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Whatever Happened To Company Loyalty?

A gate sign on a Pennsylvania steel mill early in the century read: “Firings will continue until morale improves.”One might …

A gate sign on a Pennsylvania steel mill early in the century read: “Firings will continue until morale improves.”

One might smile at the innocence of such notions, yet motivation of the workforce is one of the most critical and unmet challenges a chief executive faces today. People are more educated (at least formally) today and there are fewer entering the workforce since World War II. The Pennsylvania steelworker’s son or daughter is probably a computer programmer or marketing vice president. Most importantly, even in lower-level jobs, the knowledge content of the job is rapidly increasing. This is evident in the rise of mini-steel mills; particularly, Nucor, the Charlotte, N.C.-based producer of joists, decking, and steel beams and sheets, which is this issue’s cover story.

Ken Iverson, Nucor’s CEO for 27 years, believes firmly in a no-layoff policy even in bad times, something the industry had a lot of until the last two years. If business is slow, everyone works a four-day week with reduced pay, but everyone has a job.

This isn’t paternalism. Iverson believes that you can’t get good people if you lay them off and hire them back. This is fine for production workers, you may think,

but what about an advertising agency or a service firm? CE’s Roundtable on ESOPs unearthed an old truth (there are few new ones): When employees have a direct stake in the enterprise, productivity invariably leaps. Both Avis’s Joe Vittoria and Lowe’s Co.’s Robert Strickland report startling figures about their companies compared with their respective industries of car renting and retailing. Avis’s market share is up one point since September 1987, when the firm became an ESOP. It reports 40 percent fewer customer complaints with 16 percent more transactions. Shrinkage at Lowe’s is 0.6 percent-almost half that of industry Cinderella Wal-Mart, and well below the industry norm of 2 to 3 percent.

Iverson tells a story about a personnel man who saw a foreman shaking a worker by the arm saying, “Look, we are going to get the yield up in this plant by the end of the week or you’re fired.”

Horrified, the personnel man took the foreman aside and exclaimed, “That’s not the way we do this. It isn’t good human relations. Let me send you to our company’s course on human relations training which will properly sensitize you to achieving our goals.”

After two weeks of training the same foreman came back, only to be observed by the personnel chief shaking another employee in the same manner. This time he said, “We’re going to increase the yield in this plant by 2 percent this week or you’re fired!..And how’s your mother?”

About J.P. Donlon

J.P. Donlon
J.P. Donlon is Editor Emeritus of Chief Executive magazine.