As I understand it, the main problem in this case is employees of Nucor do not feel they have balanced equity. This is due to a performance based compensation model which allows for employees who put in more effort on the job to receive the same compensation as employees who do not put in as much effort simply because they are a part of the same team.
I looked at this situation using John Stacey Adam’s Equity Theory of Motivation because I feel the current compensation system can be altered to achieve a greater sense of equity amongst employees of Nucor while still inspiring them to be more productive.
Adam’s Equity Theory of Motivation explains how people strive for fairness and justice in social exchanges or give-and-take relationships (Kreitner & Kinicki, 2008, p. 217). In the employee-employer exchange, balanced equity is achieved when an employee’s input is met with a just return (p. 217). Negative inequity will result when an employee receives similar compensation for greater input and positive inequity will result an employee receives similar compensation for lesser input (p. 219).
Analysis
The performance based compensation model for employees of Nucor has led to a focus on team-building and corporate profitability (p. 239). The system rewards all employees when the company achieves great financial results. However, when the desired results are not met, employees receive less pay than they would in a similar role at another company (p. 239). This motivates employees to work together as efficiently as possible to minimize losses and maximize gains. While this system may help Nucor gain a short-term competitive advantage in good times, it can lead to inequities amongst employees when business is not good. This could cause disputes between e ...