During the Great Recession, the livelihoods of millions were cut short; the ability to provide for themselves and their families, cut off. The Bureau of Labor Statistics estimates that 8.7 million Americans lost their jobs between 2007 and 2010.
About 3.2 million of those jobs were consumer related and concentrated in three industries: manufacturing, professional and business services, and retail trade. Undoubtedly, countless other Americans were wrought with the stress of not knowing whether they would be yet another casualty of the nation’s worst economic downturn in decades.
For the employees at The Lincoln Electric Co., however, their jobs were secure. Thanks to a no-layoff policy enacted in the 1958, Lincoln employees could remain confident that their jobs would be there for them the next day and the day after that – regardless of the shaky economic stability of the nation.
Although the policy doesn’t cover all 11,000 of Lincoln’s global employees, it does cover a sizable chunk of its stateside workforce. At the Cleveland-based manufacturing group, which employs approximately 2,800, not a single employee has been laid off due to economic reasons since 1949. It’s important to note that the only layoffs between then and the early 1900s were based on wartime exceptions.
The Lincoln legacy
In 1907, James (J.F.) Lincoln joined his brother John, Lincoln Electric’s founder, to serve as the company’s only full-time sales person. As John’s interests shifted toward product development, J.F. took the company reigns and quickly began implementing employee-centric policies not widely seen in the business world at that time.
From the creation of an employee advisory board to the establishment of group life insurance, earned paid vacations and an employee stock ownership plan, J.F.’s leadership philosophies were progressive. The no-layoff policy, officially referred to as the Guaranteed Employment policy, was also implemented during his tenure at the company.
“J.F. Lincoln was a visionary and very oriented toward social equality,” explains George Blankenship, executive vice president and president of Americas Welding at Lincoln Electric. “He believed that there was a capitalist, a customer and an employee and that these different stakeholders had different roles to play. His view at the time was that the capitalist was taking too much gain from the business and that the employee had a large stake in helping to produce a profitable business. He wanted to treat the employee more equitably, so these policies were developed to recognize employees and give them a stake in the business.”
Much of the underlying motivations in enacting such policies were based in establishing trust with the company’s employees. When asking the workforce to give so much to a company, J.F. believed that the company should, in turn, give back.
“The Guaranteed Employment policy has served as an essential tool to garner trust between the company and the employees,” Blankenship says. “For an employee that gives years of his life to a company and then is suddenly laid off, there’s a sense of rejection. The policy is designed to avoid that loss of dignity and to promise employees that the company will take care of its workforce through difficult times.”
While the Guaranteed Employment policy assures Lincoln workers that they will not be laid off – even during major economic downturns – workers may experience reduced hours or pay. A minimum of 30 hours per week is guaranteed, but a particular job, position or rate of pay are not.
“The policy says that employees covered under the plan will take the job that is available to them,” Blankenship explains. “Although some may need to shift to a job that offers lesser pay, they’re still employed. When the economy improves, the company can move employees back to the areas where they’re the most productive or the most beneficial to the business. It allows us to scale the business back up.”
In addition to only being applicable to employees at the Cleveland-based site, the policy is also only applied after an employee has completed three years of continuous employment. The idea is that workers with several years of service under their belts are dedicated to the company and can better understand the company’s philosophies.
Employees may be subject to mandatory overtime in order to ramp up operations when the economy – and company – is recovered and ready for growth. During a downturn, employees may not see the same size of paychecks to which they are accustomed. However, when the economy is in an upswing, there are opportunities for making a lot of money.
“It’s a balancing act, but over time, it’s proven positive,” Blankenship says. “It’s also proven to preserve the workforce and the skill base of the workforce.”
Lincoln Electric employees are afforded peace of mind through the Guaranteed Employment policy. Likewise, the company is afforded advantages from the policy, such as the ability to support employee recruitment and retention efforts. Additionally, the policy also reinforces company morale and a team mentality.
“The policy pushes the company as a whole to find a solution to recover as quickly as possible to get employees back into their normal positions and pay,” Blankenship says. “In some ways, I think it helps build up the team. In some companies, when workers are laid off, they are simply out of sight and out of mind. In contrast, in Cleveland, we feel the pressure to improve as a team all the time.”
Those employees on the shop floor during a downturn are, unfortunately, more economically disadvantaged than salaried individuals. Because salaried individuals aren’t on reduced hours, there’s a lot of pressure on them to get employees back onto a full-time schedule.
For the company as a whole, it’s a good compromise, but it isn’t easy to administer. Considering the policy has been in place since the 1950s, Lincoln Electric has learned the ropes and has emerged as a stronger company for it.
“Lincoln Electric is unique in that we’re so accustomed to scaling the business back up,” Blankenship explains. “You have to have the right management policies in place to make it work. We’ve learned how to strike a balance between how productive our employees can be and how profitable the company can be. We’re proud of the policies we’ve established.”
Lincoln Electric truly is unique – few companies of its size offer no-layoff policies and even fewer, if any, are in the metals industry. A quick Google search reveals that some companies, such as Wegmans, Aflac, Publix Supermarkets and Scripps Health, offer similar policies, but like Lincoln Electric, they are larger in size and the policies have long since been established.
Smaller companies also want to protect their skilled workforce base and want their businesses to thrive, but maintaining the same number of employees while taking an economic hit is difficult. Blankenship says that business owners must be prepared for the cost involved with keeping staff on board and then must have a plan to somehow recover that cost from the business.
“You simply have to have an environment that enables cost recovery to happen,” he says. “If you have a small business with a dedicated owner who is willing to make those types of investments, it can work. You also have to do your homework and have a very diligent management team that can understand how the system works and understand the pluses and minuses. If done well, it can work well.”
Blankenship concludes that implementing the policy also comes down to respect – the type of respect that J.F. Lincoln had for his employees so many decades ago.
“If you look at the principles that we follow at Lincoln, the golden rule drives what we do,” he says. “We’re going to do unto others as we would want them to do unto us. That’s how we manage the business.”