Human Resource & Competitive Advantage- A of Nucor - Case Study Example

? Human Resource & Competitive Advantage- A Case of Nucor Table of Contents Table of Contents 2 Answer 3 Answer 2 5 Answer 3 6 Works Cited 8 of the Student: Name of the Professor: Course Number: Date of the Paper: NUCOR CASE ANALYSIS Answer 1 There is no doubt that the case is an interesting example for human resource professionals and managers who are concerned with the viability of strategic human resource practices in real world business environment. First question for the case is whether using a performance based pay system instead of using separate performance appraisal system is a right choice for Nucor Corporation (which is a renowned Steel maker having headquarter in Charlotte, North Carolina) or not? However, there cannot be one straight forward answer to the question. For example, from the viewpoint of strategic human resource, pay system of Nucor is an innovative measure but from management viewpoint, performance based pay system might not suit requirements of other organizations. Looking at the financial aspect of the pay for performance system the system might seem as inappropriate to modern organizational setting but they pay system of Nucor needed to be viewed from the human side of the equation (Cangemi, Lazarus, McQuade, Fitzgerald, Conner, Miller and Murphree 30-43). However there are advantages and disadvantages that are associated with the pay for performance scheme of Nucor (Anthony 19-30). Advantages According to the case study, pay for performance has helped Nucor to retain top performers and create the sense of responsibility among employees because employees know that their pay scale is directly related to their performance level. Korda (2009) has pointed out that leaders need to adopt alternate solutions in order to enhance performance of subordinates. Same is the case for Nucor, leaders of the company have designed a unique pay for performance scheme for employees which can positively impact the overall production performance of the company. According to the case study, workers in Nucor Corporation three times incentives along with the fixed pay when they perform exceptionally well. Now from an egalitarian perspective, the pay for performance model can be appreciated, for example, in a fixed salary based compensation scheme with separate performance appraisal system; all employees are equally compensated irrespective of their performance level in the organizations. Such type of pay system might discourage employees to put their hard work hence overall productivity of the firm will get hampered. The case is opposite when organizations link incentives along with fixed payment to appreciate workers to enhance their effort level earn more monetary rewards. Disadvantages According to Bernardin and Russell (2013) there are two major limitations associated with pay for performance scheme, 1-it is not a standardised procedure to measure performance because performance of employees can be downgraded by variety of reasons apart from incompetency of workers and 2- biased pay for performance system can decreased the level of output from workers. These problems are associated with the pay system of Nucor Corporation. Careful analysis is showing that, hourly workers in steel manufacturing giant earn $10/hour which is far less than the industry average of $16-$21/hour while rest of the payment is made in terms of incentives and bonuses which are linked with the quality and productivity of entire shift. Now imagine a case, where overall productivity of Nucor Corporation gets reduced due to decrease in demand for steel across the globe for various macro-environmental reasons. From the law of economics, in such cases, Nucor will not be able provide bonuses or incentives to workers hence the workers will go home with fixed salary which is way below than the industry average. The same case happened to Nucor during 2003, when the demand for steel was chopped; hourly workers earned only $59,000 annually. Answer 2 Nucor Corporation uses both financial and non-financial incentives to motivate workers. Under financial incentives, the company offer bonuses and profit sharing schemes to workers. However, separate pay system has been designed for managers and workers by the company. For example, hourly workers earn bonuses according to the quality and quantity of output per day along with the fixed hourly wage and a hefty profit sharing of $18,000 annually while managers earn fixed compensation and performance bonuses. However, fixed compensations for both managers and workers are almost 60% to 90% of industry average but they have the opportunity to earn almost double or triple performance based incentives. There are cases where overall compensation (fixed + incentives) for workers in Nucor Corporation might exceed the compensation of workers working in other steel companies. In 2005, the company has disbursed $220 million in terms of profit sharing and bonuses to hourly workers whereas average hourly workers made $91,000 during that year. Kreitner and Kinick (2013) have strongly supported the benefits of incentive schemes when it comes to performance improvement. Up to certain extent, example of Nucor is supporting the argument of the scholar duos. Ventrice (2009) has pointed out that organizations should use non-financial incentives such as invisible recognition, showing care to workers and many others in order to engage workers with organizational environment. Management of Nucor has employed various non-financial incentives such printing name of each worker in annual report, limiting CEO’s pay structure to only 23 times hourly worker’s annual salary whereas in other companies, CEOs earn 400 times in comparison to what hourly workers earn, valuing the suggestions of workers while taking important decision by the management, appreciating workers for their contribution by managers in periodic manner by top level managers. Using these non-financial incentives has helped Nucor create an engaged workforce are ready to compete with each other in order to improve performance to earn more incentives while still maintain the cooperation with each other. Surprising fact is that management of Nucor has never engaged any kind of union busting tactics or neither its workers felt the need of having a union which can protect their interest. Hence, it can be surmised that conjoint impact of financial and non-financial incentive schemes has not only empowered Nucor with an engaged and participative workforce but also helped them to achieve human resource based competitive advantage. Answer 3 According to the case study, workers in Nucor are already flexible enough to handle changing dynamics of work environment hence employing part-time, virtually or temporary workers for the sake of cost reduction will be a redundant choice for the company. At this point of time, the study has found no justification behind employing temporary workers to reduce cost of production. Since its formation during 1960s, Nucor has emphasized heavily on its no-layoff policy. Such kind of humanitarian policy is pretty much unprecedented for steel industry which is plagued by high attrition rate and lay-off of workers. Even during the first half of economic recession, the company has not laid-off a single worker when the steel industry was operating at 40% of natural capacity due to slowdown in demand for steel products. Actually, Nucor is a people driven organization, where managers and workers play equally important role achieve the business objective of the company in collective manner. There are no preferential treatments such as extra holidays, company cars, insurance benefits, reserve parking space etc for executives in Nucor Corporation; such egalitarian organizational treatment has been created by the company in order to appreciate effort of workers and create a cogent environment of trust, mutual respect, participation and transparency. In an organizational environment like Nucor, employing temporary labours will definitely hurt the organizational equilibrium in negative manner. There is high possibility that temporary workers might not gel up the egalitarian work environment of Nucor and they may collide with the regular workers of the company regarding earning of incentives and knowledge sharing. Logically, Nucor will face problems while designing pay for performance scheme for temporary workers due to lack of scope for monitoring the performance of temporary workers in precise manner. Hence, Nucor should not try to use part-time workers in order to reduce cost and gain flexibility. Works Cited Anthony, Robert N. Management Control Systems. 12th ed. New York City, NY: McGraw-Hill Education, 2011. Print. Bernardin, John H., and Russell, Joyce E. A. Human resource management. 6th ed. Irwin: McGraw-Hill, 2013. Print. Cangemi, Joseph P., Harold Lazarus, Ted McQuade, Jaime Fitzgerald, James Conner, Richard Miller, and William Murphree. Successful leadership practices during turbulent times. Journal of Management Development 30(1) (2011): 30-43. Print. Korda, Michael. Ike: An American Hero. New York, NY: Harper Collins, 2009. Print. Kreitner, Robert, and Angelo Kinicki. Organizational behavior. 10th ed. Irwin: McGraw-Hill, 2013. Print. Ventrice, Cindy. Make their day!: Employee recognition that works: Proven ways to boost morale, productivity, and profits. San Francisco: Berrett-Koehler Publishers, 2009. Print. Read More