Running head: WORTHINGTON INDUSTRIES CASE 12-3

Worthington Industries Case 12-3

MBA

Worthington Industries Case 12-3

Worthington Industries has a long history of success in steel processing and
metals-related businesses. From 1995 to 1999, they increased sales consistently yearover-year. During 1995, the company reported net sales of $1.126 billion. By 1999, net
sales grew to $1.763 billion, an increase of 57 percent (Anthony & Govindarajan, 2007).
There are four key factors of their management system that have helped them exceed
their competitors performance. These four factors include their values, organizational
structure, human resource policies, and their reward systems.
Values
The first key factor is the companys values. The company founder developed
these values and they have remained at their core ever since. There are eight rules or
statements that make up the companys philosophy. These eight statements include
earnings, their golden rule, people, customers, suppliers, the organization,
communication and citizenship.
The heart of these values is the golden rule of treating others the way you want
to be treated. They apply this rule to their customers, employees, investors, and
suppliers. The first priority for the company is to earn money for their shareholders
(employees are also encouraged to become shareholders through the companys profit
sharing plan) and increase the value of their investment. They measure this through
growth earnings per share. From 1999 to 2005, operating income as a percent of
stockholders equity increased from 19% to 21% (Anthony & Govindarajan, 2007).
These values are interwoven into each part of the company. They have been
successful in creating an environment where people feel valued and everyone treats
each other with mutual respect. When employees know that their hard work is

appreciated and rewarded, they go the extra mile. The company also focuses on
developing their employees. They have tuition reimbursement programs to help them
continue their education. They also have an open door policy with management to
encourage open communication and trust with the staff. These all have contributed to
the success Worthington has over their competitors.
When it came to the suppliers, they simply asked to be treated fairly. They didnt
expect the lowest price, but a competitive price for quality material. In turn, they treated
their suppliers with the same respect and prized their loyalty.
Organizational Structure
The second key factor that contributes to the companys success is their
organizational structure. They consider their organizational structure to be flat. There
profit sharing plan only has four basic levels including production, administrative,
professional, and executives. (Anthony & Govindarajan, 2007). They also believed in
smaller plants of fewer than 150 employees. This helped with communication and
allowed the employees to better identify with the company.
Most of the functions are decentralized. Purchasing and human resources are
the exception and are centralized to take advantage of cost savings and consistencies
to policies. This means plant managers have tremendous autonomy and can run their
individual plants as their own profit centers.
Human Resource Policies
The third key factor is the companys human resource policies. Managers are
not the only key decision makers. The company created employee councils made up of
workers. They are appointed by management and meet at least once per month to talk
about critical issues at the plant. They are also responsible for determining whether or

not an employee becomes permanent. Management felt the coworkers knew if an

employee was a good contributor, so after a 90 day trial period, the council votes
whether the person will be offered a permanent position or not. This contributes to
workers feeling they arent just an employee and they actually have a say in how the
company is run.
Worthington also promotes internal growth, with 95 percent of their job openings
going to internal candidates. People with common sense and who can lead others are
identified and promoted into management roles. Again, this creates trust and dedication
between management and the staff. The company also encourages cross-training
employees for different jobs. This helps more workers advance and move up in the
company. When employees know that they are promoted based on merit vs. tenure,
they tend to work harder to advance.
Reward Systems
The fourth key is Worthingtons reward system. The employees are paid for
good performance through competitive salaries and profit sharing. They make sure
salaries are in the top quartile for each location, reducing potential attrition to
competitors and helping to attract the best talent for the job. The profit sharing is
distributed quarterly and makes up a substantial part of their overall compensation. For
the workers, it was 20-25 percent of their overall compensation compared to executives,
where profit sharing made up to 60 percent of their overall compensation. Worthington
believes in performance based pay and the more money the company made, the more
they rewarded their workers.
They also require every salesperson to spend six months working in a plant
where they could see how the products are made, the plant capabilities and they

learned technical skills that they could share with their customers. This also gave them
a better understanding of order profitability. Worthington would not take an order that
was not profitable, so it was important that sales understood. A more educated sales
force gives Worthington Industries a real competitive advantage.
Conclusion
Worthington Industries (WOR) started in 1955 and has grown into a market
leader. They were named as one of the 100 Best Places to Work in 1998 and 1999 by
Fortune magazine (Anthony & Govindarajan, 2007). They continue to lead their
competition by sticking with their values, following the golden rule. Their high values,
flat organizational structure, employee centered human resource policies and generous
reward system all contribute to their continued success. The chart below shows that
Worthington Industries continue to lead their competitors in many areas including EPS
and profitability (WOR, 2012).

References

Anthony, R. N., & Govindarajan, V. (2007). Management control systems (12th ed.). New York,
NY: McGraw-Hill/Irwin.
WOR: Summary for Worthington Industries, Inc. Co- Yahoo! Finance. (2012, November 30).
Yahoo! Finance. Retrieved November 30, 2012, from http://finance.yahoo.com/q?
s=WOR