Nucor Corporation

A Case Study Presented by

Lisa Gislason and David Holmes

How does Nucor create value?

• Managers are given autonomy at each plant• Decisions are made quickly without the need to

wait for decisions from headquarters • Plants can source there inputs from other Nucor

plants or from the outside market.• Nucor is constantly innovating • Use modern equipment

– produce high quality products– competitive prices.

• Promote good customer service.

What is their competitive advantage?

• Building steel manufacturing facilities economically and operating them competitively

• Continuous innovation, modern equipment, individualized customer service and producing at competitive prices.

• Mini-Mills• Large applicant pool to hire from because they

are seen as an attractive place to work, allows them to be very selective for who they hire

• Have a willingness to take risks.

How does Nucor’s HR policies contribute to their success?

• Four tier management structure • Group-based bonus incentive plan that trickles up to

management• They have a scholarship program for children of

employees which promotes long-term employee retention• Managers have dinner with all employees with open

forum for discussion on how to improve and increase innovation, allows employees to ask questions and managers to provide feedback

• All managers, including CEO, wear same color hard hat at work

• Policies promote teamwork and allow the company to grow from within because of open communication and experience from their employees

HR Policies• Organizational Structure

• Employee relations principles

• Compensation

• Benefits

Organizational Structure

Chairman/Vice Chairman/President

Vice President/Plant General Manager

Department Manager

Supervisor

Employee relations principles

• Employees will have the opportunity to earn according to their productivity

• Employees should feel confident that if they do their jobs properly, they will have a job tomorrow – job security, reduce work week instead of fire or lay off employees

• Employees have the right to be treated fairly• Employees must have an avenue of appeal

when they believe they are being treated unfairly – grievance process

CompensationProduction Incentive Plan• Paid weekly bonuses based on production

– Based on actual output in relation compared to expected tonnages produced

– Based on group not individual performance– Expected output did not change unless there was a change the

production process– If tardiness or attendance kept team from meeting goals, then no one

received a bonus in the group• If you are 5 minutes late, you lose your bonus for the day• If you are 30 minutes late or absent, you lose your bonus for the week

– 4 forgiveness days– Maintenance personnel were assigned to each team

• No bonus paid if equipment is not operating– Supervisors were apart of bonus teams

• Received same bonus as employees– Output and bonus info for each team was posted at the entrance

CompensationDepartment Manager Incentive Plan• Annual bonus received based on performance of the entire plant

– Based on return on assets– A return of 25% or better was expected by the plant

Non-production and Non-department Manager Incentive Plan• Bonus based on each plant’s return on assets

– Includes everyone not in previous 2 plans– Every month each plant received a chart showing its return on assets on

year-to-date basis• Posted in employee cafeteria

Senior Officers Incentive Plan• Based on return on stockholder’s equity above certain minimum

earnings– If Nucor did poorly, then Senior Officers would only receive their base

pay• Senior Officers earned less than other industry executives

Benefits• No company cars, corporate jets, executive dining rooms or exec. parking spaces

– All employees traveled in economy class• Not available to Officers

– Profit-sharing• Nucor contributed 10% of pretax earnings per year• 15 to 20% was paid out to employees in March

– Scholarship program– Employee stock purchase plan

• Monthly purchase plan• Nucor contributed a 10% matching contribution

– Service awards• Holidays, vacation schedules and insurance programs were the same• All employees wore the same green hard hats• Company report contained the name of every employee• 401K

– Matching contribution of 5 to 25% of employee contribution based on return on shareholder’s equity

• Each employee received 5 shares of stock for each 5 years they worked continuously• Encouraged workers to recruit their friends and family to work for the company

Scenarios

Team 1

Compensation

Determine Bonus amount

Team 2

HR Policy

Grievance

Team 3

Benefits

Determining Stock

contribution

Van

Joyce

Ken

George

Amy

Yasu

Jeffrey

Darnell

Jessica

Elvira

Bea

Scenario 1 You are the department manager of melting in one of the ‘mini-mills’

operated by Nucor Corporation. It is Monday, and you are working on the bonuses earned by the employees the previous week. Every worker earns an average hourly wage of $10 and works 40 hours per week. In melting, there is a base requirement of 16 tons of good billets per hour; above that the workers earn a 4 percent bonus for every ton per hour. Actual production per hour was 34 tons of good billets per hour. Determine an individual worker’s pay for the week without the bonus. How much will a worker make with the bonus for the week?

Now consider, the worker you are determining a bonus for was 10 minutes late to work one day and will lose their bonus for that day. What is his weekly earnings including bonus?

Scenario 2 You are the general manager of Nucor-Yamato Steel Company in

Blytheville, Arkansas. You have just received a request from an employee to review the performance evaluation their supervisor recently administered. The employee does not believe the evaluation reflected his/her performance. The employee in the last month has exhausted their four forgiveness days and has been late on more than one occasion. The employee claims that when he/she is at work his department is more productive than when he/she is not there. The employee is additionally upset about not receiving bonuses for the days he/she was over five minutes late and weekly bonuses when he/she was over 30 minutes late. According to the reports you have on his/her department, productive on days he/she was at work was 30 percent higher, even on the days in which he was late, than days he/she was absent. The supervisor would like to see the employee fired because he/she is unreliable. In addition the employee has been with the company for three years. Your bonus is based on the plant’s return on assets. What would you say to this employee? What action would you take?

Scenario 3 You are an employee at Nucor, and you are about to

complete your fifth year working for them in May. In January you purchased five shares of Nucor common stock through the monthly stock purchase plan for $50 per share. How much did you pay for your stocks last month? According to the case, Nucor matches employee contributions. You decide to make the same purchase of stock over the next 12 months. How many stocks did you purchase? How many stocks more did you gain from the Nucor contribution? What is the value of the stocks provided to you by Nucor?

Thank you

Any questions?