general managers were expected to generate minimum of 25% return on assets under their control. The managers were also free to use new technology or processes. This encouraged employees to try out new processes and technologies. The management at Nucor made it a point not to punish mistakes and maintained high tolerance levels with regard to failures. Nucor really appreciate worker, he not only think about profit, but also the welfare of employees and value the opinions of employees. Resources: Erni Ernawan, http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Organization%20Behavior/HROB036.htm (artikel) ^Thanks^ |
