It was about 2 p.m. when three Nucor Corp. electricians got the call from their colleagues at the Hickman, Arkansas, plant. It was bad news: Hickman’s electrical grid had failed. For a minimill steelmaker like Nucor, which melts scrap steel from autos, dishwashers, mobile homes, and the like in an electric arc furnace to make new steel, there’s little that could be worse. The trio immediately dropped what they were doing and headed to the plant. Malcolm McDonald, an electrician from the Decatur, Alabama, mill, was in Indiana visiting another facility. He drove down, arriving at 9 o’clock that night. Les Hart and Bryson Trumble, from Nucor’s facility in Hertford County, North Carolina, boarded a plane that landed in Memphis at 11 p.m. Then they drove two hours to the troubled plant.

No supervisor had asked them to make the trip, and no one had to. They went on their own. Camping out in the electrical substation with the Hickman staff, the team worked 20-hour shifts to get the plant up and running again in three days instead of the anticipated full week. There wasn’t any direct financial incentive for them to blow their weekends, no extra money in their next paycheck, but for the company their contribution was huge. Hickman went on to post a first-quarter record for tons of steel shipped.

What’s most amazing about this story is that at Nucor it’s not considered particularly remarkable. “It could have easily been a Hickman operator going to help the Crawfordsville [Ind.] mill,” says Executive Vice President John J. Ferriola, who oversees the Hickman plant and seven others. “It happens daily.”

In an industry as Rust Belt as they come, Nucor has nurtured one of the most dynamic and engaged workforces around. The 20,800 nonunion employees at the company, based in Charlotte, North Carolina, don’t see themselves as worker bees waiting for instructions from above. Nucor’s flattened hierarchy and emphasis on pushing power to the front line lead its employees to adopt the mindset of owneroperators. It’s a profitable formula: Nucor issued a 371 percent return to shareholders over the past five years and increased net earnings by $654,661 (or 317 percent) to $778.2 million from 2010 to 2011. And the company has become more profitable as it has grown: Margins, which were 5 percent in 2010, reached 10 percent in 2011.

Nucor gained renown in the late 1980s for its radical pay practices, which base the vast majority of most workers’ income on their performance. This was a major, dramatic change in pay systems at the time. An upstart nipping at the heels of the integrated steel giants, Nucor had a close-knit culture that was the natural outgrowth of its underdog identity. Legendary leader F. Kenneth Iverson’s radical insight was: Employees, even hourly clockpunchers, will make an extraordinary effort if you reward them richly, treat them with respect, and give them real power.

Nucor is an upstart no more, and the untold story of how it has clung to that core philosophy even as it has grown into the largest steel company in the United States is in many ways as compelling as the celebrated tale of its brash youth. Iverson retired in 1999. Under chairman and CEO Daniel R. DiMicco, a 23-year veteran, Nucor has expanded to 23 plants while managing to instill its unique culture in all of the facilities it has bought, an achievement that makes him a more than worthy successor to Iverson.

Nucor’s performance, even in a depressed economy, has been nothing less than sensational. It has grown into a company with 2011 net sales of $20.0 billion, up from $4.6 billion when DiMicco took over in 2000. “In terms of a business model,” says Louis L. Schorsch, president and CEO of Nucor rival Mittal Steel USA, “They’ve won in this part of the world.”

At Nucor, managing and leading is about an un¬ blinking focus on the people on the front line of the business. It’s about talking to them, listening to them, taking a risk on their ideas, and accepting the occasional failure. It’s a culture built in part with symbolic gestures. Every year, for example, every employee’s name goes on the cover of the annual report. And, like Iverson before him, DiMicco flies commercial, manages without an executive parking space, and really does make the coffee in the office

when he takes the last cup. Although he has an Ivy League pedigree, including degrees from Brown University and the University of Pennsylvania, DiMicco retains the plain-talking style of a guy raised in a middle-class family in Mt. Kisco, New York. Only 100 people—yes, 100—work alongside him at headquarters.

At times, workers and managers exhibit a level of passion for the company that can border on the bizarre. Executive Vice President Joseph A. Rutkowski, an engineer who came up through the mills, speaks of Nucor as a “magic” place, representing the best of American rebelliousness. He says, “We epitomize how people should think, should be.”

Compared with other U.S. companies, pay disparities are modest at Nucor. Today, the typical CEO makes more than 400 times what a factory worker takes home. Last year, Nucor’s chief executive collected a salary and bonus close to one quarter of that average. DiMicco did well by any reasonable standard, with a total 2011 compensation of $3.29 million, but that’s because Nucor is doing well. Company returns are 13 percent higher than the industry average. When things are bad, DiMicco suffers, too. In 2003, as the company was dealing with an industry downturn and barely squeaked out a profit, DiMicco made $1.4 million. He gets few stock options, and most of his restricted stock and other longer-term bonuses don’t materialize if the company doesn’t beat the competition and outpace a sample group of other high-performing companies for good measure. Paul Hodgson, senior research associate at the Corporate Library, an organization that researches corporate governance issues, and an expert in the field who rarely has anything good to say about CEO compensation, calls Nucor’s system a “best practice.” Adds Hodgson: “Not too many companies get my vote of approval.”

Executive pay is geared toward team building. The bonus of a plant manager, a department manager’s boss, depends on the entire corporation’s return on equity. So there’s no glory in winning at your own plant if the others are failing. When Ferriola became general manager of Nucor’s Vulcraft plant in Grapeland, Texas, in 1995, he remembers he wasn’t in the job two days before he received calls from every other general manager in the Vulcraft division offering to help however they could. (Vulcraft manufactures the steel joists and decks that hold up the ceilings of shopping centers and other buildings.) “It wasn’t idle politeness. I took them up on it,” says Ferriola. And they wanted him to, he notes. “My performance impacted their paycheck.”

This high-stakes teamwork can be the hardest thing for a newly acquired plant to get used to. David Hutchins, a frontline supervisor or “lead man” in the rolling mill at Nucor’s first big acquisition, its Auburn, New York, plant, describes the old way of thinking. The job of a rolling mill is to thin out the steel made in the hot mill furnace, preparing it to be cut into sheets. In the days before the Nucor acquisition, if the cutting backed up, Hutchins would just take a break. “We’d sit back, have a cup of coffee, and complain: “Those guys stink,” he says. “At Nucor, we’re not ‘you guys’ and ‘us guys.’ It’s all of us guys. Wherever the bottleneck is, we go there, and everyone works on it.”

As Nucor grows, existing facilities making products that overlap with those of acquired plants may need to find new businesses to branch into. So Nucor employees have to innovate themselves out of tough spots and into more profitable ones. Changes have to be made often to adapt to the environment. The Crawfordsville plant is among those that have felt some squeeze. It’s famous as the place that pioneered the commercialization of the thinstrip casting of steel that made it possible for minimills such as Nucor to compete with the industry’s old guard. But Crawfordsville is not on a large waterway, a disadvantage at a time of high fuel costs. As Nucor’s oldest sheet mill, it can’t make sheets as wide as many of Nucor’s other mills, including a giant plant in Decatur acquired in 2002.

Questions

1. How would you describe the culture of Nucor?

2. Why is the type of executive pay practice at Nucor not found in many other companies?

3. If innovative solutions to problems are needed at Nucor, how do you think they will emerge? That is, will internal or external forces bring about the needed innovations? Explain

Answer rating: 100% (QA)

1 The culture at Nucor is characterized by a dynamic and engaged workforce that operates with a mindset of owneroperators The company fosters a flatte... View the full answer