Leslie_Baker046

BME-214614-02X-09FA2) Organizational Behavior

Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

Motivation; n. a motivating; a providing of a motive; inducement

What Nucor management has been able to do is get workers to identify their own
interests fundamentally with those of management, something managers have been
attempting to do, not very successfully, since the dawn of industry."
 Ted Kuster, Iron Age Newsteel Reporter in December, 1995.

Nucor – Employee Motivation at the Core of Corporate Success

Nucor Corporation, with its subsidiary companies, engages in the manufacture and sale
of steel and steel products in North America. It operates in three segments: steel mills,
steel products and raw materials.

Founded in 1940 and based in Charlotte, North Carolina, Nucor has evolved a most
unique corporate culture as “The Little Steel Company that Could” proclaiming:

“That could take “mini” technology and use it to become the nation’s largest steel
producer. That could redefine the rules on how steel is made and from what.
That could change the way the world looks at discarded scrap.

And this same little company that could…

Changed the way it managed.

Changed the way its employees viewed their jobs and their company.

Changed the way it prioritized safety above all else.

And rocked the industry.” 1

Nucor is known for their integrated approach to employee motivation most unlike the
workforce in most large corporations. Nucor employees continue to "go the extra mile"
even when there was no directive or reward given to them. It is this commitment and
loyalty that Harvard Business Review recently acknowledged when they named Nucor
Chief Executive Officer Daniel R. DiMicco to its list of 100 Best-Performing CEOs.

Nucor builds on a variety of needs based theories that demonstrate how people are
motivated to do things in order to rectify something missing or fulfill a need. Abraham
Maslow, Clay Alderfer, and David McClelland addressed need based motivation by

1
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

emphasizing individual achievement which leads to motivated employees whose

resulting actions produce record results for the company

Abraham Maslow’s pyramid or hierarchy of needs states that people have

multiple needs,
loosely classifiable
as physiological,
psychological,
growth and
transcendent
needs. As one
need is satisfied,
then another
(higher) need
becomes apparent.
 Issues: concerns
have been raised
with the small
sample size used
in the original
study, and other
academics have argued that his result cannot be replicated. Also, this model
doesn’t allow for feeling two different needs simultaneously (e.g. needing shelter
*and* food), nor for individual differences in prioritization of needs.

Table 1
Nucor Compensation program analyzed against Maslow’s Hierarchy of Human
Needs
Nucor
Higher Level Needs To Satisfy, Offer: Provides
Self-actualization needs Creative and challenging
work
Participation in decision
making
Job flexibility and autonomy
Esteem needs Responsibility of an
important job
Promotion to higher status
job
Lower Level Needs To Satisfy, Offer:

2
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

Social needs Friendly coworkers

Interaction with customers
Pleasant supervisor
Safety needs Safe working conditions
Job security
Base compensation and
benefits
Physiological needs Rest and refreshment breaks
Physical comfort on the job
Reasonable work hours

McClelland: ‘Theory of needs6: Everyone has a different balance of three fundamental

needs: power, achievement and affiliation. People with different needs have different
strategies for success in organizations, and thus it is useful to know what type of person
you are working with if you seek to motivate them (as one size will not fit all). full article
 Issues: McClelland used a well-validated scoring system to test his subjects and
his results have been corroborated by other researchers. Crucially he also allows
for individual difference to a much larger degree than Maslow or Herzberg.
 In a sentence: Different people have different needs
Outcome-based theories
 Vroom: ‘expectancy theory’: Motivation for a given act depends on the
desirability of the expected outcome of a situation, whether you believe you can
affect the success of the situation and whether you believe the success of the
situation is linked to the desired outcome. 

3
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

Victor Vroom’s expectancy theory states that people are motivated to behave in ways
that produce valued outcomes and this seems the strongest model underlying Nucor
employees’ motivated behavior.
Whereas Maslow and Herzberg look at the relationship between internal needs and the
resulting effort expended to fulfil them, Vroom separates effort (which arises from
motivation), performance, and outcomes.
Vroom, hypothesises that in order for a person to be motivated that effort, performance
and motivation must be linked. He proposes three variables to account for this, which he
calls Valence, Expectancy and Instrumentality.
Expectancy is the belief that increased effort will lead to increased performance i.e. if I
work harder then this will be better. This is affected by such things as:
1. Having the right resources available (e.g. raw materials, time)
2. Having the right skills to do the job
3. Having the necessary support to get the job done (e.g. supervisor support, or
correct information on the job)
Instrumentality is the belief that if you perform well that a valued outcome will be
received i.e. if I do a good job, there is something in it for me. This is affected by
such things as:
1. Clear understanding of the relationship between performance and outcomes –
e.g. the rules of the reward ‘game’
2. Trust in the people who will take the decisions on who gets what outcome
3. Transparency of the process that decides who gets what outcome
Valence is the importance that the individual places upon the expected outcome.
For example, if I am mainly motivated by money, I might not value offers of
additional time off.
Having examined these links, the idea is that the individual then changes their
level of effort according to the value they place on the outcomes they receive
from the process and on their perception of the strength of the links between
effort and outcome.
So, if I perceive that any one of these is true:
1. My increased effort will not increase my performance
2. My increased performance will not increase my rewards

4
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

3. I don’t value the rewards on offer

...then Vroom’s expectancy theory suggests that this individual will not be
motivated. This means that even if an organization achieves two out of three, that
employees would still not be motivated, all three are required for positive
motivation.

The employees at Nucor value money and are willing to do whatever it takes to make
sure the company is successful. They realize the more successful the company, the
more income they earn. The employees at Nucor have a positive valence for earning
more money and receiving recognition for achieved goals and new ideas. All men put
the same concepts into their own words about the needs of individuals and how they can
be motivated.

 Herzberg: ‘Two Factor theory’: Some needs are not motivators, but only de-
motivate if not fulfilled (hygiene factors) – e.g. Pay, working conditions,
relationship with boss. Other needs can motivate (motivating factors) – e.g.
intrinsic motivation of doing a good job, reward recognition and growth
 Issues: Whilst this theory has been corroborated, many believe that satisfaction
and dissatisfaction are on the same scale, not two as Herzberg proposes. Again,
Herzberg does not make allowance for individual differences, whilst we can
plainly see that different people are motivated differently.
 In a sentence: Some need fulfilment does not motivate

There seems to be no hygiene factors influencing the employees at Nucor. All of the
employees appear to be highly motivated. This motivation is seen in the example of
the three engineers who dropped everything and immediately traveled to Arkansas to
help get that plant back up and running when the electrical grid failed. All three joined

5
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

in and worked long hours to get the plant running again ahead of schedule, reducing
the time lost on production and saving the company money. They received no
immediate monetary benefit, but they knew that saving the company money would
save them and their colleagues future bonus money and paychecks. Here there is
also a useful link to the Equity theory of motivation: namely that people will also
compare outcomes for themselves with others. Equity theory suggests that people
will alter the level of effort they put in to make it fair compared to others according to
their perceptions. So if we got the same raise this year, but I think you put in a lot
less effort, this theory suggests that I would scale back the effort I put in.
Crucially, Expectancy theory works on perceptions – so even if an employer thinks
they have provided everything appropriate for motivation, and even if this works with
most people in that organization it doesn’t mean that someone won’t perceive that it
doesn’t work for them.
At first glance this theory would seem most applicable to a traditional-attitude work
situation where how motivated the employee is depends on whether they want the
reward on offer for doing a good job and whether they believe more effort will lead to
that reward.
However, it could equally apply to any situation where someone does something
because they expect a certain outcome. For example, I recycle paper because I think
it's important to conserve resources and take a stand on environmental issues
(valence); I think that the more effort I put into recycling the more paper I will recycle
(expectancy); and I think that the more paper I recycle then less resources will be
used (instrumentality)
Thus, this theory of motivation is not about self-interest in rewards but about the
associations people make towards expected outcomes and the contribution they feel
they can make towards those outcomes.
Other theories, in my opinion, do not allow for the same degree of individuality
between people. This model takes into account individual perceptions and thus
personal histories, allowing a richness of response not obvious in Maslow or
McClelland, who assume that people are essentially all the same.
Expectancy theory could also be overlaid over another theory (e.g. Maslow). Maslow
could be used to describe which outcomes people are motivated by and Vroom to
describe whether they will act based upon their experience and expectations.

6
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

Equity theory plays a major role in keeping the Nucor employees motivated. The
CEO Daniel DiMicco is one with his employees. He flies commercial with them, does
not have an executive parking space, and even makes a fresh pot of coffee when he
takes the last cup. He is living the attitude, "I will not ask you to do anything I will not
do myself."

The experienced steelworker at Nucor makes from $6 to $11 dollars an hour less
than the average steelworker at another company. That Nucor steelworker, however,
has the opportunity to earn three times that of the steelworkers elsewhere, if the
entire shift can produce defect-free steel. If this goal is not met they will take home a
sub par paycheck. To avoid the disappointment of a sub par paycheck, they make
sure their efforts are such that produce the desired results. The organizational
culture is one of sharing, team work, and acceptance of company goals and the plan
to reach those goals. The employees put egos aside and learn from each other
certain practices and techniques that will benefit the company. They are one big
team. This creates an "all for one and one for all" teamwork oriented organizational
culture motivating them to work hard and efficiently together.

Also, the employees within this organization possibly feel more like business owners
than employees. Just as the owner of Nucor who is largely at risk financially and
whose income will fluctuate with profits, so too does the income of the employees
fluctuate. It is almost as if they are given a blank check and a pen with the
permission to fill in an amount based on their efforts. Although the owner has no
ceiling on his income and the employees do, the employees still have the ability to
control their financial income making the organizational structure also one of
freedom.

It may not be easy at first for a company to copy what is going on at Nucor, but it with
hard work, great communications and strong managers, it can be done. Many
employees today feel undervalued and underappreciated, causing their work to
suffer because of poor hygiene factors. Once the dissatisfied employees begin to
feel appreciated for their time and efforts, and they see the new income they are

7
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

generating, they will begin to feel valuable and want to perform to the best of their
abilities.

Money and respect can be excellent motivators for many employees, and when
received, those employees will become valuable assets to the company.

McClelland's acquired needs theory

David McClelland's acquired needs theory recognizes that everyone prioritizes
needs differently. He also believes that individuals are not born with these needs, but
that they are actually learned through life experiences. McClelland identifies three
specific needs:
 Need for achievement is the drive to excel.
 Need for power is the desire to cause others to behave in a way that they would
not have behaved otherwise.
 Need for affiliation is the desire for friendly, close interpersonal relationships
and conflict avoidance.
McClelland associates each need with a distinct set of work preferences, and
managers can help tailor the environment to meet these needs.
High achievers differentiate themselves from others by their desires to do things
better. These individuals are strongly motivated by job situations with personal
responsibility, feedback, and an intermediate degree of risk. In addition, high
achievers often exhibit the following behaviors:
 Seek personal responsibility for finding solutions to problems
 Want rapid feedback on their performances so that they can tell easily whether
they are improving or not
 Set moderately challenging goals and perform best when they perceive their
probability of success as 50-50
An individual with a high need of power is likely to follow a path of continued
promotion over time. Individuals with a high need of power often demonstrate the
following behaviors:
 Enjoy being in charge
 Want to influence others

8
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

 Prefer to be placed into competitive and status-oriented situations

 Tend to be more concerned with prestige and gaining influence over others than
with effective performance
People with the need for affiliation seek companionship, social approval, and
satisfying interpersonal relationships. People needing affiliation display the
following behaviors:
 Take a special interest in work that provides companionship and social approval
 Strive for friendship
 Prefer cooperative situations rather than competitive ones
 Desire relationships involving a high degree of mutual understanding
 May not make the best managers because their desire for social approval and
friendship may complicate managerial decision making
Interestingly enough, a high need to achieve does not necessarily lead to being a
good manager, especially in large organizations. People with high achievement
needs are usually interested in how well they do personally and not in influencing
others to do well. On the other hand, the best managers are high in their needs
for power and low in their needs for affiliation.

Herzberg's two-factor theory

Frederick Herzberg offers another framework for understanding the motivational
implications of work environments.
In his two-factor theory, Herzberg identifies two sets of factors that impact
motivation in the workplace:
 Hygiene factors include salary, job security, working conditions, organizational
policies, and technical quality of supervision. Although these factors do not
motivate employees, they can cause dissatisfaction if they are missing.
Something as simple as adding music to the office place or implementing a no-
smoking policy can make people less dissatisfied with these aspects of their
work. However, these improvements in hygiene factors do not necessarily
increase satisfaction.
 Satisfiers or motivators include such things as responsibility, achievement,
growth opportunities, and feelings of recognition, and are the key to job

9
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

satisfaction and motivation. For example, managers can find out what people
really do in their jobs and make improvements, thus increasing job satisfaction
and performance.
Following Herzberg's two-factor theory, managers need to ensure that hygiene
factors are adequate and then build satisfiers into jobs.

As stated at the start of this article the theories presented here are not mutually exclusive, in fa
parallels can be drawn between the work of theorist such as Maslow and Herzberg (see the figu
below).
Fig 3 : Comparing Maslow & Herzberg

Maslow and Herzberg determined that our needs are divided into levels, from the most basic survival needs to very
sophisticated needs that nourish our inner spirit. Maslow believed that we tend to satisfy our most basic needs first,

then move to higher level needs. 

Herzberg
Maslow
 Basic  Biological Needs
food, clothing, shelter food, clothing, shelter

 Safety  
personal safety and security
 Motivator Needs
 Belonging achievement, recognition,
need for others, affiliation responsibility, growth,
advancement

 Ego
need for recognition

10
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

 Self-Actualization
personal growth
Maslow and Herzberg determined that our needs are divided into levels, from the most basic survival needs to very
sophisticated needs that nourish our inner spirit. Maslow believed that we tend to satisfy our most basic needs first,

then move to higher level needs

One might argue for example that the lower level needs of Maslow's Hierarchy relate to the Extrinsic / Hygie
factors of Herzberg's Two Factor Theory. Perhaps satisfaction of lower level needs leads to an absence of
'dissatisfaction' in relation to work, rather than that which herzberg considers true motivation.
So we do not have to face the task of choosing between competing theories, instead we are faced with a far
difficult task - to make the connection between theories and real individuals at work, in order to find ways to
levels of motivation at work. To achieve this requires, not only an appreciation of business theory, but more
importantly a true understanding of those specific individuals, and a creative approach to designing their wo
experience.
Vroom presents us with the idea that people are influenced by the expected results of their actions. In on
what we do depends on what we believe we will gain from doing it. In Vroom's model three variables are ide
as described in the table below.

Vroom's Variables

Variable Description

The motivational force / effort with which the

Force individual will pursue a particular course of
action.

Valence The attractiveness, or unattractiveness, to the

individual of the outcome of that course of
action. This is often given a grade of between
+1 & -1.
 +1 indicating an outcome which is highly
attractive to the individual

11
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

 -1 indicating an outcome which is highly

unattractive to the individual
 0 indicating an outcome which is of no
concern / interest to the individual and is
therefore neither attractive nor unattractive.

The individuals expectation, the perceived

probability, that such an outcome will be
achieved. This is also often expressed as a
value between 1 & 0
Expectancy
 1 indicating complete confidence that the
outcome will be achieved.
 0 indicating the perception that the outcome
is impossible to achieve.

Vroom proposes that Motivational force is a function of Valence & Expectancy, this can be best co

by the formula.
Force = Valence x Expectancy

F=VxE
Lets us consider the following example.

     
Example 1
   Sales Department Example   
Let's consider one initiative to motivate staff, the offer of
promotion within a sales department if certain sales
targets are met. For one member of staff this is a highly
attractive (Valence = + 0.9), but their portfolio of clients
and past performance means they perceive achievement
of the outcome, e.g. the sales target, almost impossible
(Expectancy = 0.1). By applying the formula we see that

12
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

the motivational force will be :

F=VxE
F = 0.9 x 0.1 = 0.09
Alternatively, another member of staff finds the possibility
of promotion reasonably attractive (Valence = + 0.6), and
based on their portfolio of clients, and past sales
performance, they feel reasonably confident that they will
achieve the sales target set (Expectancy = 0.8). Here we
see that the motivational force is far stronger in
comparison:
F=VxE
F = 0.6 x 0.8 = 0.48
The above example further underlines the individual nature of motivation, in that what might appear to be
universally appropriate means of motivating people, can actually have significantly differing effects on each
individual.

Resources
1. Kuster, T. (1995, December). How Nucor Crawfordsville Works. Iron Age Newsteel. ,
11(12): 36-52.
2. Byrnes, N. (2006, May 1). The Art of Motivation. BusinessWeek. Retrieved from
http://www.businessweek.com/magazine/content/06_18/b3982075.htm also printed
in Kreitner, R, & Kinicki, A. (2008).Organizational behavior 8e: New York: McGraw
Hill
3. Nucor corporate website, The Little Steel Company That Could. Retrieved from
http://www.nucor.com/story/
4. CliffsNotes.com. Motivation Theories: Individual Needs. 5 Jan 2010
Retrieved from
http://www.cliffsnotes.com/WileyCDA/CliffsReviewTopic/topicArticleId-8944,articleId-
8908.html
5. Sunil Ramlall. (2004). A Review of Employee Motivation Theories and their
Implications for Employee Retention within Organizations. Journal of American
Academy of Business, Cambridge, 5(1/2), 52-63.  Retrieved January 15, 2010, from
ABI/INFORM Global. (Document ID: 653882471).
6. 29-JAN-2004: Motivational Needs. (2004). Retrieved January 11, 2010, from
http://www.arrod.co.uk/archive/article_motivational_needs.php
7.

13
Leslie_Baker046
BME-214614-02X-09FA2) Organizational Behavior
Module 2 – 12/12/09
OB in Action Case Study – Nucor, Employee Motivation at the Core of Corporate Success

14