Problem-Solving Case: Motivating Employees at NucorCorporation Today Nucor Corporation is the largest producer ofsteel in the United States, so it is hard to believe it was once anunderdog in a struggling industry. What has set the company apartis a focus on moti- vating and empowering employees. The employeefocus is illustrated by the custom of printing each individual’sname on the cover of Nucor’s annual report. But the concern foremployees is much more practical and goes far beyond symbols.Nucor’s pay system is remarkable. At all lev- els of the company,the largest share of employ- ees’ income is tied to theirperformance. Base pay for a Nucor steelworker is near $10 per hour,far below the industry range of $16 to $21. But on top of that,steelworkers can earn a bonus based on the amount of defect-freesteel pro- duced during their shift. Those bonuses can tri- ple theworkers’ pay, taking it far above the industry average. Tying thebonus to the entire shift’s performance also motivates employees tocooperate to get the job done. In addition, the company pays outprofit sharing, encouraging employees to care about the entirecompany’s performance. The company computes the bonus on everyorder of steel and pays it weekly, so employees have plenty ofreinforcement. In 2005, a typical Nucor steelworker earned $79,000plus $2,000 from a special bonus celebrating record earnings forthe company plus nearly $18,000 in profit sharing. Managers receivesim- ilarly large amounts of their pay in the form of bonuses andprofit sharing. For employees new to Nucor, often used to relyingon base pay, the compensation arrange- ment seems alarming atfirst. Once they get a taste of bonuses, however, they becomehighly moti- vated. When Nucor acquired a steel plant in Auburn,New York, workers wanted to keep their old pay system, somanagement simply contin- ued paying them the old way butannouncing what they would have made under Nucor’s sys- tem.Eventually employees began to see that a new way of thinking couldfill up their pocket- books. Auburn, says that before Nucoracquired his plant, workers in his group tended to relax when- everan earlier stage of operations slowed down. But with a bonus ridingon their shift’s output, the employees no longer think ofthemselves as separate groups: “Wherever the bottleneck is,”explains Hutchins, “we go there, and everyone works on it.” Beforelong, output in Auburn was up, and so were paycheck totals.Motivation at Nucor is about more than pay, however. The companyencourages employees to share ideas and empowers them to make deci-sions and solve problems. Supervisors, for exam- ple, makedecisions more typical of a plant manager. Once, following thefailure of an electri- cal grid at the Hickman, Arkansas, plant, agroup of electricians at Nucor facilities in Decatur, Alabama, andHertford County, North Carolina, traveled to Hickman to work on theproblem. They did not need to get a supervisor’s approval; theyjust needed to do what they determined was most important. Alongwith cooperation, Nucor fosters friendly competition in order tostimulate creative think- ing. For example, plants often holdcontests among the shifts to see which one can meet a goal relatedto output, safety, or efficiency.
Questions -
How does performance-based pay motivate Nucoremployees? Would this pay system be effective if Nucor did not alsoempower employees to make decisions? Why or why not?
Supervisors do not set up the pay system for a largecompany like Nucor. How can Nucor’s supervisors contribute toemployee motivation?
Does the description of Nucor sound like anorganization in which you would feel motivated? Why or why not?Which theory of motivation would best explain your feelings?
