One manufacturing giant has avoided layoffs for 70 years and still earns billions
Good morning.
Is it possible for a company to avoid layoffs for more than half a century and still be competitive? The answer is yes.
In a new Fortune feature, my colleague Geoff Colvin tells the story of Lincoln Electric, a $12 billion manufacturing powerhouse that has avoided layoffs for 70 years while still dominating its industry.
“No one is sure when Lincoln Electric had its most recent layoff,” Colvin writes. “CEO Christopher Mapes thinks it was in the 1950s. Vice president Amanda Butler believes it was the late 1940s. Documents suggest it was no later than 1951 and could have been as long as 1925. Whenever it was, no one at Lincoln Electric today was there to witness it, or maybe even alive when it happened.”
You would think that to avoid layoffs for so many years, a company would be sacrificing financial performance. That's not the case. Founded in 1895, Lincoln went public in 1995. Since then, the S&P 500 is up 740%, while Lincoln Electric stock is up 3,834%, according to Colvin.
“The company, which reported revenue of $3.8 billion last year, is among the world’s largest producers of arc welding equipment and supplies (some competitors are privately held and don’t publish revenues),” he writes. “Financial statements show that Lincoln’s production employees at its primary manufacturing sites in the Cleveland area receive pay above the manufacturing industry average—around $1,075 a week, as the Bureau of Labor Statistics reported. And remarkably, for an old manufacturer, Lincoln Electric isn’t unionized.”
So what’s Lincoln Electric’s secret sauce?
Lincoln avoids layoffs by following a unique, decades-old system, according to Colvin. “That system works within the Lincoln culture, but few, if any, other companies have implemented it successfully—and even Lincoln can’t execute it in every part of its business. Is the system an innovative answer for today’s employers, or is it a tantalizing solution just out of reach?”
You can read more here to find out all about Lincoln’s system and whether it’s possible for your organization to follow its lead.
Regarding layoffs, it's well known that the tech industry has had significant number of them this year. But the manufacturing industry has experienced mass layoffs as well. Minnesota-based 3M announced in April the company is implementing a structural reorganization plan that includes eliminating 6,000 positions from its global workforce. The staff reductions are expected to save the company an estimated $700-900 million, pretax, according to reports.
But as experts recently told me, layoffs can lead to a loss of institutional knowledge, lower morale and productivity, and also lead to bigger costs down the road when management decides to grow headcount again.
Lincoln Electric apparently has been thinking about the long term, maybe even into the next century.
Sheryl Estrada
sheryl.estrada@fortune.com
This story was originally featured on Fortune.com
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