Argues that a steel company's competitive advantage is 70% culture and 30% technology — and that culture is built by destroying hierarchy, sharing everything, and treating employees as equals who control their own destiny, not by motivational programs layered on top of a command structure.
Argues that a steel company's competitive advantage is 70% culture and 30% technology — and that culture is built by destroying hierarchy, sharing everything, and treating employees as equals who control their own destiny, not by motivational programs layered on top of a command structure.
“It is 70% culture and 30% technology. The truth is, I'm not sure if it's 80 to 20 or 60 to 40 percent, but I'm certain our culture accounts for more than half of our success as a business.”
Iverson on explaining Nucor's success in a commodity industry.
“We're not dogs on a leash, doing tricks to manage the stock price or maximize dividends quarter-by-quarter. We're eagles. We soar.”
Iverson rejecting Wall Street pressure for short-term earnings management.
“When I think of the millions of dollars spent by people at the top of the management hierarchy on efforts to motivate people who are continually put down by that hierarchy, I can only shake my head in wonder.”
Iverson on the absurdity of motivation programs layered onto rigid hierarchies.
“It's never a mark against you for trying to do something different if you think it will make things work better. It's a mark against you if you don't try.”
Nucor employee Bobby Hanna describing the culture of initiative.
“Delegation without information is suicide.”
Iverson on why decentralization requires a tight information system.
Spending millions on motivation programs while maintaining the hierarchical structure that demotivates people is self-defeating — destroy the hierarchy first.
Managers think empowerment means stepping back and not interfering, but equality requires active, sustained attack on hierarchy, status markers, and bureaucratic layers.
Capitulating to short-term Wall Street pressure — taking on debt, slowing depreciation, capitalizing costs — is like a drug fix that guarantees painful withdrawal later.
“We don't look over the shoulders of our general managers and we don't ask them to submit voluminous nous reports, explaining their actions. But that doesn't mean we're not paying attention. Delegation without information is suicide. Every week, each division sends headquarters a few key numbers that, taken together, give us a "snapshot" shot" of their basic operations from beginning to end: • Quotes (bids) • Orders • Production • Backlog • Inventory • Shipments These numbers for all of Nucor's divisions print out on one 8.5" x 11" sheet of paper. A second weekly report, about four pages long, compares the current week's numbers with those of the preceding week, shows each division's numbers over a period of thirteen weeks, and compares the current figures to the corresponding thirteen weeks of the preceding year. This enables us to look at trends. And since the reports are compiled by a computer, puter, these comparisons are very easy to generate. In total, then, we rely on about five pages of data to keep abreast of the weekly operations of twenty-one one divisions across a multibillion-dollar corporation. tion. I review the weekly reports every Wednesday morning over coffee. If the numbers for a particular division look out of whack, we know we need more information. John Correnti (Nucor's president and CEO) or I will call the general manager right away. They're rarely surprised to hear from us. They know when the numbers are likely to trigger questions. If, on the other hand, the numbers are on track, we assume their operations are doing just fine. We know they'll call us if they need us.”
“Nucor has consistently required its general managers agers to generate a return of at least 2 5 percent on the assets we place under their control. The assets belong to the shareholders of the company, and entrusting them to a general manager is like making a deposit at the bank. The shareholders have every right to expect a healthy return. "That's fine by me," Joe stresses. "I take the same approach with the people who work here in the division. sion. My department heads, the people in the control trol rooms ... they all spend thousands of dollars without anybody's approval. All of us can make that kind of decision, because all of us stand behind our decisions. We're accountable for getting the job done."”
“"Remember, Ken, a good manager has to be hard to bruise and quick to heal." That was a good lesson, one I've passed on to many other managers. You can't be too quick to take offense.”
“General managers agers run their own businesses. They call their own shots. But they have to hold up their plans, decisions, and their results to the scrutiny of their peers. That's a very effective check against making impulsive decisions, sions, whether it's a multimillion-dollar capital investment vestment or a key promotion.”
“What we did was push aside the notion that managers agers and employees have inherently separate interests. ests. We've joined with our employees to pursue a goal we can all believe in: long-term survival. We run Nucor first and foremost to ensure that, a decade or two from now, there will still be a place for our children dren and grandchildren to work without being laid off. That is our higher cause.”
“We have no performance appraisals in Nucor. People earn according to what they produce, and those earnings are determined simply and objectively. tively. We also have no job descriptions. We let our employees define their own jobs as they search for ways to optimize their productivity.”
“• We are in a labor-intensive and technology-intensive intensive business, yet we've built most of our manufacturing facilities in areas that have more cows than people.”
“Businesses that need to operate uniformly wherever ever they are-McDonald's or Wal-Mart, for example-must ple-must be shaped by relatively few people. In such a business, centralized decision making is a very sensible approach. Businesses that serve diverse markets, on the other hand-or that experience very different conditions in different locations, or that rely more on high levels of innovation and flexibility than on uniformity-are best shaped by a wider array of people.... That is, by the people closest to where the work actually gets done. Those businesses must tell people on the front lines to "trust your instincts." And businesses that tell their people to "trust your instincts" generally should be decentralized. A decentralized structure pushes the power to set strategy, spend money, make decisions, and create policies out toward the marketplace. It promotes motes local autonomy. Managers within companies can look at the operations ations for which they are accountable in much the same way. In your department or work group, what's more important, uniformity or innovation? Consistency tency or flexibility? If your success depends heavily on uniformity and consistency, centralized decision making may be justified. If your success relies more on innovation and flexibility, you should make a conscious scious effort to push decision-making power down.”
“I can't tell you how many times I've heard a Nucor general manager say that "this is how we ought to structure compensation" or "this is how we should look at risks," and thought: "Yeah, that's the right way to run a business." I've latched onto those ideas and pushed them around Nucor as hard as I can. Some people assume they are all my ideas. I should be so smart.”
“We refuse to do it. I like to remind our managers: "We're not dogs on a leash, doing tricks to manage the stock price or maximize dividends quarter-by-quarter. quarter. We're eagles. We soar. If investors want to soar, too, they'll invest in us. The speculators, we don't need."”
“We track and manage costs more closely than just about any business you can name, yet we anticipate and accept that roughly half of our investments in new ideas and new technologies will yield no usable results.”
“MOLTEN METAL is a wild and restless force. Engineers, neers, supervisors, and production workers will gather around a new caster like kids at the lighting of a bonfire, fire, staring in silent expectation while the maiden melt of steel spits and hisses its way through the apparatus. ratus. If the caster works, the long rectangular shells of cooling steel will secure the still-molten core, glowing in its persistent fury, and the onlookers, having caged the beast, will clap one another on the back, celebrating ing their collective triumph over a power not one of them could hope to master alone.”
“To my eyes, two of the most fascinating sights to behold are hot metal in motion and a group of people ple in headlong pursuit of a shared purpose. Those images are the essence of Nucor. They convey how we turned a confused, tired old company on the brink of bankruptcy into a star player in the resurgence gence of American steel.”
“We're big on informality, caring, freedom, dom, respect, equality, and the simple truth. We have little tolerance for the politics, the pettiness, the fixation ation on rank and status, and the insensitivity to employees' legitimate needs that people in most big companies endure as a matter of course.”
“Our company is broken up into 21 independently dently operated businesses, each with almost complete local autonomy, yet we have an unusually usually active and free exchange of ideas and solutions across divisional, geographical, and functional boundaries.”
“Our strategy was what executives now call "focusing on our core competencies," although that's not what we called it. We just placed the few chips we had left on the businesses nesses that were turning a buck.”
“Why make products when there's nobody to buy them? Cutting back to four-day or even three-day work weeks reduced the average Nucor worker's earnings by 25 percent. You know that had to hurt. Still, as I'd walk through our mills and plants, I never heard one employee complain about it. Not one.”
“"What Nucor management has been able to do is get workers to identify their own interests ests fundamentally with those of management, something thing managers have been attempting to do, not very successfully, since the dawn of industry."'”
“The way we see it, making a living in today's economy omy is like crossing a broad and stormy sea. You could jump straight in and start swimming. Of course, that would be foolish. People with sense will get together and build themselves a boat. And when the seas get a little rough, you could run around pushing your shipmates overboard. People with composure work together to pull through the storms. They deal with the perils of the moment together, never forgetting that the people around them represent their best hope of reaching a better future.”
“Here is the gist of my opening remarks to them: Many of you, with your short-term view of corporations, rations, remind me of a guy on drugs. You want that quick fix, that high you get from a big spike in earnings. So you push us to take on more debt, capitalize start-up costs and interest, and slow down depreciation and write-offs. All you're thinking about is the short term. You don't want to think about the pain of withdrawal that our company will face later on if we do what you want. Well, Nucor isn't going to respond to that kind of thinking. We never have and we never will.”
“These days, you can't swing a dead cat without hitting some corporate executive whining that Wall Street won't let him run the company for long-term growth. But I say complaining is a waste of time. In the end, you have to choose your master-the investor vestor or the speculator.”
“What's the difference? Time. Over a three-to-five-year five-year period, the success and growth in equity of a business will be reflected in its stock price, rewarding ing the investor. I've received letters from shareholders ers who assured us they won't cut and run should our earnings dip or our share price drop. "Do what's right," they say.”
“EVERY DECISION WE make as managers is rooted in long-term perspective.”
“A focus on long-term survival over shorter-term considerations can change every aspect of your business, ness, because it drives fundamentally different priorities. ties. Most of all, it is a safeguard against management's tendency to make business decisions solely in response to the pressures of the moment.”
“I ask our managers to focus, day in and day out, on maintaining close bonds with employees, because I believe people are our company's most valuable resource.”
“Our relations with employees are based on these four clear-cut principles: 1. Management is obligated to manage the company in such a way that employees will have the opportunity tunity to earn according to their productivity; 2. Employees should feel confident that if they do their jobs properly, they will have a job tomorrow; 3. Employees have the right to be treated fairly and must believe that they will be; 4. Employees must have an avenue of appeal when they believe they are being treated unfairly.”
“AT N u c OR, people get what they ought to get from their work: Good pay. Real job security. Interesting challenges. Respectful treatment. The chance to accomplish complish something every day. A fair and equitable workplace. The pride of being a part of a very successful cessful enterprise.”
“A LOT OF MANAGERS who want decision-making autonomy don't fully understand the responsibilities that come with that freedom. You have to accept that your operations will stand or fall on their own merits. its. There's no cavalry waiting to ride in to the rescue, cue, and no mega-corporation in which to hide. There's just you and those people working with you. Together, you'll find a way to succeed. Or you'll fail. So you'd better not forget how much is riding on your ability to communicate with employees.”
“At our employee meetings, the general manager of the division kicks off the discussion with comments that last no more than 20 minutes. Then, the employees take over. They talk about their equipment, ment, rules and procedures, and anything else that pertains to how they see the business. Management listens. Second, management takes what employees tell them seriously. Most employees have to screw up a bit of courage to stand up and present a real problem or issue to their managers. If management then just pays the issue lip service, the connection will be lost.”
“If you want to manage autonomously, you'd better stay connected nected with your people, and if you want to stay connected nected with your people, you'd better be ready to give it an honest and sustained effort.”
“In short, while we work hard to get the information tion we need, we've worked just as hard to keep our reports streamlined and ourselves free of "information tion overload."”
“You can't wait for someone else to come along and relieve you of the burden of information overload. load. You have to do it for yourself. You have to fight back. The key is to identify the fraction of information tion that truly is useful to you, so you can concentrate on it. That was how I gradually pared down the information I'd allow others to burden me with to the handful of data points I've just described.”
“I'd suggest that you try to focus on information that tells you what you need to know under ordinary circumstances, and that will give you early warning when something extraordinary is going on. If you experience a precipitous drop in orders, for example, you want to know immediately, so you can find out why and figure out what to do about it. You should also take care to differentiate between objective and subjective information.”
“I'm not so much a champion of decentralization centralization as I am an advocate for decisiveness. Managers at all levels need to assess what is most crucial cial for the operations they manage and-based on that assessment-choose where the locus of decision-making making power should reside. Then they must implement ment that choice thoroughly, and stick to their choice over the long term.”
“The greatest counterweight to divisiveness in Nucor is that the general managers of our divisions are also officers of our corporation. Most of the year, a general manager is preoccupied with running his own show. He thinks about his own revenue totals, his own profits, and his own return on assets employed. ployed. But three times each year-in November, February, and May-he takes off his general manager's ager's hat to focus on his role as an officer of the corporation. poration. He meets with the other general managers to set policies and make decisions that shape Nucor, as a whole. These meetings usually begin with a 3-to 4-hour session on a Wednesday evening, then run all day Thursday and Friday and, occasionally, into the weekend. In November, the general managers present budgets gets for their divisions for the upcoming year. They also outline their plans for capital expenditures. In February, we finalize the budgets and capital plans. The May meeting is devoted almost entirely to human resource issues, compensation, safety, and benefits. Collectively, the general managers created our personnel policies, and they refine them each May.”
“There are some boundaries for what's acceptable in the general managers' meetings, of course, and I'm often the one who points them out. I take into account that these are people with big egos. We're all for big egos. But we're against building up your ego by stepping on the back of someone else. As a firm rule, we don't discuss personalities. If I see that happening, pening, I step in and put a stop to it as quick as I can.”
“It's a heck of a lot easier to listen to someone tear down your position when you know the disagreement is honest, objective, and motivated by what they truly believe is good for the company. That's what makes it possible for managers agers to disagree, to argue, and to criticize, then resolve the issue and move on.”
“These gatherings remind our general managers that their idea isn't the only idea, and that their answer isn't the only answer. They do that for each other three times a year. They may not always like it, but they know it's healthy.”
“while there are many good ways to manage, there is no excuse for being wishy-washy about how you will manage. You must choose-Where will decisions sions be made, and by whom, within your operations?”
“We have told our managers to "trust your instincts"-and we have meant what we said. We've urged them to confer the same kind of decision-making autonomy to their people-to make their own decisions based on what they think is best for the business-and we have never backed off our commitment. Before making your choices, you must think through which decision-making structures will best serve the operations you manage. We chose decentralization to gain the innovation, tion, speed, and flexibility that stem from operating like twenty-one smaller companies instead of as a monolithic corporation. We're willing to live with the redundancies and "inefficiencies" that go with that choice.”