Here’s a success story by any measure:
"It’s a profitable formula: [Company X’s] 387% return to shareholders over the past five years
[…]It
handily beats almost all other companies in the Standard & Poor’s
500-stock index, including New Economy icons Amazon.com,
Starbucks, and eBay. And the company has become more
profitable as it has grown: Margins, which were 7%
in 2000, reached 10% last year.
has grown into a company with 2005 sales of $12.7 billion,
up from $4.6 billion when DiMicco [the new CEO] took
over in 2000. Last year net income was $1.3 billion,
up from $311 million in 2000."
What do you suppose "Company X" does? Specialty
retailing? Biotech? Building tools for e-commerce?
Company X is Nucor, now the largest steel producer
in the U.S. Even in a sexless industry pronounced
dead a couple of decades ago, Nucor excels. How
do they do it?
Business Week has the story,
and it’s all about employee motivation, founded on
"legendary
leader F. Kenneth Iverson’s radical insight: that employees,
even hourly clock-punchers, will make an extraordinary
effort if you reward them richly, treat them with respect,
and give them real power." Again, this means
truly letting go: Talk to the line workers, truly
listen, take risks on their ideas, and accept the occasional
failure.
And it’s a two-way street: Nucor’s compensation
system is unlike any other in the industry. Whereas
the going rate for an experienced steelworker is
$16 to $21 an hour, base pay at Nucor is closer to
$10. But a bonus system tied to production of
defect-free steel can triple the average take-home. The
same holds true for managers, whose salaries are 75%
to 90% of market, but who can earn bonuses equal to
another 75% to 90% on top of that. The
result is pretty simple:
“In average-to-bad years, we earn less than
our peers in other companies. That’s supposed to teach
us that we don’t want to be average or bad. We want
to be good,” says James M. Coblin, Nucor’s vice-president
for human resources."
The final, indispensable ingredient is No Hypocrisy
From the Top. The CEO’s pay is exactly 23 times
that of the average steelworker, compared to average
CEO pay of more than 400 times what a factory worker
takes home. And the symbolism aligns as well: Fly coach,
make your own coffee, put every single employee’s name
on the cover of the annual report.
Lessons from what should be a dead-on-arrival, Rust
Belt antique? Not only lessons, but if it works
with steel mill workers, because they "get it," how
likely do you think it is that the
cream of the Ivy League and the country’s top law schools
might also get it?
