Question

CASE B: Contingent Pay at Nucor Corporation

At Nucor Corporation, contingent pay has for many years a part of the company’s approach to compensation. Nucor, based on Charlotte, North Carolina, is the largest producer of steel in the USA. The company employs 11,500 people. The pay practice at Nucor includes putting a considerable amount of pay at risk, and the size of paychecks depends upon results achieved. For comparison, competitors often pay an experienced steelworker between $16 and $21 per hour. The similarly qualified employee at Nucor would have a guarantee of $10 per hour; however, the bonus system at Nucor allows employees to make three times the average pay under certain circumstances, such as producing steel without any defects. Bonuses are based on performance and paid on a weekly basis. The system also means that substandard performance is penalized by a loss in pay. For example, errors may result in a lost bonus opportunity. Managers in the company are also paid a lower than average base pay, generally 75% - 90% of industry average rates, but bonus payments could reach 75% - 90% of base salary, depending on the performance outcomes established for the plant as a whole.

Question:

4.       Evaluate the contingent pay plan of Nucor Corporation. Does it motivate employee performance? List down the various types of contingency plan and their corresponding objectives. Which contingency plan is applicable to Nucor Corporation? Justify.

Answer 1

The contingent pay plan of Nucor Corporation.

• Nucor backs up its philosophy with a singular pay-for-performance compensation system.
• Salaried employees receive 0 to 25 percent of their salary supported the Return on Assets (ROA) of their plant. Employees earn money based on their individual productivity.
• While employees are paid a but industry average hourly rate, they qualify for an exceptional performance bonus if they exceed hourly quotas.
• This unique way of rewarding productivity keeps Nucor’s productivity high and its absenteeism at a coffee 1 to 1.5 percent a year.
• Employees see an immediate correlation between what they are doing and their paychecks a serious incentive, and a key strength of the program.
• In fact, this program prompts such high performance that employees were refusing to require day off .
• It focuses on two clear goals: building steel manufacturing facilities economically, and operating the facilities productively.
• To achieve these goals, Nucor has streamlined and decentralized management and allows each plant to work as independent business units
• . Only four layers of management exist: Chairman, president and President; Vice President-General Manager; Department Managers; supervisor/Professional; and hourly employees. Only 22 employees eight managers and 14 administrative employees add the company headquarters.
• Senior executives don't have company cars, dining rooms, executive parking spaces or corporate jets. Everyone from the janitors to the CEO has an equivalent basic but generous benefits plan.
• Nucor’s employee relations philosophy is simple and effective:

Employees should have the chance to earn according their productivity.
If employees do their job well today, they ought to have employment tomorrow. (They haven’t laid off employees in 28 years.)
Employees have a right to be treated fairly. The company listens to employees through crew meetings, department meetings, shop dinners and employee surveys.
Employees must have an avenue of appeal if they believe they need been treated unfairly.

This complaint procedure allows employees to hold their complaints to the President of the corporate .
To achieve these goals, Nucor has streamlined and decentralized management and allows each plant to work as independent business units. Only four layers of management exist: Chairman, president and President; Vice President-General Manager; Department Managers; supervisor/Professional; and hourly employees. Only 22 employees eight managers and 14 administrative employees add the company headquarters. Senior executives don't have company cars, dining rooms, executive parking spaces or corporate jets. Everyone from the janitors to the CEO has an equivalent basic but generous benefits plan.

Nucor’s employee relations philosophy is simple and effective:

• Employees should have the chance to earn according their productivity.
• If employees do their job well today, they ought to have employment tomorrow. (They haven’t laid off employees in 28 years.)
• Employees have a right to be treated fairly. The company listens to employees through crew meetings, department meetings, shop dinners and employee surveys.
• Employees must have an avenue of appeal if they believe they need been treated unfairly. This complaint procedure allows employees to hold their complaints to the President of the corporate .