Innovation, Change and Motivation at Nucor Corporation - Essay Example

? Innovation, Change and Motivation at Nucor Corporation Number Question The organizational culture of Nucor Corporation is a devolved management system where rewards are based on performance. The organization attempts to achieve wage parity, embrace technology leadership, and foster effective customer care. Apart from these cultural values, none of the company’s employees is unionized. Nucor does not approve of unions, as it believes the culture is counterproductive, especially where building of a strong workforce whose objective is to serve the steel company’s interests is concerned. Nonetheless, the employees remain committed to quality of service and lay-offs are minimal. (a) Devolved Management system Nucor is heavily devolved in its operations, a culture that enables the employees to be innovative in their work and develop a feeling that they are owner-operators. In light of this, the company encourages most of the decisions about the business operations to be made at the lower level. In addition, Nucor’s claim that only 65 employees work at the headquarters is quite telling about the company’s lean culture. (b) Performance-driven rewards Nucor has established general rules of compensation which apply to all employees. The policies provide for a uniform compensation for individual employees who meet particular incentive-specific objectives. Apart from these common bonus plans, Nucor Corporation has periodically awarded extraordinary rewards to all employees, in the financial years when the company has made the highest amounts of profits. For instance, the company’s record sales of $23.6 billion in 2008, which was up from $4.6 billion in 2000 trickled down to the employees’ pockets, with the Chief Executive earning a whopping $ 5.24 million (Ivancevich, Konopaske, & Matteson, 2007). The uniform treatment of employees has tremendously reduced the gaps between the earnings of senior executives and lower ranking employees. (c) Egalitarian perks The company’s senior executives are not guaranteed traditional high bonuses such as company cars, executive parking slots or executive dining rooms (Ivancevich, Konopaske, & Matteson, 2007). Additionally, the publication of all the names of the company’s employees at the back of Nucor’s annual reports is a clear indication of the company’s egalitarian culture and inclusiveness of the decision-making processes. This is also a sign that the company values all of the employees, irrespective of their position within the organization. (d) Effective customer service Although, the text rarely mentions sound customer service at Nucor, it can be inferred. Effective customer service and quality can be explained by the simplicity and courtesy, which the Chief Executive cultivates. The culture of inclusivity, teamwork and appreciation of every person’s effort is a clear indication that all the stakeholders in the company are assured of respect and recognition. (e) Technology-driven culture Nucor Corporation is undeniably banking on the technological edge in its production of steel products. The process of using electric arc furnaces to liquefy scrap metal is the first of its kind in the twenty-first century (Ivancevich, Konopaske, & Matteson, 2007). Currently, Nucor’s association with two multinational steel companies in the running of the Crawfordsville facility, which specializes in the manufacture of sheet of steel from liquefied steel without necessarily deploying heavy, costly, and energy-inefficient rollers, is in itself a technological breakthrough that many steel companies have not yet adopted. Question # 2 Nucor has maintained the gap between executive pay and that of lower-ranking employees to the bare minimum as compared to other American companies. Since 1980s, the level of growth recorded by companies has been growing at almost the same pace as that of executive compensation (Ivancevich, Konopaske, & Matteson, 2007). Globalization makes highly performing executives more likely to attract higher pay than ever. And with the growing need to cultivate a culture of knowledge management, expertise of contemporary CEOs renders irrelevant the modest incomes of the twentieth century executives. Peer group and role of unions The unique, fair executive compensation model adopted by Nucor mainly stems from its delineation from peer group networks and labor unions. Other companies with different compensation systems that support huge disparities between executive pay and the earnings of lower-ranking employees do so as a result of three main issues: firstly, they perceive role of executives as the driving force within an organization, therefore a handsome remuneration will directly translate into better performance, more productivity and profitability. This theory is based on the fact that any input of the average employees has no bearing on the organizational goals the company. Secondly wide disparities in pay for executives and junior employees in other companies are as a result of stagnating pay for the latter group in order to safely reward the executives, without necessarily running the business into losses. This reasoning is based on the fact that by far an executive can micromanage a firm to realize the needed profits. Finally, unlike Nucor’s organizational culture that advances performance-based benefits, unionized companies will inexorably raise their executive pay without any credible reasons (Ivancevich, Konopaske, & Matteson, 2007). Additionally, owing to reluctance of unionized companies to acknowledge that they provide average compensation to their employees, many organizations tend to give their executives higher salaries and allowances than the average pay. The disparity in executive pay arises from every organization’s need to offer their executives an amount which is above the average. Impacts of pay disclosure Disclosure of pay has had a great impact on the nature of executive pay. Unlike in Nucor’s case, which basically resembles a closely guarded-affair pegged on yearly sales, other companies are merely responding to the impacts of an ever-increasing pay in the labor market. Interestingly, Nucor is less perturbed by the directives issued by the Securities and Exchange Commission for organizations to reveal the details of how they use the peer group issue to calculate executive pay. In light of this, Nucor’s culture inherently excludes it from the majority culture of key American companies, which peg their executive compensation models on the median earnings of their peer group. As a result, Nucor is effectively cushioned from the situations that raise the pay. It is notable that “above-average effect,” has become indefinable for most company boards tasked with the duty of hiring executives and setting their salaries. As a result, other companies task tentatively above-average boards to work on the right compensation for CEOs. By virtue of their status, they often come up with executive pays which are “above average,” but highly above the earnings of the average employee. Question # 3 Innovative solutions in an organization are triggered by internal or external forces. The origin of innovation is dictated by the influence and readiness of internal or external organizational assets for the cause. Nucor apparently nurtures internal mechanisms for innovation by providing an enabling environment for employees to reap the highest benefits from workplace learning. By doing away with numerous hierarchies and strict supervision at all its facilities, the organization literally supports internal or employee-driven innovation. Nucor supports internal innovative solutions by engaging the hearts and minds of stakeholders, allowing quality learning at the workplace. The company has recognizable rewards for deserving employees. Nucor has created interdependencies among all employees irrespective of rank, a culture that not only enhances innovation through open-mindedness within the organization. Employee motivation Innovative solutions can also be achieved through employee motivation. In light of this, Nucor nurtures the search for internal innovative solutions by making employees passionate about the organization and their work (Ivancevich, Konopaske, & Matteson, 2007). For instance, despite the absence of an elaborate compensation strategy for Nucor’s employees, three of the company’s electricians show their willingness to respond to some kind of unofficial distress call placed by fellow workmates, to go and repair the stalled electrical at the Hickman Arkansas plant. Malcolm McDonald, Les Hart, and Bryson Trumble are determined to travel long distances ‘by any means’ to reach the facility at night. And during the work, they spend about 20 hours a day to ensure that the facility is restored within the shortest time possible (Ivancevich, Konopaske, & Matteson, 2007). The three electricians are an example of employees who feel appreciated by the organization and involved in the system, and indeed they showed signs of wanting to contribute. Moreover, Nucor has cultivated a culture of accommodation of all employees as far as charting the right course for the company is concerned. This clearly symbolizes its readiness to embrace failure and appreciate success, since these are key factors in the search for innovative solutions. Ivancevich, Konopaske, and Matteson (2007) indicated that in innovation, radical innovations will barely materialize, but small breakthroughs will yield tangible outcomes in the long term. On the same note, Nucor has shown commitment to recognize and reward internal progress through concrete benefits such as bonus payments for the Chief Executive and other employees when the company’s performance is better. In light of these strategies, Nucor is likely to achieve internal innovative solutions to problems. Nucor’s internal innovator recognition program is not only unique; it is highly welcomed by most of the employees (Ivancevich, Konopaske, & Matteson, 2007). Therefore, the company is not expected to source for innovative solutions from outside or use outside forces to generate the desired results because Nucor’s employees work independently like owner-operators. In conclusion, Nucor has cultivated an ideal working environment where employees are not manipulated or subjected to strict supervision. As a result, they have developed a feeling of ownership of various company assets and therefore show responsibility for their work. This lean culture works well for the company, as fewer supervisors are needed to ensure that the work progresses well. In spite of its successes, Nucor needs to strengthen its internal structures for innovation by establishing elaborate measures aimed at collecting, sorting and recognizing ideas which meet the set innovative thresholds. By so doing, Nucor will be strengthening its culture of innovation; nurturing the expertise of all the employees; and establishing a fertile ground for solutions, which the senior management only cannot generate. Reference Ivancevich, J.M., Konopaske, R., & Matteson, M.T. (2007). Organizational behavior and management. New York: McGraw-Hill/Irwin. Read More