Incentives as Architecture, Not Decoration

“According to Kenneth Iverson, Nucor’s success was ultimately tied to how the company paid its people; he really understood the iron rule of nature: At minimum, pay systems should drive specific behaviors that make your business competitive. So much of what other businesses admire in Nucor —our teamwork, extraordinary productivity, low costs, applied innovation, high morale, low turnover —is rooted in how we pay our people. More than that, our pay and benefit programs tie each employee’s fate to the fate of our business. What’s good for the company is good—in hard dollar terms—for the employee.”

“Ken Iverson was quoted as saying that 40% bonuses used to “scare” him, but as he fully understood the power of the incentive structure, he began to worry when bonuses were too small. “If a man produces a great deal, you’d be amazed at how much you can pay him.””