There were four incentive system at Nucor, one each for production workers, department heads, staff people, and senior management. Production workers received a performance-based bonus dependent on the historical time metrics for completing tasks. If a group beat the metric by 40% for the week, they received a 40% bonus paid the next week. The bonus for divison heads production was based on division contribution. Wages were set at 75% of the industry norm with bonuses reported to run between 0 and 90 percent (average 35-50) of a person’s base salary. The other bonuses were based on company metrics like ROA or ROE. After beating a certain industry benchmark, managers and staff people would receive a bonus.
Predictably, Nucor workers are described as the hardest working in the industry. Abseentism and tardiness was not a problem for Nucor either. Each employee had four days of absences before pay was reduced. In addition to these, missing work was allowed for jury duty, military leave, or the death of close relatives. The value added to the employees was passed along to the customers in the form of increased productivity and low turnover that kept costs of products low.Technological Innovation
As discussed in the VCA, Nucor has been an industry leader in technological innovation. Technology changes fairly slowly in the steel industry due to high switching costs, therefore many companies stop scanning for new technologies. The utilization of mini-mills has allowed Nucor to sustain its competitive advantage in cost. As evidenced by the most recent venture into fasteners, Nucor is quick to take advantage of new technologies. Subjected to VRIO testing, this advantage is sustainable due to the high sunken cost of the many integrated firms. Nucor is able to implement new technology cheaply, because they have a support system created specifically for the implementation of new technologies.
Unlike most US steel firms, Nucor has had excellent strategic...