1. Would you want to work under a compensation system like Nucor's? Why or why not!

2. Why don't more firms use approaches to compensation along the lines of Nucor's model?

Nucor Steel For the most part, the watchwords in U.S. business since the 2008- 2011 recession have been cutting payroll, reducing head count, and eliminating jobs. But Nucor, the country's largest steelmaker, still has all its jobs. Hit by a 50 percent plunge in output that had begun in September 2008, the U.S. steel industry laid off some 10,000 work. ers by January 2009 and another 25,000 by 2010 Nucor, however, has refused to follow suit in lay ing anyone off. Whenever they don't have enough steel orders to fill their workweek, Nucor employees have been performing other tasks rewriting safety manuals, getting a head start on maintenance jobs, mowing the lawns, and cleaning the bath rooms, but they're still drawing paychecks."Financially," says one employee at the company's facility in Crawfordsville, Indiana, "Nucor workers are still better off than mosty As far as top management is concerned, the company's ability to weather the recent economic downturn is based on several factors, most importantly, the firm's employees and culture. What's that culture like? It originated in the 1960s as the result of policies established by Ken Iverson, who brought a radical perspective on how to manage a company's HR to the job of CEO. Iverson figured that workers would be much more productive if an employer went out of its way to share authority with them, respect what they accomplished, and compensate them as handsomely as possible. Today, the basics of the company's HR model are summed up in its "Employee Relations Principles": 1. Management is obligated to manage Nucor in such a way that employees will have the opportunity to earn according to their productivity 2. Employees should feel confi- dent that if they do their jobs properly, they will have a job tomorrow 3. Employees have the right to be treated fairly and must believe that they will be 4. Employees must have an avenue of appeal when they believe they are being treated unfairly The Iverson approach is based on motivation, and the key to that approach is a highly original pay system. Step 1, which calls for base pay below the industry average, probably doesn't seem like a promising start, but the Nucor compensa- tion plan is designed to get better as the results of the work get better. If a shift, for example, can turn out a defect-free batch of steel, every worker is entitled to a bonus that's paid weekly and that can potentially triple his or her take-home pay. In addition, there are one-time annual bonuses and profit-sharing payouts. In 2005, for instance, Nucor had an especially good year; it shipped more steel than any other U.S. bonus and an average of $18,000 in profit-sharing money. The system, however, cuts both ways. Take that defect free batch of steel, for example. If there's a problem with a batch, workers on the shift obviously don't get any weekly bonus. And, that's if they catch the problem before the batch leaves the plant. If it reaches the customer, they may lose up to three times what they would have received as a bonus. "In average-to-bad years," adds HR vice president James M. Coblin, we earn less than our peers in other companies. That's supposed to teach us that we don't want to be average or bad. We want to be good." During fiscal 2009, total pay at Nucor was down by about 40 percent. Everybody in the company, from janitors to the CEO, are covered by some form of incentive plan tied to various goals and targets. We've just described the Production Incentive Plan, which covers operating and maintenance workers and supervisors and may boost base salaries by 80 percent to 150 percent. Bonuses for department managers are based on a return on-assets formula tied to divisional performance, as are bonuses under the Non- Production and Non-Department Manager Plan, which covers everyone, except senior officers, not induded in either of the first two plans; bonuses under both manager plans may increase base pay by 75 percent to 90 percent. Senior officers don't work under contracts or get pension or retirement plans and their base salaries are below industry average. In a world in which the typical CEO makes more than 400 times what a factory worker makes, Nucor's CEO makes considerably less. In the banner year of 2005, for example, his combined salary and bonus (about 523 million) came to 23 times the total taken home by the average Nucor factory worker. His bonus and those of other top managers are based on a ratio of net income to stockholder's equity. Nucor needs just four incentive plans because of an unusually flat organizational structure-another Iverson mistakes made in the line of decision-making duty. The Nucor website points out that workers are allowed to fail if that failure comes as a result of logical initiative and idea sharing. That is, if a worker approaches a problem in a logical manner and makes a sound decision that is defensible but turns out to be wrong, he or she is not punished. The reasoning behind this approach is that it promotes creativity and initiative. The Nucor system works not only because employees T share financial risks and benefits but also because, in sharing risks and benefits, they're a lot like owners. And, people who think like owners are a lot more likely to take the initiative when decisions have to be made or problems solved. What's more, Nucor has found that teamwork is a good incubator for initiative as well as idea sharing. John J. Ferriola, who managed the Nucor mill in Hickman, Arkansas, before becoming COO, remembers an afternoon several years ago when the electrical grid at his facility went down. His electricians got on the phone to three other company electricians, one in Alabama and two in North Carolina, who dropped what they were doing and went straight to Arkansas. Working 20 hour shifts, the joint team had the plant up and running again in 3 days (as opposed to an an ticipated full week). There was nothing in it (at least financially) for the visiting electricians, but they knew that maintenance personnel get no bonuses when equipment in their facility isn't operating. "At Nucor,' says one frontline supervisor, we're not you guys and us guys. It's all of us guys. Wherever the bottle neck is, we go there, and everyone works on it." THINK IT OVER 1. Would you want to work under a compensation system like Nucor's? Why or why not? 2. Why don't more firms use approaches to compensation along the lines of Nucor's model