With sales of more than $19 billion annually, Nucor (IW 500/64) is a manufacturing powerhouse but it wasn’t always that way. In fact, recalls former CEO Dan DiMicco in his new book American Made: Why Making Things Will Return Us to Greatness, when Ken Iverson brought the former nuclear technology company into the steel business in the 1960s, “the corporation was fighting for its very survival.”
Nucor not only survived but prospered. As many competitors in the U.S. steel industry foundered, Nucor steadily grew. But even in 2000 when he succeeded Iverson as CEO, DiMicco writes, Nucor “could have very easily fallen to pieces….”
“Losing our founder was very tough. The leadership transition wasn’t easy. A lot of people wondered, with good reason, whether the Nucor culture would die with Ken. There was a lot of uncertainty,” he writes.
What allowed Nucor to be successful? DiMicco told IndustryWeek the key was to build a team of talented leaders and manage for the long-term.
“You’re in a cyclical business,” DiMicco says of the steel industry. “Don’t burden yourself with excessive debt. In good times, save for the bad times. You can take that money you save in good times and invest it to grow the company at a lower capital cost than if you spent it as soon as you made it.”
DiMicco says a long-term focus also requires respect for the workforce. Employers who only expect to be around for a year or two might be able to “run roughshod” over their employees, he observes. But Nucor wanted a culture that would serve its customers and shareholders in good times and bad. That meant, he stresses, “you better treat your employees the way you would want to be treated.”
As a result, even though Nucor has gone through “serious cyclical downturns,” the company has never laid off an employee. It also prompted Nucor’s pay for performance system, where all employees can earn regular bonuses if they meet or exceed production goals.
“We always had a group of people who saw themselves as owners who would do everything they could to drive success, lower costs, be more productive and to take care of our customers’ needs,” he says.
Founder Ken Iverson, DiMicco points out, “was dead against paying attention to Wall Street’s needs for immediate, quarter to quarter results. He was building a company for long-term success and he knew that he would return the greatest shareholder value to his shareholders versus those who focused on the short term.”
Wall Street’s insistence on immediate returns has encouraged companies to be “too short-sighted,” he observes, adding that Wall Street’s mantra is, “If you can’t perform today, I don’t care about the future. I want my money now.”
But DiMicco says the proof of the wisdom of a long-term focus is in the results. From the time he took over the reins at Nucor in 2000 until he retired in 2012, the company had a total shareholder return of 720%. By contrast, he says, the entire steel industry in the U.S. (including Nucor’s extraordinary results) returned 180%.
