HR Management assignment help online study review help: Report on total quality management – Nucor corporation
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Write a report on total quality management for Nucor corporation that produces steel ??
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Introduction:
Quality management is the management of processes so as to ensure good and consistent quality for the product and services of the organization. Quality planning, quality control, quality assurance and quality improvement are important tools in the quality management process. A number of management principles guide quality management mindset. Some of the major principles are : a strong customer focused approach, a process-oriented production approach and the search for continuous improvement (Gavin C. Reid, 1993).
Total quality management is an evolution of the quality management mindset. It is a process-oriented management philosophy which strives for continuous improvement of the products and processes of the organization. Total quality management over the years has evolved into a multi-dimensional management philosophy with many different aspects (Crosby, Philip B ,1989).
The report looks broadly into quality management at Nucor Corporation. Nucor is the biggest manufacturer of steel and steel products in United States of America. It is headquartered in Charlotte, North Carolina. Because of its stellar quality management, Nucor has succeeded in maintaining profitability in a difficult industry. The steel industry in United States is currently plagued by falling demand and tough competition from cheaper steel manufacturers in Asia.
Nucor pioneered the mini-mill concept in the decade of 70s. The mini-mill technique is a method of making steel by melting scrap metal in electric arc furnace. This technique manufactures steel at fraction of the cost of conventional steel making (J.A.T. Jones, B. Bowman, P.A. Lefrank,1998). Nucor’s biggest strengths are the quality of its products, the state-of-the-art manufacturing processes that it uses, and its high productivity ratio (Crosby, Philip B ,1989).
All three of these strengths of Nucor are linked to its total quality management approach. The total quality management mindset ensures that its products are of the highest quality and standards. This gives it a sustainable competitive advantage against competitors. It uses state-of-the-art machines and manufacturing processes so that wastage can be eliminated and quality defects can be minimized. This in turn has the effect of reducing the operational costs of the company. So Nucor has become a sort of cost leader in its industry. This cost leadership has further strengthened the competitive advantage of the country.
The high productivity ratio of Nucor is because of efficient utilization of resources. This efficient utilization of resources is possible because of efficient and effective quality management at production facilities of Nucor. Quality management focuses on minimization of wastage in production processes. This minimization results in higher productivity ratio for the steel manufacturer. The whole production set-up at Nucor is a process-oriented one. The process-orientation ensures that every process of production is done in the most efficient and effective way. Continuous process improvement is one of the key elements of production management at Nucor.
2. Main Content
2.1 How Nucor’s management practices affect its ability to produce high quality products?
Nucor’s management practices strongly affect its ability to produce high quality products. Nucor has annual turnover of USD 4.8 billion annually. Still it has only four layers of management between the CEO and frontline employees. This hierarchal structure increases quick flow of information between the different management layers. The top management is able to keep a closer watch on the quality of products being produced. Large number of hierarchal layers in the management structure of a company often makes communication across management layers less effective. Nucor has therefore chosen its management structure so as to speed decision making and increase effectiveness of communication across the organization.
The general managers make day-to-day decisions on the floor of the plant. This enables real time decision making when quality issues arise. Immediate redressal of quality problems leads to minimization of wastage of resources because of quality defects. There is also involvement of employees in decision making process. Rank-and-file employees are involved in devising methods for improving operations. This empowers the employees and increases their commitment towards quality (Michael J. Stahl, David W. Grigsby, 1997).
Organizational culture is the collective behavior, values and action of the members of an organization. Organization culture is created and guided by the behavior, action, values and policies of the top management. In Nucor the management supports an egalitarian culture. There are no company cars, company planes, and assigned parking spaces, hunting lodges and or other indication of position or status. All the employees wear the same colored hat; they have the same group insurance program; they get the same holidays and vacation plans.
This egalitarian culture ensures that lower level employees do not feel any kind of resentment from the special treatment often reserved for employees at higher levels of hierarchy. Rank-and-file employees are motivated when they see their superiors wearing the same colored hats that they wear on the floor of the plant. Employees who are motivated have higher productivity and greater commitment towards quality. Since there are no such perquisites for senior management, operational costs also come down (Michael J. Stahl, David W. Grigsby, 1997).
The management style at Nucor is one of participative-decision making. There is no authoritarianism in the functioning of management. The same group insurance for all the employees and same holiday and vacation plans communicate to employees that equity is one of the core values of the organization. This belief in equity drives the employees to create maximum value for the customers by creating high quality products.
2.2 How Nucor’s human resources practices affect product quality?
Human resources management involves management of issues related to human resources or employees of the organization. It is often responsible for attracting, selecting, recruiting and training employees. Traditionally human resources management was taken as an administrative function which had little or no bearing on top-line (revenues) or bottom-line (profits) of the company.
However much empirical evidence shows that the traditional approach of treating human resources management as solely an administrative function a faulty one. Successful organizations like Nucor have adopted a strategic approach to human resources management. Nucor has leveraged its human resources management to motivate its employees to enhance the quality and productivity of the entire organization. The improved productivity and quality is reflected in the top-line and bottom-line of the company. It is therefore not surprising that in a tough environment Nucor remains a profitable company while its competitors struggle to break even.
Nucor has a well-developed employee incentive plan. This incentive plan has effectively aligned the interests of the employees with the interests of the firm. The typical employee at Nucor receives a base salary that is slightly below the industry standard. But Nucor gives very generous bonuses to its employees when it is doing well. The bonus system at Nucor clearly defines the bonuses based on performance criteria that employees will get. So it is in the interests of the employees that Nucor performs well so that they get bonuses. After including the bonuses that employees at Nucor get, the average pay of a Nucor employee is much higher than the average pay in the industry. Still the total cost per ton of steel produced by Nucor is less than that of other integrated steel producers. This shows that employees of Nucor are more productive than employees of its competitors. The successful rewards management of human resources management at Nucor has played a major role in enhancing the productivity of the employees.
Reward management involves setting and designing of rewards system in such a way so as to motivate the employees to strive for achievement of the objectives of the organization. The rewards management at Nucor has succeeded in its purpose. The three main operational objectives of Nucor are : i) to produce high quality products , ii) to have a high productivity ratio, and iii) to have lower costs through operational efficiency.
Rewards management is an important aspect of human resources management at Nucor. It has a very positive impact on quality at Nucor. It has motivated the employees to give their 100 % for ensuring quality of production at Nucor. The bonus system motivates the employees to strive for improving their performance and of the company. It ensures that employees get higher salary than industry standard when Nucor is profitable. This attracts the best employees to the company in spite of it offering lower base salary than competitors (Preston, Richard,1992).
The better quality of steel, the higher productivity and the ensuing minimization of wastage gives Nucor cost leadership among its competitors. This cost leadership means that Nucor produces steel at lower cost per ton than its rivals. It was because of its motivated employees that Nucor was able to pioneer the mini-mill concept in the decade of 70s. This technique involved production of steel by melting scrap steel in an electric arc furnace. It strengthened Nucor’s cost leadership in the industry (J.A.T. Jones, B. Bowman, P.A. Lefrank,1998).
2.3 How has the success of Nucor’s policies and structure affected the thinking and behavior of other organizations? What are the general lessons that can be more widely applied?
Nucor is a leader in its industry. It is not only a leader in terms of turnover and production but also in terms of processes and management techniques. The strong focus on quality has given it both product leadership and cost leadership. The high quality of steel and steel products that it produces gives it product leadership. The focus on quality management and processes minimizes wastage due to defects in quality. This makes it possible that Nucor produces steel at lower costs than competitors.
Nucor’s policies and structure have affected the thinking and behavior of other organizations, especially that of its rivals in the steel industry in United States of America. The entire structure and management philosophy at Nucor supports quality. Many of its competitors have imitated the processes and management structure of Nucor at their own organization. The mini-mill concept that Nucor pioneered in the 70s is being followed on a very large scale by manufacturers in developing economies like India and China. This concept has lowered the cost of steel and steel products greatly, thereby increasing its usage (Preston, Richard,1992).
Nucor through better quality and lower cost of its products has succeeded in creating value for its customers, employees and other stakeholders. This stakeholder approach to management has also been imbibed by many other organizations in the integrated steel industry. Nucor’s management structure with fewer layers of management cuts down bureaucratic red tape which often creeps in large organizations. This delays decision making and increases diseconomies of scale because of managerial inefficiencies.
It is admirable, how Nucor, a Fortune 300 company, has succeeded in minimizing diseconomies of scale by managing to keep very few layers between the top management and front line employees. This made Nucor capable of keeping a tight control on the quality of steel produced in its plants. The egalitarian culture at the company is another thing which other corporations in America can take as a lesson from Nucor. In an age when salaries and perquisites of the top management are spiraling, Nucor has kept its costs in control by cutting down wasteful expenditures on such amenities which are just meant as status symbol for top management.
The whole culture of Nucor emphasizes efficiency and effectiveness. Efficiency in controlling costs and minimizing wastages; effectiveness in producing high quality steel and steel products. The unique wage and incentive system for employees is another aspect that other companies can learn from Nucor. Often companies have such wage and incentive system which puts the interests of employees in conflict to the interests of the organization.
3. Conclusion
Product leadership cannot be attained without state-of-the-art manufacturing processes. Nucor is known for employing the most sophisticated processes and techniques in its production. Few companies have succeeded in achieving both product leadership and cost leadership at the same time. Nucor is one such rare company. That explains its success over the years. And while competitors and the steel industry in general are plagued by multiple problems the ship called Nucor continues to sail smoothly in these stormy times (Michael J. Stahl, David W. Grigsby, 1997).
Nucor presents a model for other manufacturing companies in the developed world. Companies from developing world have access to cheap labor. This gives them cost leadership over their counterparts from the developed world. By having a process oriented approach to quality; a management structure that supports quality and efficiency; and a human resources management that can effectively motivate the employees, companies in developed countries too can maintain their competitive advantage like Nucor.
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