In this paper, I will present an analysis of Nucor Corporation. The paper will discuss the trends in the steel industry and how it may impact Nucor’s strategy, Discuss the organizational structure and management philosophy at Nucor, Identify three (3) HRM issues related to strategy implementation and recommend actions to address these issues, Based on the situation, recommend whether a related or unrelated diversification should be used by the company. Provide supporting rationale. Also my Recommendation whether a related or unrelated diversification should be used will also be discussed. . Discuss the trends in the steel industry and how it may impact Nucor’s strategy. Blast furnaces were the trend for the major steel producers. The arc furnaces adopted by Nucor led to increased production and cost savings. While using less labor, increased production, and was considered the new most cost-effective strategy among the steel industry the new technology took off. It was Nucor’s first to come up with the decision to adopt this process and be the first to introduce this new process to the United States.
In the late 90s into the 2000s man steel companies went out of business because of the reduce demand for steel. Instead of building new plants and using funds Nucor chose to buy the failing plants and converting them into their production lineup. This also in many cases was a cheaper route than building new plants. The procurement strategy was one of the best moves because the factories were already setup for steel production at mass quantities and Nucor was able to inherit their ties and partnerships as well as their presence in their surrounding geographical area.
The constant drive for efficiency and cost effective production was another strategy chosen to increase competitive advantage, market share, and ultimately become the number one steel producer among heavy competition(Thompson/Strickland/Gamble, 2009). 2. Discuss the organizational structure and management philosophy at Nucor. Nucor had a decentralized organization structure. According to the book, “Nucor had a simple, streamlined organization structure to allow employees to innovate and make quick decisions”. (Thompson, Strickland, & Gamble, 2009).
This made Nucor different from the other steel plants and their organizational structure. The typical firm had a structured series of organization levels, such as Hourly Employee, reporting to a Supervisor, reporting to a Department Manager, reporting to a General Manager. Plant managers for Nucor and their staff were responsible for the day to day operations of the plants. Each plant ran by the plant manager was seen as its own entity and operated independently of other plants. These plant managers reported to 4 executive vice presidents.
Each worker was held accountable for their action with this in place the factory was based on a bonus compensation structure this allowed them to passed responsibility and accountability on to everyone from the lower hourly workers to the top management and was given bonuses base on overage of expected output(Thompson/Strickland/Gamble, 2009). 3. Identify three (3) HRM issues related to strategy implementation and recommend actions to address these issues. Nucor has to remain competitive, Nucor implemented human resource management (HRM) issues related to the strategy implementation.
In looking for recruitment Nucor took the “X” management approach to find new recruitments that had the mindset that would fit into the new organizational style that they were looking for. Nucor criterion was to find personnel which can communicate straight up with others and work with limited supervision. There are three identified HRM issues in this case, as follows: A. Selection and recruitment system: An essential element is the job description which is the determinant of the ‘right fit’ for an organization as it relates to the purpose of a job, aligning the job with the organizational strategy.
In the Nucor’s selection and recruitment system does not use this relevant aspect in the process. Nucor plants do not use job descriptions as this organization is dependent upon the guidelines provided by teammates. In addressing this issue by providing employees with a set of well defined job tasks and responsibilities, which connect to the firm’s identity and values, mission, goals, and strategy directions. This also provides a baseline for employee reviews, salary increases, and the continued direction for organizational goals(Nucor Corp’s Organizational Culture, 2003). B.
Performance appraisal system: The second HRM issue is the lack of a performance appraisal system. Nucor does not view the performance appraisal as an important feature in the organization; hence it is viewed as a chore that requires additional paperwork. In the observation of the management team in Nucor an individualized performance appraisal system could cause an annihilation of strategy implementation. In addressing this human resources issue with a structured appraisal system then management will describe specific tasks identified as acceptable and unacceptable levels of performance.
This will provide guidance for future behaviors and promote employee motivation as the criterion directly relevant to the job(Nucor Corp’s Organizational Culture, 2003). C. Compensation and reward system: The reward system at Nucor emphasized fair pay based on productivity for the whole unit instead of individualized production. Nucor’s pay for performance system encourages high productivity among workers by using pay as a means of raising performance to motivate employees. In this system, the primary focus is on making money thereby not encouraging advancement individually.
To address this issue Nucor organizational culture should focus on building commitment to the achievement on individual company goals rather than on monetary incentives(Nucor Corp’s Organizational Culture, 2003). 4. Based on the situation, recommend whether a related or unrelated diversification should be used by the company. Provide supporting rationale. Nucor had a wide span of steel products. Initially Nucor produced nuclear parts a sense has changed. They are much diversified among steel related products.
Nucor pioneered new technology and new processes to make bolts, fasteners, sheets, as well as rods and applications for all steel products used in a wide array of buildings, structures, and assemblies(Thompson/Strickland/Gamble, 2009). Their wide product span in the steel industry has allowed them to master their craft while remaining one of the leaders in the Steel Industry. Nucor is in relatively strong financial condition to make acquisitions and finance new plant construction without costly levels of debt. Nucor had the production capacity for its acquisitions and purchases of an array of companies from 2001 to 2007.
Some of these acquisitions are as follows: Auburn Steel, Alabama-based Trico Steel, Worthington Industries, Marion Steel Company, Verco Manufacturing Company and the Canada based Harris Steel. In acquiring these assets Nucor can compete in the steel industry dominated by consolidation, thus increasing Nucor’s position in the market(Nucor Corp’s Organizational Culture, 2003). The above companies provide an extensive range of opportunities to leverage cross business value chain relationships which strategically fit into the competitive advantage.
These businesses appeal to Nucor for the related diversification such as skill transfer, lower costs, and the ability to spread the investors’ risks over broader base with stronger competitive capabilities(Nucor Corp’s Organizational Culture, 2003). 5. Based on your recommendation for related or unrelated diversification, identify the organizational structure issues that the company would need to address to implement that diversification. Domestic and international Nucor is face with increasing competition.
Therefore, it is relevant that Nucor continues to grow and increase its global market share. Management team must continue to concentrate in Nucor’s core product and capitalize on a proven successful organizational structure that has worked for them thus far. By aligning all cross business value chains within the related diversification plan in the decentralized structure will create the competitive resources. Also the organizational structure was decentralized to allow the front line workers and managers to be responsible for their success.
This was done by the pay performance pay structure. Under this structure plant workers and managers would receive weekly bonuses if their production exceeded the industry standard. According to (Thompson/Strickland/Gamble, 2009) maintenance workers would rapidly work to repair broken machinery, since no bonus would be paid to those plants whose machine malfunctioned. (Thompson, Strickland, ; Gamble, 2009) NO WORK NO PAY.
Nucor Corp’s Organizational Culture. (2003). Retrieved February 29, 2012, from ICMR IBS Center for Management Research: