Leadership Part IV: Pay for Performance, Teamwork, the 'Right People'

Reposted from Dan DiMicco's blog of September 26, 2014

* Excerpt from my overview on leadership……”We discussed the critical role of Teamwork and our Pay for Performance system; not just theirs but for all levels in the company. We also discussed how working for Nucor was not for everyone. How it was critical that we hire the 'right' people. People who would take to and support the unique culture of the company. How people were not our most important resource....the 'right people' were.....and what defined the ‘right’ people.”

Nucor’s “Pay-for-Performance”/ " Share the Gain", system exists and is ingrained throughout the organization from top to bottom. It is reinforced at every level. It starts on the shop floor and goes right up to the CEO.

The CEO is paid based upon the profitability of the company both in absolute terms and relative to our competitors both in and out of Steel. If there are no profits the CEO and all officers of the company only receive their base pay. Typically a base pay well below median for the industry. Where they make it up is when we are strongly profitable and then the officers pay will go above median for all but the CEO who has been historically been paid well below median. (Officers do not participate in the employee profit sharing program, or children’s scholarship program.)

At the entry level compensation is based on tons of good steel each team produced safely for production workers and paid weekly. Two thirds or more of their pay will typically come from this production bonus. Having it paid weekly really gets the teammates attention and also their spouses, which can be an added motivator for the teammates!

For non-production teammates they are paid a base salary competitive with the market and then get a yearly bonus that can be a 0-35% depending on the profits of their Division. All non-officer Teammates participate in the company’s Profit Sharing program. Which in good years has averaged over $20,000 per employee.

So what you have is a compensation system that encourages and reinforces high performance from top to bottom. A system very much in tune with enhancing shareholder value and continual improvement and overall efficiencies and competitiveness. A reward system that was very dependent on people working together as a Team at every level, across levels, across Divisions and Product groups. We even emphasized this as a marketing tool with our “1Nucor” approach to doing business with our Customers.

The key to the overall success of any organization and in particularly Nucor’s, is the ability to attract and keep high quality people that will thrive in our High Performance Culture. That is why I have always said, “Our most important resource is not people, it’s the Right People!” The ‘right’ people are the ones who will thrive in our culture of Safe-Work, Teamwork, high performance, continual improvement! It takes people that are Team oriented, with a strong work ethic, good communication skills, eager to learn, continually improve their skill sets and grow with the many opportunities that Nucor presents them.

Teamwork by definition means doing it together. This became one of my main Mantras as I continually spoke, wrote and signed off with….”Let’s Do It Together, Dan”!

Teamwork at Nucor is not only a means to drive success, both financial and personal, but it was a way of life each and everyday. It created the glue and the focus to work Safely, Productively, and Competitively. It was integral in the buy-in process of taking ownership of their company and our goals and success and yes our failures; failures that everyone learned from and as a result led to even greater future successes.

One of the key components of team building is communication and the knowledge, through experience, that what any individual has to say, pro or con, is valued. Now not every item, issue, idea, can be acted upon but they can be discussed and the best direction chosen and if that doesn't work, look at one of the other points brought up. A tough, experienced Melt Shop manager once told me "god gave you 2 ears and one mouth for a reason, listen twice as much as you talk". Great advice for leaders!

Ken Iverson, our Founder, made it clear that it was " the Right of every Nucor teammate to their ideas, concerns, issues all the way to him. The beauty of Nucor's organization was there was on 3-4 levels of management between the newest teammate to the CEO. This made this policy actually work, and it did and does! The key to it working, and not to destroy teamwork, was what we call the "Chain of Communication" and it's rules. It is a simple and because of that, easy to understand and support. It goes like this-while it is your right to take things all the way to the CEO, we ask that you use the Chain of Communication first. The chains path is short and clearly marked. First take the issue, etc to your Supervisor and give them the chance to handle things properly, if that works great, if not take it to your Manager. If that fails to take care of your issue then on to the VP/Plant Manager, and next the CEO. We ask you to do this to show your respect for each leader in the chain, just as you would want to be respected if you were in that role, and someday the chances are good you may be. Give them the opportunity to do their jobs properly. However, if you still are not comfortable that you were listened to and had a fruitful discussion, the PLEASE use the Chain. When we were at that point in our first meeting when we discussed the Chain, I would ask my new teammates if this made sense to them and could they work together thus way. Without exception their response was a resounding yes we can. Then I would remind them of the definition of commitment (think chicken/pig), and ask for their commitment to work together this way, and they did. Of course the proof would always be in the  'Walking of the Talk' by everyone. It was and it is! Of course nothing is perfect but as long as we keep the discussion going in earnest, then success won't be far behind.

Let's Do It Together,
Dan

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