Nucor

Another company that promotes a corporate culture and innovation is Nucor Corporation, one of the largest steel producers in the country. In the mid-1960’s the company was failing and near bankruptcy. The manager of the company’s only profitable division, Ken Iverson, was asked to take over the company. He began to change the culture to stress innovation at all levels in an effort to improve efficiency and profitability. Iverson established a compensation system that rewarded people based on how much they produced. Usually in piece rate compensation plans, rates are raised as productivity increases. Of course, this discourages innovation because people wind up doing more work for the same amount or even less money. Iverson took another approach. He did not change rates as productivity increased. Rates were changed only when the company invested a significant amount of money in a process. Otherwise, people are free to develop and implement as many ideas as they can to improve productivity and efficiency. The result is that each Nucor worker produces three times as much steel as his counterpart in other companies. Some employees make 200 percent or more of their base compensation rate. Furthermore, Nucor employees and managers are encouraged to take risks. Failure is tolerated if an honest effort is made. In fact, one manager lost millions of dollars for the company when he selected a new type of blast furnace that did not work. But he was not fired. Managers at Nucor who are fired are almost always fired for failures in people management or an inability to operate in Nucor’s risk-taking, autonomous, innovative culture.