SYNOPSIS: Nucor earned a position as one of the most remarkable good-to-great cases in the last fifty years. Facing possible bankruptcy in 1965, the board turned the company over to Ken Iverson. Under Iverson, Nucor built its first steel mills because it could not find a reliable supplier. Nucor people discovered that they had a knack for making steel better and cheaper than anyone else, so they built additional minimills. Nucor eventually generated greater profits than any other steel company on the Fortune 1000 list. From 1975 to 1990, its stock outperformed the general stock market by more than five times. The cornerstone of the company’s success was its marrying a performance-oriented culture with advanced steel-making technology, which steadily drove down the cost per finished ton of steel. In the mid-1990s, Nucor began to falter during a period of executive turmoil at the end of Iverson’s career. He retired in 1996 after a messy boardroom showdown, and his chosen CEO successor resigned in 1999. In 2000, the board put longtime insider Daniel DiMicco into the CEO role and Nucor regained its footing; its stock performance once again took on a beat-the-market trajectory, and Nucor proceeded to have the most profitable years in its history.259
I’ve outlined Nucor’s recovery through the lens of the good-to-great concepts below. (For an explanation of these concepts, see Appendix 7.)
LEVEL 5 LEADERSHIP: DiMicco displayed long-term dedication to Nucor and its culture, having joined the company in 1982, eighteen years before becoming CEO.260 He maintained Nucor’s egalitarian, no-class-status culture, flying commercial, taking phone calls from all employees, making more coffee when he poured the last cup, and operating out of a drab, cheap-looking headquarters in a strip-mall-style, low-rise office building. DiMicco continued to cultivate a culture in which management was in service to employees, not the other way around.261 He practiced giving credit to others and taking little credit for himself. Despite the executive turmoil associated with the end of the Iverson era, DiMicco highlighted the debt he owed to his predecessors: “Who we are today is the culmination of the efforts and the dedication of our leadership—in particular, Ken Iverson and his team.”262
FIRST WHO, THEN WHAT: DiMicco continued the tradition of putting every employee’s name—all 18,000 of them in 2007—on the cover of the annual report, reflecting the idea that Nucor’s strength was based first and foremost on having the right type of people who fit with the Nucor culture. DiMicco and his team retained the philosophy that it is better to hire people with the right work ethic and character and teach them how to make steel than to hire people who know how to make steel but lack the Nucor work ethic and character traits. Under DiMicco, Nucor increased attention to developing, rather than just selecting, the right people, creating customized leadership-development programs for each and every manager.263
CONFRONT THE BRUTAL FACTS: DiMicco and his team confronted the rising threat of Chinese steel and paid increased attention to the risks of facing unfair trading practices.264 They confronted the risks associated with volatile energy prices and created a hedging strategy for its natural gas purchases.265 They employed conservative financial accounting practices and maintained a strong balance sheet to be able to weather storms and seize opportunities to gain market share over weaker competitors in difficult times.266
HEDGEHOG CONCEPT: Nucor built itself on a simple concept: a passionate dedication to taking care of its customers by monomaniacally harnessing culture and technology to produce low-cost steel while steadily increasing profit per ton of finished steel.267 DiMicco and his team remained committed to this central idea while making appropriate strategic changes (see Preserve the Core/Stimulate Progress below). DiMicco remained relentlessly focused on only those selective arenas in which Nucor could attain best-in-the-world status and superior economic returns, and jettisoned businesses that failed these tests, such as its bearing products and iron-carbide operations.268
CULTURE OF DISCIPLINE: DiMicco reinvigorated the intense culture of productivity that defined Nucor. Instead of focusing on employee rank and status, Nucor emphasized performance; those teams that met or exceeded productivity goals without compromising safety or quality received compensation 100 to 200 percent in excess of their hourly wages. Bonuses were based on team and unit performance, which encouraged all employees to assume full responsibility for productivity, not just for their little piece of the puzzle. If a team produced a bad batch of steel, its members would lose their bonuses; if that batch reached the customer, they could lose three times that amount. The entire system was designed to reinforce the idea that no one at Nucor received a paycheck simply by virtue of having a “job”; rather, each employee was responsible for contributing to the dual goals of producing high-quality, low-cost steel and taking care of the customer.269
FLYWHEEL, NOT DOOM LOOP: DiMicco did the exact opposite of grasping for salvation and falling into a doom loop of chronic inconsistency. He understood the importance of consistency, building cumulative momentum in the flywheel. In the wake of the tumultuous events of 2001 and the disruptive challenges facing the steel industry, his letter to shareholders that year stated, “I wrote the same thing in my letter to you last year, and I expect you’ll be reading it 12 months from now. No matter what’s happening to the industry and in the world around us, we must never lose sight of our main goal.” And in 2003, after a particularly turbulent time in the steel industry, he wrote, “Whatever turn the economy takes, Nucor will remain true to the principles that have guided us through nearly four decades of uninterrupted profitability and growth.”270
CLOCK BUILDING, NOT TIME TELLING: The ultimate testament to the Nucor system is the fact that the company survived its tumultuous transition beyond the thirty-year tenure of its guiding genius, Ken Iverson. DiMicco committed to reinvigorating the Nucor culture and organization so that the company’s sustained recovery would not depend on his leadership alone.
PRESERVE THE CORE/STIMULATE PROGRESS: DiMicco explicitly embraced the idea of holding values and principles constant, while changing practices and strategies to endlessly adapt to a changing world: “Businesses must evolve while ensuring that core principles are not being compromised.”271 Key mechanisms for driving progress under DiMicco included paying greater attention to taking care of customers, using their demands as a constant catalyst for improvement, and creating an internal benchmarking mechanism.272 DiMicco changed the longtime practice of relying almost exclusively on internally developed minimill sites and added selective acquisitions based on three disciplined decision criteria: don’t overpay, stick to businesses you know, and ensure cultural compatibility.273 He invested in and experimented with new technologies, such as creating the world’s first production installation for the direct strip-casting of carbon sheet steel.274