Lessons from Improbable-Land

Here's a success story by any measure:

"It's a profitable formula: [Company X's] 387% return to shareholders over the past five years handily beats almost all other companies in the Standard & Poor's 500-stock index, including New Economy icons Amazon.com, Starbucks, and eBay. And the company has become more profitable as it has grown: Margins, which were 7% in 2000, reached 10% last year.

[...]It has grown into a company with 2005 sales of $12.7 billion, up from $4.6 billion when DiMicco [the new CEO] took over in 2000. Last year net income was $1.3 billion, up from $311 million in 2000."

What do you suppose "Company X" does?  Specialty retailing?  Biotech?  Building tools for e-commerce? 

Company X is Nucor, now the largest steel producer in the U.S.  Even in a sexless industry pronounced dead a couple of decades ago, Nucor excels.  How do they do it?

Business Week has the story, and it's all about employee motivation, founded on "legendary leader F. Kenneth Iverson's radical insight: that employees, even hourly clock-punchers, will make an extraordinary effort if you reward them richly, treat them with respect, and give them real power."  Again, this means truly letting go:  Talk to the line workers, truly listen, take risks on their ideas, and accept the occasional failure.

And it's a two-way street:  Nucor's compensation system is unlike any other in the industry.  Whereas the going rate for an experienced steelworker  is $16 to $21 an hour, base pay at Nucor is closer to $10.  But a bonus system tied to production of defect-free steel can triple the average take-home.   The same holds true for managers, whose salaries are 75% to 90% of market, but who can earn bonuses equal to another 75% to 90% on top of that.    The result is pretty simple:

"In average-to-bad years, we earn less than our peers in other companies. That's supposed to teach us that we don't want to be average or bad. We want to be good," says James M. Coblin, Nucor's vice-president for human resources."

The final, indispensable ingredient is No Hypocrisy From the Top.  The CEO's pay is exactly 23 times that of the average steelworker, compared to average CEO pay of more than 400 times what a factory worker takes home. And the symbolism aligns as well: Fly coach, make your own coffee, put every single employee's name on the cover of the annual report.

Lessons from what should be a dead-on-arrival, Rust Belt antique?  Not only lessons, but if it works with steel mill workers, because they "get it," how likely do you think it is that the cream of the Ivy League and the country's top law schools might also get it?