Quality Steel by Sound Management
Review of Case 7-2—Nucor Corporation: Producing Quality Steel by Stressing Sound Management Practices
Nucor Corporation, North Carolina-based leading U.S. steel manufacturing company, purportedly a 1970s “pioneer,” revolutionized steel production with its proprietary manufacturing processes—excogitating the mini-mill—transforming scrap metal into steel to curtail conventional costs.
At the technological vanguard of innovation, Nucor reputedly ranks superior in a presumably floundering industry. However, Nucor accredits its success with the “high standards” it sets for employees to incentivize conscientiousness and punctuality—a rigorous meritocratic award system that rewards effort while penalizing tardiness.
This “objective, performance-based bonus plan” to reinforce motivation, work-ethic, and citizenship—reporting no performance-related layoff in 20 years—one author formulates as follows:
“Give employees stake in company growth;”
“Focus on business at hand;”
“Minimize bureaucracy.” [i]
Impact on Quality
If a “synonymous” relationship exists between performance and quality, then Nucor epitomizes quality as inferred from its apparent unprecedented success. [ii] After all, its reputation for “state-of-the-art manufacturing processes”—harnessing contemporary, cutting-edge technology with its “products” to engender “industry-leading productivity ratios”—assumes “quality.” [iii] Nevertheless, Nucor emphasizes two “unique principles” it implements, allegedly lacking from competitors of comparable technology, which may distinguish its ingenuity:
- Sound Management Principles;
- Employee-Relations Approach.
Nucor seeks to align the interests of firms and employees under these principles. But Nucor’s disciplined management to align mutual interests evidence in its results. While Nucor supposedly leads the steel industry in average pay, it seemingly achieves a lower “total cost per ton of steel,” than “other integrated products.” [iv] Yet, despite the putative lead in average pay mill workers earn a base pay “slightly” beneath industry standards. The assumption of a “generous bonus plan” sufficient to overcompensate sub-average base pay might explain Nucor’s overall “higher than average pay,” stimulating employee retention. [v]
This disciplined compromise to mutually satisfy both interests—the company and employees alike—demonstrates a quality culture. If true, lower equipment costs may facilitate greater flexibility to invest in employee bonuses, an incentive for retention. The apparent absence of “company cars, planes, assigned parking spaces, and other status indications,” strengthens this conclusion. [vi] If so, the psychological anticipation of rewards may increase employee effort, which if accurate, might correlate with improved quality presumably from enhanced performance. The supposedly “egalitarian culture” standardizing uniformity with identical treatment, e.g., “same insurance, holiday, and vacations plans, etc.” perhaps signals equal employment opportunity. [vii] Additionally, that 20 years elapsed without “a single employee laid-off due to lack of work,” strengthens the probative inference of increased retention.
Moreover, the opportunity for “continuous education” incorporated into this “employee relations approach” may also strengthen retention assuming it reinforces perceived employee-value. [viii] This inference appears plausible because continuous education might:
- Suggest expanded knowledge-based responsibilities perhaps unavailable before training, possibly signaling greater company contribution from employees;
- Inspire employees to maximize learning potential for vocational and/or personal enrichment.
Nucor’s employee involvement, specifically, “rank-and-file employees” supposedly ensconced in “devising methods to improve operations,” instantiates a culture that values active employee contributions. If accurate, such active employee involvement in daily operations suggests a commitment to employee value, which may further foster work incentives. [ix]
Ultimately, this greater “stake”—vested interest in the company via greater pay and/or knowledge/skill acquisition—may bolster employee motivation, an impetus for performance enhancement. If true, the elevated productivity assumed in improved performance, assuming greater employee motivation and retention, correlates to ameliorating quality. Therefore, the article demonstrates quality assumed in employee retention by evidently creating a disciplined culture that simultaneously satisfies company and employee interests.
Why This Article?
This article presents quality as an intangible asset—goodwill manifest in company culture through strong citizenship and employee morale. Nucor underscores the relevance of disciplined management principles and “employee relations” assumed in quality. This illustration exemplifies my rationale for selecting the Nucor example.
[i] Foster, S. Thomas, “Managing Quality Integrating the Supply Chain,” Sixth Edition, Prentice Hall, Upper Saddle River, NJ (2007), p. 180.
[ii] Foster at 4.
[iii] Foster at 180.
[iv] Id. at 180.
[v] Id. at 180.
[vi] Id. at 180.
[vii] Id. at 180.
[viii] Id. at 180.