{"id":5145,"date":"2015-12-09T18:48:25","date_gmt":"2015-12-09T23:48:25","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/"},"modified":"2015-12-09T18:48:25","modified_gmt":"2015-12-09T23:48:25","slug":"nucor-revolutionizes-the-steel-industry","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/","title":{"rendered":"Nucor Revolutionizes the Steel Industry"},"content":{"rendered":"<p><strong>Nucor Evolves Into the Steel Industry Leader<\/strong><\/p>\n<p>On the heels of bankruptcy in the 1960s, Nucor Corporation divested itself of many of its businesses and shifted its\u00a0focus to its profitable steel joist business. \u00a0In 1968, recently appointed CEO Ken Iverson made a radical decision to invest in radical steel-making technology from Europe called the electric arc furnace (EAF). \u00a0Traditional steelmaking had relied\u00a0upon the Bessemer process in which iron ore reacted with oxygen from atmospheric air\u00a0&#8211; a time consuming process that was costly to\u00a0start up or shut down. \u00a0In contrast, the EAF melts recycled scrap metal using massive\u00a0quantities of direct and alternating current electricity passed through huge graphite electrodes. \u00a0At the time, electricity was relatively cheap and scrap metal was a fraction of the cost of iron ore as a raw material.<\/p>\n<p>Around this innovative\u00a0technological advantage, Iverson developed a business model of saturating\u00a0the market with low-cost steel and undercut their competition. \u00a0Competitors like U.S. Steel scoffed at the idea of this young, up-start company being able to produce meaningful quantities of steel with a relatively unproven, radical technology. \u00a0Yet by the 1980s, Nucor had proven itself domestically as the lowest-cost producer of steel through the EAF process. \u00a0With steel being a commodity used in other heavy industries, price primarily motivated customers rather than customer service, high product quality, or glossy advertising. \u00a0Many of Nucor&#8217;s senior managers can recall\u00a0being in a price war with traditional competitors who would lower their price by $1-$2 per ton, only to be undercut by Nucor by $10-$15 per ton while still maintaining a larger gross margins than their competitors. \u00a0Doing this allowed Nucor to steal market share, build brand recognition, and become the dominant player domestically. \u00a0Today, Nucor is a Fortune 150 Company, the largest producer of steel products in the United States, and has a market capitalization of $13.3 billion.<\/p>\n<p><iframe loading=\"lazy\" title=\"Charging the furnace\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/nolpiat6Sk0?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p><strong>Nucor&#8217;s Pay-for-Performance, Team-based Culture<\/strong><\/p>\n<p>Iverson recognized that\u00a0Nucor\u00a0possessed a\u00a0superior technology which enabled them to produce far larger quantities of lower-cost steel than their competitors. \u00a0Around this principal,he built a culture of teamwork within a dangerous, dirty, and physically demanding industry. \u00a0Nearly all of Nucor&#8217;s steel mills are located in the rural\u00a0Deep South and Midwest &#8211; areas known for historically agricultural populations with lower income and less education. \u00a0Yet workers have the opportunity to make huge salaries through the pay-for-performance system. \u00a0They earn\u00a0a\u00a0lower base wage than in\u00a0a traditional, union steel mill, but are also paid a production bonus weekly for the number of steel tons they produce according to customer specifications. \u00a0In practice, this means that an employee making $20\/hour will actually make $40-60\/hour depending\u00a0on the production bonus; a typical production bonus is 150-200% on top of the base wage, with employees also being paid 1.5x for every hour over 40. \u00a0Entry-level employees with only a high-school education in rural areas can easily earn $80-90k per year, while production supervisors can make in excess of $150k &#8211; well above their industry peers. \u00a0In addition, all employees are awarded\u00a0profit-sharing bonuses and historically Nucor&#8217;s executive management is some of the least compensated relative to the market capitalization of the company.<\/p>\n<p>The pay-for-performance system has incredible implications on team dynamics within production crews. \u00a0At all times, employees are cognizant of the ticker calculating their production bonus for that shift. \u00a0When the process is shut down for a mechanical or electrical failure, workers rush to help in order to get the process running again, as all of their collective bonuses are linked to the tons produced. \u00a0Employees, called &#8220;teammates&#8221;, share knowledge and best practices and are quick to hold each other accountable, knowing that the collective performance of the team determines their shared outcome. \u00a0Additionally, teammates are constantly watching out for each others&#8217; safety and &#8220;treat each other like family&#8221; in accordance with Iverson&#8217;s vision. \u00a0All of this allows for a lean management structure and flat hierarchy, enabling operational decisions to be made at the lowest level possible.<\/p>\n<p><iframe loading=\"lazy\" title=\"Nucor Steel Labor Policy in 1992\" width=\"640\" height=\"480\" src=\"https:\/\/www.youtube.com\/embed\/qI0i13iJ8qs?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>Nucor&#8217;s evolution has included many acquisitions, expansion, and vertical integration of raw material sourcing and downstream processing. \u00a0Nucor continues to invest in new technologies, but has had questionable results such as with their $750mm direct-reduced iron facility in Louisiana. \u00a0Although the company remains committed to its vision, it remains to be seen whether they can maintain their competitive edge in the face of adoption of their best practices by competitors and a surge in international imports of steel from China.<\/p>\n<p>&nbsp;<\/p>\n<p><em>Note: the author of this post is a former Nucor employee and drew extensively on personal experience in addition to the sources below.<\/em><\/p>\n<p><strong>Sources:<\/strong><\/p>\n<p><a href=\"http:\/\/www.nucor.com\/\">Nucor Corporation Website<\/a><\/p>\n<p><a href=\"http:\/\/www.steel.org\/making-steel\/how-its-made\/processes\/processes-info\/the-basic-oxygen-steelmaking-process.aspx\">AIST SteelWorks&#8217; Basic Oxygen Steelmaking Process<\/a><\/p>\n<p><a href=\"http:\/\/marketrealist.com\/2015\/09\/nucors-financial-strength-muscle-behind-performance\/\">Market Realist News on Nucor Steel<\/a><\/p>\n<p><a href=\"http:\/\/leeds-faculty.colorado.edu\/madigan\/4820\/Presentations%202011\/Nucor%20NUE%202011%20Ketellapper%20Hartnick%20Report.pdf\">University of Colorado Summary of Nucor Steel<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nucor Steel disrupted and overhauled the steel industry with innovative technology, forever changing how steel is manufactured around the world.  In doing so, it built a culture that proved the potential of well-executed pay-for-performance systems.<\/p>\n","protected":false},"author":781,"featured_media":5146,"comment_status":"open","ping_status":"closed","template":"","categories":[742,331,123,587,866,1],"class_list":["post-5145","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-culture","category-disruptive","category-incentive-structure","category-process-technology","category-team","category-uncategorized"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Nucor Revolutionizes the Steel Industry - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Nucor Revolutionizes the Steel Industry - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Nucor Steel disrupted and overhauled the steel industry with innovative technology, forever changing how steel is manufactured around the world. In doing so, it built a culture that proved the potential of well-executed pay-for-performance systems.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Nucor-Tusacloosa-EAF.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"640\" \/>\n\t<meta property=\"og:image:height\" content=\"480\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/nucor-revolutionizes-the-steel-industry\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/nucor-revolutionizes-the-steel-industry\\\/\",\"name\":\"Nucor Revolutionizes the Steel Industry - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/nucor-revolutionizes-the-steel-industry\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/nucor-revolutionizes-the-steel-industry\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/Nucor-Tusacloosa-EAF.jpg\",\"datePublished\":\"2015-12-09T23:48:25+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/nucor-revolutionizes-the-steel-industry\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/nucor-revolutionizes-the-steel-industry\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/nucor-revolutionizes-the-steel-industry\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/Nucor-Tusacloosa-EAF.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/Nucor-Tusacloosa-EAF.jpg\",\"width\":640,\"height\":480},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/nucor-revolutionizes-the-steel-industry\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Nucor Revolutionizes the Steel Industry\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Nucor Revolutionizes the Steel Industry - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/","og_locale":"en_US","og_type":"article","og_title":"Nucor Revolutionizes the Steel Industry - Technology and Operations Management","og_description":"Nucor Steel disrupted and overhauled the steel industry with innovative technology, forever changing how steel is manufactured around the world. In doing so, it built a culture that proved the potential of well-executed pay-for-performance systems.","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/","og_site_name":"Technology and Operations Management","og_image":[{"width":640,"height":480,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Nucor-Tusacloosa-EAF.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/","name":"Nucor Revolutionizes the Steel Industry - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Nucor-Tusacloosa-EAF.jpg","datePublished":"2015-12-09T23:48:25+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Nucor-Tusacloosa-EAF.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Nucor-Tusacloosa-EAF.jpg","width":640,"height":480},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/nucor-revolutionizes-the-steel-industry\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"Nucor Revolutionizes the Steel Industry"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/5145","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/781"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=5145"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/5145\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/5146"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=5145"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=5145"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}