CHANGING WORKPLACES

Nucor: share pain, gain

Teamwork boosts morale, and paychecks, at the steel plant, but also shrinks checks when times are tough

DAYTON DAILY NEWS CRAWFORDSVILLE, Ind. - Eight years ago, Cindy Billings traded in her Army staff sergeant's stripes and her White House communications post and moved back home to Crawfordsville, a town of 15,000, 45 minutes northwest of Indianapolis.

Billings, 36, is now earning three times her $16,000-a-year soldier's salary as an electrician trained on-the-job at a new, high-tech steel mini-mill in cornfields on the outskirts of town.

Today, ribbons of steel spew from the almost smokeless plant that melts junker cars with electrically generated heat.

But what makes Nucor unique is not what it does to cars, but how it treats workers. Nucor's practice of rewarding workers during the good times and asking for shared sacrifices during the bad seems to have hit the right note with the workforce. `I love working for Nucor. It's a very fair company,' said Billings' co-worker, Norm Libengood. `We share in the profit, and we share in the pain.'

Among these Indiana cornfields, there are no unions to represent workers, and there are no multiple tiers of managers.

Or tiered pay structures.

Nucor Steel Corp. credits its success to the productivity of its worker teams.

Its management philosophy stands in sharp contrast to most manufacturing plants in Dayton and across the nation.

At Nucor, everyone works from the same playbook and teamwork genuinely seems to be more than just a slogan.

Fully 60 percent of workers' wages are based on the productivity and performance of their teams. Objective standards, such as tons of steel produced, can boost a worker's annual earnings to an industry-high $75,000 a year. `The less I do, the more I earn,' said Billings. That's because bonuses are paid when equipment is operating; Billings does most of her work when the equipment is idle.

Nucor Steel changed Billings' life, along with those of the plant's other 485 employees, a group that includes just 35 managers. They all seem to have bought into the share-the-wealth/share-the-pain philosophy.

But could Nucor work in a heavily unionized environment, such as at General Motors? John Weiler isn't so sure.

"I think it could, but I'm not sure it would with the current cast of characters," said Weiler, director of the Center for Business and Economic Research at the University of Dayton. Convincing union members to take pay cuts during hard times "would be a really hard sell, unless, maybe, they had a bigger voice in management decisions," Weiler said.

Nucor officials credit their management approach for the company's remarkable turnaround. After rising out of bankruptcy three decades ago, the 6,000-employee company ranks third among the nation's steelmakers, with new plants dotting farm fields across the country.

At Nucor, workers and supervisors up to the top level of the corporation share the same benefits, including partially paid health care and up to $2,200 a year for each child who attends college.

The company hasn't laid off a worker in more than two decades. Instead, as production or sales fall off, Nucor slashes wages and work hours for all employees and withholds even higher percentages of pay from supervisors.

Even as imported steel drove their product's prices into the ground in the third quarter of this year, plant workers here expected no layoffs. They knew their checks might be pared more than 25 percent from what they earned a year ago, but at least they wouldn't have to stay home.

`When you lay off employees, they return unhappy,' plant manager John Ferriola said. `Keep them, even at lower pay, and develop new products and preserve morale...

"We think long term.' The workers don't sit idle when production is down, either. The last time the plant's products were in a slump, the worker teams spent their spare time experimenting with making stainless steel.

As an electrician, Billings works five eight-hour days, but her co-workers in steel production are on eight-day cycles; they work four 12-hour days in a row, then get four days off.

`The only bad thing is working weekends,' said Libengood, a lead man at one of the furnaces in the hot mill. `It's not like a factory where every day you do the same thing over and over.'

Libengood said he has gotten a lot of fishing done in those four-day breaks since he started six years ago. He worked for another Nucor plant in Nebraska for nine years, then quit to work at a more conventional factory that made doors. Now he cherishes the challenges and opportunities in his current job.

Libengood, 40, has two girls, 19 and 16; the oldest will go to college next year. She will get the company's $2,200 stipend available to any college-enrolled child of a Nucor employee. Last year, Nucor paid $1.4 million to 700 children of employees.

Libengood said about 60 percent of his weekly paycheck in October came from bonuses based on his unit's production.

Health insurance costs are high, Libengood acknowledged. Employees pay half for conventional insurance and a third for an alternative Preferred Provider Organization (PPO). Sick pay doesn't start until the third day off.

As Libengood spoke, he manipulated knobs on a control panel, watching through a wire-reinforced window as the furnace burned golden-white molten steel 20 yards away.

Even the stress of the dangerous work doesn't seem to bother him. `Once a guy gets used to it, I wouldn't have it any other way,' he said. `I guess that makes me different.'

Nucor uses a Chicago-based psychologist to screen every potential employee, plant manager Ferriola said. An extensive interviewing process includes long meetings with prospective co-workers. Ferriola said he listens closely to his workers, whether he is hiring a front-line worker or one of the plant's 35 supervisors.

But hiring at any Nucor plant is a rarity. Ferriola estimated about four jobs open each year.

Ron Barnett, an electrical supervisor in the hot mill, described his job simply as `great.'

`I more than doubled my pay coming to Nucor,' the former Alcoa project engineer said.

Barnett, 35, estimated he earns 10 to 15 percent more than the workers he supervises. He also works alongside them. `I have a tool box,' he said.

Barnett said he likes the way the company pushes decisions to the lowest level of workers.

Ferriola took over the top spot here about mid-year after heading the company's Norfolk, Neb., steel plant. He started out as an electrical engineer and got his first steel experience at Bethlehem Steel, a unionized company, in Allentown, Pa.

Ferriola cited two major differences between Nucor and Bethlehem: The management structure is far leaner at Nucor and managers are not guaranteed pay when production is down.

Ferriola said Nucor managers encourage risk-taking, and they like the rural labor pool where they build their plants. Rural workers, many from family farms, tend to be multi-skilled before they hire on, he said.

`They have good work habits,' Ferriola said.

Crawfordsville has a mostly white male workforce. But Nucor's plant in Jewett, Texas, has about 20 percent minorities split between African Americans and Hispanics. They have had the same success story for 25 years, plant manager Kenneth `Sam' Huff said. Without counting retirees, turnover at the Jewett plant averages less than 1 percent a year, he said.

At the Crawfordsville plant, pay bonuses range up to 150 percent of base pay, which might be $10 an hour for a particular job, Ferriola said. With the top bonus, an employee can make $25 an hour, so the bonus coupled with an attendance bonus makes up about 60 percent of the paycheck.

`We're always competitive regardless, because we are paying them on the results,' Ferriola said. `For every extra ton out the door, Nucor makes money.'

Ferriola called the company `capitalism at its purest form.'

His job is to guide the plant through the hard times. When production tapers off, he takes the largest percentage pay cut of anyone at the plant.

How does his overall compensation compare with his former colleagues at conventional plants?

`Close to competitors during the good times,' he said. "Not anywhere close during bad times.'

When production drops for the entire company, officers such as Nucor Chairman Ken Iverson see their pay slashed up to 60 percent at the corporate office in Charlotte, N.C., where a lean 23-person staff runs a corporation with more than $4 billion annual revenue. Iverson's company has only four layers of management. Between Iverson and the worker on the shop floor are one general manager, one department manager, and one supervisor.

Retiring CEO Iverson is so sold on his own success that he co-wrote a book about the work philosophy, published last year: Plain Talk: Lessons From a Business Maverick (John Wiley & Sons, $23).

`We showed that many of the so-called `necessary evils' of life in corporate America are, in fact, not necessary,' Iverson wrote. `The people of Nucor stand in sharp, even defiant contrast to the status quo.

"We're big on informality, caring, freedom, respect, equality, and the simple truth. We have little tolerance for the politics, the pettiness, the fixation on rank and status, and the insensitivity to employees' legitimate needs that people in most big companies endure as a matter of course.'

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