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NUCOR CORPORATION

Charlotte, North Carolina. Nucor Corporations mission is to Take Care of Our Customers by being
the safest, highest quality, lowest-cost, most productive, and most profitable steel and steel products
company in the world. In 2006, Nucor employed 12,000 employees and earned gross revenue of $1.76
billion, a personal best. It is one of the best-run steel companies in the United States. Nucor operates one
of the leanest corporate organizations in the nation. A typical Fortune 500 company has a triple-digit
corporate staff. Nucor, which ranked No. 189 on the list in 2005, has about 65 corporate employees. Its
organizational structure has just five levels of management: president and CEO, executive vice president,
general manager, department manager, and supervisory/professional. This streamlined chain of command
allows the general managers at each Nucor division to operate their facility as an independent
business. With the day-to-day decisions made at the operating facilities, Nucor can respond to suppliers,
customers, and employees without waiting for a decision from the corporate office.
Reducing the distinctions between management and hourly employees serves Nucor well. Nucor
remains committed to not laying off employees in slow periods. Since its entry into the steel-making
business, Nucor has not laid off a single worker. The result is a committed team of Nucor employees and
high-quality products.
Nucor uses base pay and productivity bonuses to motivate its employees. Employees involved
directly in manufacturing are paid weekly bonuses based on the production of their work groups. The
bonus can average 80170 percent of the base wage and has no set limit. Department managers earn
annual incentive bonuses based primarily on the return on investment of their facility. These bonuses can
be as much as 100 percent of base salary. Professional and staff employees, such as accountants,
engineers, clerks, and receptionists, can earn bonuses up to 28 percent of salary. The base pay of Nucor
employees is actually significantly below industry average, but the productivity bonuses make them
among the highest-paid workers in the world. And Nucors employees respond positively to Nucors
production incentives.
The success of Nucor is due in part to the unprecedented domestic and international demand for steel.
Growing economies, particularly China, have had an insatiable need for steel. But in the last year China
has become self-sufficient and not only produces enough steel to meet local demand but also is emerging
as a major exporter of steel. As this chapter is being written, Chinese steel-makers are negotiating with
Indian steel companies to start joint ventures to produce high-quality steel. Worldwide supply of steel is
catching with demand, and current inventories are higher than industry analysts consider appropriate.
With decreasing demand, production will slow, which means bonuses will decrease and total
compensation (base pay plus bonus) could fall below industry average. You wonder what this would do to
employee motivation. You start to think about alternative non-monetary recognition programs that you
could initiate now so as to minimize the impact of decreasing bonuses on employee motivation. What if
the demand for steel decreases so much that Nucor is forced to revoke its long-time no layoff policy?
How will layoffs be handled; what will employees perceptions be? Instead of layoffs, could you reduce
the number of work hours? What criteria will you use to determine who works how many hours? To
maintain a motivated work force, you must ensure that these decisions are fair, and perhaps more
important, that the employees see them as fair. You also realize that you will have very little time to plan,
communicate, and execute your programs.

As the chief HR officer of Nucor, what would you do?