The trouble with normal is it always gets worse -- Bruce Cockburn, Canadian folk/rock guitarist and singer-songwriter, from his 1981 song "The Trouble with Normal"
Canadian author Frank Koller quotes his countryman in "Spark" (PublicAffairs paperback, 272 pages, $15.95) in his extended examination of Cleveland, OH-based Lincoln Electric Co. and other companies with no-layoff policies.
"Normal" in American corporate practice is to lay off workers when times get tough, as they have been for the last three or more years. My own profession, journalism, has seen unprecedented layoffs at such major newspapers as The New York Times, the Los Angeles Times (where I worked from 1976 to 1990), the Chicago Tribune, and many other newspapers.
Since 1948, Lincoln Electric Co., the world leader and innovator in arc welding equipment and supplies, has adhered to a policy of not laying off permanent workers (those with three or more years of service) during slow periods and recessions. Instead, as Koller describes in this page-turning economic thriller -- it thrilled me to see humane policies from a publicly traded corporation -- the company reduces its bonuses, cuts hours and even cuts the salaries of top management. In the current "great recession," Lincoln Electric has resorted to buyouts for highly compensated employees -- many of them at or near retirement age.
Workers at Lincoln Electric even spruce up the grimy Cleveland area plants during slow periods. Everybody enters the plant from the same door and there are no special parking spots for the management. Everybody eats in a spartan cafeteria that reminded one former employee of those in "correctional facilities." The company doesn't even pay for medical coverage for its employees, although it requires them to have health insurance. With typical annual shop floor salaries north of $90,000, Lincoln Electric reasons that employees can afford the premiums. Just before Christmas, Lincoln Electric distributes annual bonuses that can exceed the yearly wages of most employees.
The book's long subtitle -- "How Old-Fashioned Values Drive a Twenty-First Century Corporation: Lessons from Lincoln Electric's Unique Guaranteed Employment Program" -- distinguishes the company, founded in 1895 by John C. Lincoln with an investment of $200 to make electric motors and later run for many decades by his brother James F. Lincoln -- who instituted its guaranteed employment plan -- from its "normal" former neighbors. Companies near Lincoln Electric in Euclid -- TRW, Addressograph-Multigraph, Chase Brass, GM's Fisher Body -- are out of business or relocated to other countries, but Lincoln Electric soldiers on in Euclid with its not-so-"normal" employment policy.
Koller interviewed more than 60 Lincoln Electric employees, including management, to find out how a guaranteed employment program works. His legwork included interviewing multigenerational families who've worked at Lincoln Electric, including a husband-wife team. He also looks at the company's business model, the subject of best-selling case studies by Harvard Business School and many other business schools around the world. (For a summary of the 1975 case study by HBS professor Norman Berg and his co-author Norman Fast, click: ...). The 1975 study has sold in excess of 275,000 copies, making it a best-seller in anybody's language!
It should be emphasized that Lincoln Electric is not just a small company in Rust-Belt Cleveland. It's a global concern, with 39 manufacturing locations in 20 countries, including Koller's Canada. Among the operations, manufacturing alliances and joint ventures in those countries are plants in such low-cost producers as China and India. Lincoln Electric is truly a company upon which the sun never sets, with distributors and sales offices covering more than 160 countries.
Chances are pretty good that if you look at an auto body shop, a repair garage, a farmer's workshop or a do-it-yourselfer's shop, you'll find a Lincoln Electric arc welder in the workplace. The company's most popular portable welder was even featured in John Hughes's hit movie "Home Alone!"
While factories across the Midwest shutter their doors, Lincoln Electric has thrived for more than a century. In addition to being profitable and technologically innovative, through good times and bad, the company has fulfilled its unique promise of "guaranteed continuous employment." Workers are viewed as assets--not liabilities. Through flexible hours and job assignments, as well as a merit-based bonus system, Lincoln Electric's employment policies have proven healthy for the company's bottom line its employees and its shareholders.
In "Spark" Koller examines how this unusual and profitable Fortune 1000 multinational company challenges the conventional wisdom shaping modern management's view of the workplace. Through insightful storytelling and extensive interviews with executives, workers, and leading business thinkers, Koller uses the Lincoln Electric example to illustrate how job security can inspire powerful growth and prosperity in our communities, which in our hollowed-out manufacturing base is especially relevant.
Unfortunately for America's workers, while the Lincoln Model has been heavily studied, it hasn't been adopted by many companies. Koller takes us to two companies, Xilink in California, and Hypertherm, in New Hampshire, that have tried guaranteed employment. Following a change in CEO's, Xilink abandoned the policy, reverting to the "normal" layoff practice of its Silicon Valley comperes. Hypertherm, which makes equipment that cuts rather than welds metal, continues to practice a no-layoff policy for employees that have been at the company for a stated period, like Lincoln Electric. Koller also mentions Southwest Airlines, founded in 1971 and based in Dallas, TX, that adheres to the policy.
One thing that struck me as hypocritical among the academic critics of guaranteed employment that Koller interviewed was the almost universal opposition to it. Coming from academics who enjoy tenure, this stands out as hypocrisy of the highest order.(for comments by Koller on Harvard Business School and the Lincoln Electric case studies, click: (...)