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Production-Sharing Plans

Production-sharing plans allow groups of workers to receive bonuses for exceeding predetermined levels of output. The plans tend to be short-range and related to very specific production goals. For example, a team may get a bonus for a specific goal. One well-publicized example comes from Nucor Corporation.

Nucor’s management transformed the company into a steel producer in the late 1960s, a time when the North American steel industry was beginning to face strong competition from European and Japanese pro- Nucor ducers. Nucor’s strategy was to be a low-cost steel producer. Nucor’s nonunion production workers earn a base wage below that received by employees in the United Steelworkers Union. But if they reach progressively higher production targets, they are able to supplement their weekly pay with bonuses ranging from 100 to 200 percent  f their base wage. If production does not reach the target, no bonuses are paid.

The results? Workers are motivated as a team to find ways to improve productivity. Employees who do not do their share receive considerable peer pressure. Workers earn about 20 percent more than do their unionized counterparts and about 250 percent more than does the average production worker in South Carolina, the home of Nucor’s flagship steel mill. The company has been able to add mills in Texas, Nebraska, and Utah while producing steel at prices equal to or helo ~ those charged by foreign producers

Posted on September 4, 2014 in Incentives and Gain sharing

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