Running head: WORTHINGTON INDUSTRIES CASE 12-3

Worthington Industries Case 12-3 MBA

Worthington Industries Case 12-3 Worthington Industries has a long history of success in steel processing and metals-related businesses. From 1995 to 1999, they increased sales consistently yearover-year. During 1995, the company reported net sales of $1.126 billion. By 1999, net sales grew to $1.763 billion, an increase of 57 percent (Anthony & Govindarajan, 2007). There are four key factors of their management system that have helped them exceed their competitors performance. These four factors include their values, organizational structure, human resource policies, and their reward systems. Values The first key factor is the companys values. The company founder developed these values and they have remained at their core ever since. There are eight rules or statements that make up the companys philosophy. These eight statements include earnings, their golden rule, people, customers, suppliers, the organization, communication and citizenship. The heart of these values is the golden rule of treating others the way you want to be treated. They apply this rule to their customers, employees, investors, and suppliers. The first priority for the company is to earn money for their shareholders (employees are also encouraged to become shareholders through the companys profit sharing plan) and increase the value of their investment. They measure this through growth earnings per share. From 1999 to 2005, operating income as a percent of stockholders equity increased from 19% to 21% (Anthony & Govindarajan, 2007). These values are interwoven into each part of the company. They have been successful in creating an environment where people feel valued and everyone treats each other with mutual respect. When employees know that their hard work is

appreciated and rewarded, they go the extra mile. The company also focuses on developing their employees. They have tuition reimbursement programs to help them continue their education. They also have an open door policy with management to encourage open communication and trust with the staff. These all have contributed to the success Worthington has over their competitors. When it came to the suppliers, they simply asked to be treated fairly. They didnt expect the lowest price, but a competitive price for quality material. In turn, they treated their suppliers with the same respect and prized their loyalty. Organizational Structure The second key factor that contributes to the companys success is their organizational structure. They consider their organizational structure to be flat. There profit sharing plan only has four basic levels including production, administrative, professional, and executives. (Anthony & Govindarajan, 2007). They also believed in smaller plants of fewer than 150 employees. This helped with communication and allowed the employees to better identify with the company. Most of the functions are decentralized. Purchasing and human resources are the exception and are centralized to take advantage of cost savings and consistencies to policies. This means plant managers have tremendous autonomy and can run their individual plants as their own profit centers. Human Resource Policies The third key factor is the companys human resource policies. Managers are not the only key decision makers. The company created employee councils made up of workers. They are appointed by management and meet at least once per month to talk about critical issues at the plant. They are also responsible for determining whether or

not an employee becomes permanent. Management felt the coworkers knew if an employee was a good contributor, so after a 90 day trial period, the council votes whether the person will be offered a permanent position or not. This contributes to workers feeling they arent just an employee and they actually have a say in how the company is run. Worthington also promotes internal growth, with 95 percent of their job openings going to internal candidates. People with common sense and who can lead others are identified and promoted into management roles. Again, this creates trust and dedication between management and the staff. The company also encourages cross-training employees for different jobs. This helps more workers advance and move up in the company. When employees know that they are promoted based on merit vs. tenure, they tend to work harder to advance. Reward Systems The fourth key is Worthingtons reward system. The employees are paid for good performance through competitive salaries and profit sharing. They make sure salaries are in the top quartile for each location, reducing potential attrition to competitors and helping to attract the best talent for the job. The profit sharing is distributed quarterly and makes up a substantial part of their overall compensation. For the workers, it was 20-25 percent of their overall compensation compared to executives, where profit sharing made up to 60 percent of their overall compensation. Worthington believes in performance based pay and the more money the company made, the more they rewarded their workers. They also require every salesperson to spend six months working in a plant where they could see how the products are made, the plant capabilities and they

learned technical skills that they could share with their customers. This also gave them a better understanding of order profitability. Worthington would not take an order that was not profitable, so it was important that sales understood. A more educated sales force gives Worthington Industries a real competitive advantage. Conclusion Worthington Industries (WOR) started in 1955 and has grown into a market leader. They were named as one of the 100 Best Places to Work in 1998 and 1999 by Fortune magazine (Anthony & Govindarajan, 2007). They continue to lead their competition by sticking with their values, following the golden rule. Their high values, flat organizational structure, employee centered human resource policies and generous reward system all contribute to their continued success. The chart below shows that Worthington Industries continue to lead their competitors in many areas including EPS and profitability (WOR, 2012).

References

Anthony, R. N., & Govindarajan, V. (2007). Management control systems (12th ed.). New York, NY: McGraw-Hill/Irwin. WOR: Summary for Worthington Industries, Inc. Co- Yahoo! Finance. (2012, November 30). Yahoo! Finance. Retrieved November 30, 2012, from http://finance.yahoo.com/q? s=WOR