Archive for December, 2016
The Passing of An Inspiring and Caring Business Leader – Donald Hastings
Friday, December 30th, 20162016 Ends at Lincoln Electric, No Layoffs for, now, 68 years and 83 Years of Amazing Profit-Sharing Bonuses
Friday, December 9th, 2016Lincoln Electric, which I profiled in my book SPARK, just announced its 2016 employee profit-sharing results, backed by the firm’s now 68 years-long unbroken no-layoff promise.
It was another impressive year in difficult times for a company that with hard dollars, not with rhetorical niceties, puts its employees on an equal platform with its customers and its investors. As a result, all three groups do well as does our society at large. This remains a powerful economic model for sustainable work that benefits everyone.
2016 details (2015 in italics) with my comments further on.
83 = uninterrupted years paying an employee profit-sharing bonus (Lincoln has been profitable every year since 1934.)
$ 24,111 = average 2016 bonus / permanent U.S. employee (approx. 2,800) (2015 $29,261 )
$ 72,323 = average 2016 total earnings per employee (wages/salary + bonus) (2015 $73,543 )
$ 68 million (approx.) = pre-tax profits shared among employees (32% of pretax corporate profit) (2015 $ 80 million (approx.) )
0 = number of layoffs in 2015 (68 years layoff free)
Lincoln Electric (Nasdaq: LECO) remains #1 in the global marketplace for welding technology and materials.
The Guaranteed Continuous Employment Policy remains unbroken since at least 1948. (The no-layoff track record may go back to 1925.) No one has been laid off for lack of work at Lincoln Electric in the US through the Great Depression, wars and the Great Recession.
Notes for 2016:
These continue to be challenging times for manufacturing globally: Lincoln is no exception. I have no special knowledge of the company’s finances, but annual sales for 2016 seem to be heading 10-12 % lower than in 2015 (somewhere around $ 2.4 billion.)
So the average bonus is smaller this year. BUT … no one was laid off.
Looking back, in mid-2015, Lincoln’s US production employees saw their work-week reduced from the normal 40 and often more hours; many began working just 32 hours per week (the minimum guaranteed by the corporate no-layoff policy/promise.) There were similar slowdowns in Lincoln facilities around the world. Salaried employees – from administration to R&D and all executives – also faced significant pay reductions.
In 2015 (as in 2009/10) the company introduced a voluntary early retirement incentive program, stopped new hiring and brought some externally contracted work back inside. As a result, and with natural attrition, Lincoln’s US workforce shrank from 3,000 to 2,800 employees.
Also in 2015, Lincoln suspended its 401K matching contributions for the retirement plan (similar to employer-matching RRSP retirement programs in Canada.)
And the company’s pension plan was converted from a defined benefit plan to a defined contribution plan. (Like so many others in the US and Canada.)
This has represented a significant and painful sacrifice for all employees and their families.
But … no one was laid off!
THE GOOD NEWS
Most hourly workers (as of late-October, 2016) are back up to 40 hours per week of paid employment. Part of this is due to demand picking up for welding products, part is due to the smaller workforce.
This January 1, 2017, the 401K matching contributions will begin again. More importantly, Lincoln has promised that in any future economic downturns, these vital matching retirement contributions will continue uninterrupted. An important and positive policy change.
Lincoln Electric is an American-based Fortune 1000 multinational. In other countries where it has production facilities, it tries – under often very different legislative, labor and regulatory regimes – to treat its workers with the same respect and employment structure that US employees earn. In Canada, Australia and Mexico, profit-sharing and steady work has remained as close as possible to that in the US itself; further afield, local factors have forced many accommodations.
But the essential contract within Lincoln Electric remains ….. shared sacrifices by everyone in the firm in tough times will be rewarded fairly through significant profit-sharing and guaranteed steady work over the long term.
Lincoln Electric has done its best to earn the trust of its workforce by keeping its people on the job through thick and thin – while remaining technologically innovative, and thus highly profitable, for more than a century.
This goal continues to be one which many more private sector firms should embrace in fact, not just with vague rhetoric. Public policy makers at all levels should make efforts to support these initiatives.
The pain from layoffs, all-too often unnecessary, and from the resulting unemployment is extraordinarily damaging to the fabric of our society, and extends far beyond the awful economic impacts. We need to do much better at keeping people steadily employed in productive jobs and thus keeping our communities strong and vital.