Steel Man Ken Iverson

The "father of the minimill" manages Nucor Corp. according to one big principle: simplicity.

 

Nucor Corp. could very well be the biggest small company in America. Nucor has almost 4,000 employees working in 18 plants around the counry, with sales last year of $758 million. For years it has been listed on the Fortune 500. Yet here is a company run by a corporate staff of only 16, working out of 8,000 square feet in an anonymous office building located across the street from a shopping mall on the outskirts of Charlotte, N.C.

There's a modesty and simplicity about this company that reflect its chairman and chief executive officer, F. Kenneth Iverson. Iverson has put the lie to the notion that the American steel industry is dead, with a company that has continued to grow at a compound annual rate of 23% over the past 10 years, selling nothing but steel and steel products. Much of his success derives from a commitment to hands-on management, investment in steel technology, and an unusual compensation program that keeps productivity high, turnover low, and has job applicants lined up around the block.

Editor George Gendron spoke with Iverson about how his management style and how Nucor find both stability and profits in one of the nation's most troubled industries.

INC.: In the steel industry, you're something of a renegade for opposing the industry's call for protectionism.We all know the general arguments against trade barriers. But why not at least give the industry some temporary relief, time to regroup and modernize and find some way to protect workers from the effects of cutthroat international competition?

IVERSON: If you look, we've had this "temporary" relief for a long time. We had a voluntary quota system in the early 1970s. We had trigger prices in the late 1970s. And what happened during these periods? As soon as prices began to rise so that the steel companies began to be profitable, they stopped modernizing. It's only under intense competitive pressure -- both internally from the minimills, and externally from the Japanese and the Koreans -- that the big steel companies have been forced to modernize. I think you'll find that, nationally, our continuous casting has jumped from 25% of our output to 39%. We're still behind the rest of the world -- in Japan, close to 90% of their steel is continuously cast -- but we are modernizing, closing down these old facilities that cannot be made economically viable or environmentally acceptable, which is what we should do. We have an excess of steel-manufacturing capacity, and the only way to get around that is to shut down the old facilities.In 1980, we still had rolling mills that rolled steel back in the Civil War.

INC.: So your argument is that protectionism tends to make the industry weaker, not stronger.

IVERSON: That's right. Unless you're under intense competitive pressure and it becomes a question of the survival of the business to do it, you're just going to lapse back into your old ways. There's no other answer. But out of all this will come a lot of things that are beneficial: more of an orientation toward technology, greater productivity, certainly a lot of changes in management structure.

INC.: But isn't the big problem with the American steel industry a wage structure that makes it impossible to compete internationally, no matter how much technology you bring in?

IVERSON: At Nucor we produce more than twice the steel per man-hour as workers in large steel companies. Since we're not unionized, I've heard people say that Nucor is proof that unions per se have a negative impact on worker productivity. That's nonsence! That conveniently ignores vital questions like: What's the quality of direction being given the workers? Where are the resources the workers need to get the job done efficiently? Where's the opportunity for workers to contribute ideas about how to do the job better? The real impediment to producing a higher-quality product more efficiently isn't the workers, union or nonunion; it's management.

INC.: But that's easy for you to say -- you don't have to deal with unionized workers with inflexible union wages and work rules. Isn't that the big advantage you have over the integrated mills?

IVERSON: Look, I'd be the last to say that unions don't present some problems. But you've got to look at why we don't have unions here. For one thing, we pay our people well. The average hourly worker at our plant in Darlington, N.C., for example, with bonus and everything, earned more than $30,000 last year. In addition, employees know that we are not going to lay anybody off, and that has a tremendous impact on the way people approach their jobs. Many of the work rules that have grown up in the unionized plants -- the ones that have led to featherbedding and the resistance to new technology -- these are the response to worker demands for some form of job security. Can anyone blame workers for wanting that? I can't. So if there is any responsibility for how these work rules have developed, how they have been negotiated and implemented, I think it belongs with management. At Nucor, we think we've been able to avoid those problems by dealing with the job-security problem right up front.

INC.: The unions aren't at your door, then?

IVERSON: As a matter of fact, the last time we had a union organizer in Darlington, we had to send out management in order to protect the union guy passing out the pamphlets.

We're fortunate -- people like to work here. Last fall, Darlington needed eight people, and we put a little ad in the county weekly newspaper that said, "Nucor Steel will take some applications on Saturday morning at 8:30 for new employees." When we went out there for the interviewing, there were 1,200 people lined up in that plant. We couldn't even get into the plant to get to the personnel department. Twelve hundred people! Finally, we called the state police and said, "You've got to do something. We've got a traffic jam out here." And the cop on duty said, "We can't do it, because we've got three people out there applying for jobs ourselves!"

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