HRM ISSUES/DIVERSIFICATION STRATEGIES Introduction This paper presents the analysis of the Nucor Corporation case (Thompson, Strickland,

Gamble, 2010, Nucor Corporation, p. C-193). Nucor is one of the largest producers of steel in the United States with a production capacity that exceeds 26 million tons. Nucor was among the first steel companies in the United States to use electric arc furnaces to melt recycled steel. In 2007, Nucor recycled nearly 10 million cars in its production processes, the equivalent of one SUV every four second (Nucor.com). Trends in the Steel Industry Steel Industry Trends are not at all static in this industry and is a very dynamic. The country that is producing the maximum amount of steel may not be in the first position in the coming years. Analysis of the Steel Industry Trends show that from the period starting from 1910 until the year 1960, the first position in terms of producing the largest amount of steel in the whole world was captured by United States of America. During this period, it was observed that almost half of the total steel production around the globe was produced by USA. However, the scenario started to change after the countries like Japan and China came to the fore. Again, in the recent years, India as well as Brazil has shown tremendous performance in the steel production side. According to the recent Steel Industry Trends, China is the largest steel producing nation. However, it has also been seen that the production of quality steel in China is very low. Thus, they have to import large quantities of the same from the foreign countries, especially Brazil. The rising of India as a key player in the world steel industry scenario is also evident from Steel Industry Trends. Very recently, the Indian Steel company called TATA Steel has acquired the

1 fifth largest steel company of the world called Corus and consequently came up from 65th to 5th position (EconomyWatch.com). These trends have impacted the steel industry leading Nucor to take risks in new innovations while being classified as the visionary leaders. This risk taking was illustrated by adopting mini-mill technological advances while other steel companies were still utilizing large steel mill operations. The mini-mills facilities converted scrap steel into finished steel using small-scale electric furnaces. With the increased in mini-mills integrated the steel companies out of the outdated niche markets which was led by Nucor through entry into the flat-rolled steel market. Hence this provided more efficient operations with a cost advantage over integrated steel producers, eventually driving the latter out of the steel industry. The Organizational Structure and Management Philosophy The organizational structure of Nucor is based on the conception of teamwork and environment stewardship. The customers are the prime focus in meeting and exceeding their demands. This is accomplished by having the safest, high quality, and low cost provider while upholding profits in the steel industry. Nucor emphasis is in using the technology that would reduce mills magnitude. This gives allowance to change the direction in production from large mills to micro mills for operations. Nucor has lean business operations and strives to have physical plants in locations where the lowest overhead costs and minimizing transportation costs for its customers. The management operating philosophy for Nucor is the authority to be pushed down to the local plant manager with accountability for actions. The organizational structure is a streamlined approach where employees can make quick decisions for the daily operations. This is a highly decentralized organization with a flat management structure.

2 With the decentralized management, Nucor has four layers of management; hence, most steel companies have numerous the layers of management. Each plant manager has business targets to accomplish in order for each division to produce profits. Management would compare and track the performance of its plants electronically in the following ways: monthly operating reports, weekly tonnage reports, and monthly cash management reports (Thompson, Strickland & Gamble, 2010) Three HRM Issues Related to Strategy Implementation and Recommended Actions In order to remain competitive, Nucor implemented human resource management (HRM) issues related to the strategy implementation. Nucors process for recruitment is based on employing people with the right mindset. Additionally, Nucor criterion is to find personnel which can communicate frankly with others and work with limited supervision. There are three identified HRM issues in this case, as follows: Selection and recruitment system: In the staffing and recruiting processes are to implement the best fit facilitates for the organizational strategies. 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 Nucors 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 firms 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.

3 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. Compensation and reward system: The reward system at Nucor emphasized fair pay based on productivity for the whole unit instead of individualized production. Nucors 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. Recommended Diversification Should Be Used by the Company The related diversification in Nucor is when the actions within the company illustrate the combined performances in the business operations. Nucor is in relatively strong financial condition to make acquisitions and finance new plant construction without costly levels of debt. Hence, 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

4 Manufacturing Company and the Canada based Harris Steel. In acquiring these assets Nucor can compete in the steel industry dominated by consolidation, thus increasing Nucors position in the market. These companies provide a broad 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. In diversifying related business ventures maximizes its strengths in manufacturing distinction, technology, and organizational structures. Thereby consolidation in similar businesses demand strong brand image that protect against competition. Organizational Structure Issues that the Company Would Need to Address to Implement Recommended Diversification Nucor is faced with increasing competition from both domestic and international rivalries. Therefore, it is relevant that Nucor continues to grow and increase its global market share. For this reason, the management team must continue to specialize in Nucors core product and capitalize on a proven successful organizational structure. By aligning all cross business value chains within the related diversification plan in the decentralized structure will create the competitive resources. Within the related diversification will increase the linkages among divisions as well as the increased number of employees to be managed. There will be requirements to provide coordination and control over increased employees, including the growth in the hierarchical levels of management. The growth will require that Nucor provide additional work units to divide work assignments into specialized teams in order to continue to retain the competitive

5 advantage over its rivals. Henceforth, there are no written policies and procedures that govern Nucor employees, there will be a need for an employee handbook. Conclusions Nucor is the global industry leader who continuously reviews innovative ways to stay ahead of the competition. The organizational factor for Nucor to remain competitive is to establish the global consolidation. This will enable those consolidated companies to focus on specialized products while launching investment priorities in steering resources into the most attractive business units. Thus the consolidated companies will become a controlling force within the market. Technological innovations are the critical elements in steel making with electric arc furnace technology and direct casting of carbon steel, which provide access for Nucor to enter new product segments. This is the driving force to increasing competitive pressures for Nucor in leading the charge for new low cost steel making technology. Nucors success is greatly also due to the empowerment of its employees coupled with a clear direction generated by the heightened motivation from its workers to produce better quality work performance based on the pay for performance model.

6 References Nucor Corporation (2010). 2009 Annual Report. Retrieved February 24, 2011 from http://www.nucor.com/investor/performance/annual/ Steel Industry Trends (n.d.). EconomyWatch.com. Retrieved February 24, 2011 from http://www.economywatch.com/world-industries/steel-industry/trends.html Thompson, A.A., Strickland, A.J., & Gamble, J.E. (2010). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York, NY: McGraw-Hill-Irwin.