Michael D. Moberly January 2, 2014 ‘A blog where attention span matters’!
What follows is, in my view, an excellent example of a company culture melding into an attractive, valuable, and very powerful competitive advantage. In 1987, the former and now late Nucor Steel CEO, F. Kenneth Iverson embarked on an admittedly risky proposition (business model) at the time, in which he came to embrace the perspective that most all employees (at Nucor) would likely perform better if they were provided with, at the time, were deemed quite innovative incentives. (Byrnes & Arndt, 2006).
There is little doubt that Iverson himself, was the driving force for developing, what was described at the time, as a uniquely egalitarian (companywide) culture for Nucor. Being somewhat familiar with Iverson’s initiative as it evolved in the late 1980’s, I sensed the key differentiator for this particular company culture Iverson that was fabricating sprung from its (employee) performance-based features.
That ‘cultural’ change Iverson set in motion was to ‘empower’ Nucor’s employees with probably the most significant tool in any management teams’ tool box at that time, which was to treat them (employees) with respect! To this component, I suspicion Iverson was not just an admirer of McGregor’s Theory Y, he strongly embraced it, and it probably influenced his views on particular (differentiating) components he sought to embed in Nucor’s company culture.
As such, an integral component prominently embedded in Nucor’s overall (employee) compensation strategy was designed to foster (employee) motivation and productivity on a companywide basis. That is, salary reconstruction aspects of Nucor’s company culture allowed for sixty-six percent of Nucor employee’s weekly pay to be linked to performance with up to 20% of this total coming from Nucor’s profit sharing program, which took 10% of operating profits and divided them among all employees (excluding senior officers).
Very simply, but respectfully stated, Iverson’s premise was that by rewarding individual and collective employee productivity, rather than the conventional job title or higher-level degree methodologies, Nucor would be positioned to empower its employees to consistently work hard because risks and rewards were being shared and would ultimately come to benefit stakeholders as well. Thus, individual employee empowerment, as a method for rewarding employee productivity, would ultimately fall to how well employees recognized and utilized their intellectual, structural, and relationship capital, each of which are, of course, intangible assets.
Therefore, the wellbeing of Nucor executives was dependent on the productivity of Nucor’s employees. So, if productivity declines, employee salaries will decline as well, but, the CEO’s salary and benefits will decline also. Thus employees know that the same factors impacting their income also impact c-suite executives, providing for a shared sense of risks and rewards on an enterprise wide basis. (Byrnes & Arndt, 2006)
So, once Nucor’s (Iverson’s) ‘company culture’ is in place, and I take the position it is a very positive step, it will elevate Nucor’s competitiveness. But, relevant question is, what is the absolute best and most objective method for capturing this contributory value when Nucor is sold?
This post was inspired by Business Roundtable Institute for Corporate Ethics blog post written by Kevin Belt in October, 2009.
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