What People are Saying about SPARK
LATEST .. November 10, 2011: TheTrustWorthyLeader.org … “Inspiring .. absorbing .. definitely worth reading” .. Amy Lyman, co-founder of the Great Place to Work Institute.
September 30, 2011 … WeldMyWorld.Com: “A Great Book … A Fascinating Story.”
August 1, 2011 … Princeton University: “2010 Noteworthy Book in Labor Economics.”
June 23, 2011 … The MotleyFool.com: “An excellent book .. A remarkable true story.”
In short (full reviews below):
Wall Street Journal:
“Striking … against the backdrop of the layoff mania that has claimed more than eight million American jobs since late 2007.”
Harvard Business Review:
“A fascinating depiction of a rare human resource practice in a company with a long and hearty track record—food for thought for the rest of us.”
Michael Enright on The Sunday Edition, CBC Radio One:
“A fascinating story.”
Akron Beacon Journal :
“A fascinating insight into a singular operation that may be an alternative for layoff-plagued America.”
Jim Stanford, Chief Economist, Canadian Autoworkers Union :
“Highly recommended, extremely well-written and impeccably documented.”
Richard Freeman, Harvard University:
“Remarkable story of the best side of US capitalism …. required reading for everyone from the president and his economic advisors to business leaders and employees everywhere “
MARKETPLACE/American Public Radio,:
“Never worry about losing your job in a down economy? The stuff of fairy tales .. but for workers at Lincoln electric, it’s realty”
Ottawa Business Journal:
“A compelling read … fascinating … good storytelling … and well-researched”
Thomas Kochan, MIT/Sloan School of Management:
“Timely …. Well-researched and well-written”
Cleveland Plain Dealer:
“Clear, vivid and compelling.”
“Fascinating …. Instructive and heartening”
CHOICE Library Reviews:
“A valuable perspective for evaluating our employment system in a time of crisis … an eminently readable narrative about one company’s journey through the landscape of American capitalism”
Norman Berg, Harvard Business School:
“Remarkable …. Excellent”
Inside Business Magazine:
“What the 200-page book does best is drive home the fact that the approach the Lincolns designed for 19th-century factory workers fits as well today as it did then: Be good to your people, and they’ll be good to you.”
Akron Beacon Journal, March 14, 2010:
Lincoln Electric policies continue to spark interest:
Cleveland-based Lincoln Electric has been in the news a lot lately; the 115-year-old manufacturer of welding equipment’s unusual business plan includes not only amazing bonuses (the average bonus in 2008, a dreadful financial year worldwide, was $28,873), but also a policy that no employee would ever be laid off for economic reasons. How does it do it, and why?
In Spark: How Old-Fashioned Values Drive a Twenty-First-Century Corporation, Canadian journalist Frank Koller explores Lincoln’s success, talking to executives, employees and business analysts. One expert says the program is a ”terribly nonoptimal and inefficient policy.”
It’s not an ideal place to work. In good times, mandatory overtime cuts into leisure; in a recession, salaries and hours can be cut and jobs reassigned — a technician may be sent to painting or outside sales. The atmosphere is intense, and Lincoln doesn’t offer medical benefits. Koller offers a fascinating insight into a singular operation that may be an alternative for layoff-plagued America.
What’s not to love about guaranteed employment? You’re a worker—assembly line or salaried executive—and when times get tough, you still have a job. Maybe you’re working a little harder, maybe you’ve had to take a pay cut, but you have a job! What’s more, you’re eligible for profit-sharing, usually a pretty hefty bonus.
That’s the unique promise of manufacturer Lincoln Electric, a leading supplier of welding equipment that made its no-layoff policy official in the 1950s. And it’s pretty tough to argue with the company’s steady success over the course of decades. Koller, a journalist, takes us through its history, giving us a lesson in welfare capitalism along the way.
Lincoln Electric has an astonishingly low rate of attrition for the industry, and, since going public in 1995, has enjoyed the ongoing admiration of Wall Street analysts—at least those who attend to long-term returns over short-term results. For almost 60 years, no employee has been laid off for lack of work.
It’s a nice approach, and the financials seem sound. But especially in the later chapters, Koller seems to protest too much, repeatedly citing (and discrediting) the opinions of skeptics. Few other companies have tried the same tactic. Employees have little choice but to accept overtime work or transfers when it makes sense for the business. And Lincoln Electric regularly sheds employees who don’t meet its rigorous performance standards, in good times as well as bad. At what point is guaranteed employment a matter of semantics?
Still, Spark is a fascinating depiction of a rare human resource practice in a company with a long and hearty track record—food for thought for the rest of us. —Ellen Peebles
In the Black, But No Pink Slips: One company’s experience with a no-layoffs policy.
In a 1945 letter to President Harry Truman, James Lincoln wrote that the government’s priorities for the postwar economy should focus on improving cooperation between businesses and their workers.
By all accounts Mr. Lincoln—the head of Lincoln Electric Co., a Cleveland-based welding-equipment manufacturer—detested the New Deal, labor unions and welfare programs, but he suggested to Truman that companies promise continuous employment to their workers as part of a strategy for economic stability. He was convinced that a no-layoffs policy was plausible, citing his own company’s success at increasing profit, boosting shareholder dividends and providing higher wages even though “no person in the last 20 years has been laid off because of a lack of work.”
Sixty-five years later, Lincoln Electric still hasn’t laid off U.S. employees, despite several economic recessions, a three-decade decline in U.S. manufacturing and Lincoln’s own costly miscalculations on overseas expansion in the 1990s.
In “Spark,” Frank Koller describes the 115-year-old company’s unusual approach to managing its employees, an approach that is all the more striking today against the backdrop of the layoff mania that has claimed more than eight million American jobs since late 2007. Mr. Koller, a veteran correspondent for the Canadian Broadcasting Corp., uses Lincoln Electric to argue against layoffs as a response to falling corporate sales and income.
Mr. Koller contends that layoffs deprive companies of profit-generating talent and leave the remaining employees distrustful of management—and often eager to find jobs elsewhere ahead of the next layoff round. He cites research showing that, on average, for every employee laid off from a company, five additional ones leave voluntarily within a year. He concludes that the cost of recruiting, hiring and training replacements, in most cases, far outweighs the savings that chief executives assume they’re getting when they initiate wholesale firings and plant closings.
James Lincoln’s ideas about changing the dynamics between labor and management were born out of the calamitous environment of U.S. manufacturing in the late 19th century, when companies were beset by frequent strikes and high levels of employee absenteeism and turnover, often caused by deplorable working conditions and low wages.
Mr. Lincoln’s older brother, John, started Lincoln Electric in 1895. He brought James onboard in 1907 and promoted him to general manager in 1914. From James’s earliest days with the company he was determined to forge a more cooperative relationship with workers than was the norm on most shop floors. “I knew that if I could get the people in the company to want the company to succeed as badly as I did,” he once wrote, “there would be no problem we could not solved together.”
To create the teamwork he had in mind, James Lincoln relied on four organizational pillars that remain in place to this day: a management advisory board made up of employee representatives; wages based on piecework, so that the quality and quantity of individual workers’ output can be monitored; annual performance-based bonuses; and guaranteed employment.
Although the no-layoffs pledge would be formally adopted as a policy only in the late 1950s, the company began the practice, de facto, as far back as the mid-1920s. James Lincoln, who died in 1965, considered the guarantee essential for getting employees to trust management and accept the inevitable wage cuts, reduced work hours and job transfers that were necessary to keep people working when orders slumped. Over the years, Lincoln Electric has given itself some wiggle room by reserving the right to let go employees with less than three years of service. The policy also doesn’t extend to its overseas operations, which now account for about half of Lincoln’s annual revenue.
For decades the publicly traded company has been the world’s largest manufacturer of electric arc welders and other welding equipment, with sales last year of $1.73 billion. Mr. Koller stresses throughout the book that Lincoln Electric shouldn’t be regarded as a workers’ paradise; its motives have always been rooted in profit. In exchange for a no-layoff guarantee, Lincoln’s 3,300 U.S. employees are subjected to rigorous performance and productivity standards to keep them from becoming complacent. Workers who don’t meet the company’s expectations receive smaller bonuses or end up getting bounced out entirely. But for those who can handle the work, Lincoln Electric has been a generous employer. More than 30% of its annual profit is distributed to employees through bonuses.
If Lincoln Electric has been successful without layoffs, why haven’t more companies copied the idea? Southwest Airlines is believed to be the largest U.S. company with a no-layoffs policy. A couple of other companies have adopted one in the past 20 years but have later abandoned it. Mr. Koller found indifference and skepticism about Lincoln Electric during interviews with executives and business-school students, even though the company has been a standard case study in business-school curriculums for three decades. Most of the people Mr. Koller talked to concluded that Lincoln Electric’s employment guarantee requires a unique set of circumstances and conditions that can’t easily be replicated elsewhere.
Mr. Koller attributes the enduring appeal of layoffs to deeply ingrained notions about the creative destruction that drives capitalism, though layoffs, he notes, might just as well be seen as an indictment of corporate leadership. He quotes Peg Wynn, a former vice president for the semiconductor chip company Xilinx Inc., who concedes that avoiding layoffs “really requires great managers.” Her company’s eight-year experience with a no-layoffs policy ended in 2004. Ultimately, she says, “just doing what everybody else does” was easier.
Bob Tita is a manufacturing reporter for Dow Jones Newswires.
Richard B. Freeman, Harvard University/National Bureau of Economic Research:
“Huge bonuses for normal workers? Guaranteed employment in Rustbelt Cleveland in a recession? You gotta be kidding! In a time when the face of American capitalism is Wall Street destroying jobs, Spark tells the remarkable story of the better side of US capitalism — Lincoln Electric, the billion dollar manufacturer that succeeds by treating its employees the right way. This book should be required reading for everyone who wants to make the economy work for us all, from the President and his economic advisors to business leaders and employees everywhere. “
(Richard Freeman is Herbert Ascherman Chair in Economics at Harvard University, Faculty Director of the Labor and Worklife Program at the Harvard Law School and Director of the National Bureau of Economic Research / Sloan Science Engineering Workforce Projects. His many books include What Workers Want and America Works.)
Thomas A. Kochan, MIT Sloan School of Management:
““Why has Lincoln Electric’s incentive compensation and employment system endured for nearly 100 years when most incentive systems have short half-lives? Could this approach work elsewhere? These are questions I ask my students every time I teach this classic case. Frank Koller’s Spark provides a well researched and well written analysis that allows readers to come to their own answers to these questions. Business, labor, and government leaders would do well to read this timely book as they search for more equitable and sustainable principles for rebuilding trust in management and getting compensation once again growing in tandem with productivity and profits.”
(Tom Kochan is Co-Director of the Institute of Work and Employment Research and George M. Bunker Professor of Management at MIT’s Sloan School of Management. His latest book is Restoring the American Dream.)
Cleveland Plain Dealer:
Sunday Arts Sunday, February 21, 2010
Lincoln Electric’s sold promise to its workers
SPARK by Frank Koller PublicAffairs, 249 pp, $25.95
Reviewed by Susan Ager
About 3,300 workers in Euclid, Ohio, cope like the rest of us with the bleak uncertainties of life – death and taxes. But they enjoy another guarantee most of us don’t – a job.
You might well raise an eyebrow: All of us know somebody who thought their job was solid – until the company went to Jell-O.
But no. Lincoln Electric’s promise has lasted, like an old-time marriage vow, for its 115-year history, and on paper for more than six decades. Even its handful of critics agree: Not a single employee has ever been laid off for economic reasons – not even in 2008 and 2009.
Canadian workplace journalist first heard of the company during an NPR broadcast in 1996, while the author, an MIT-educated engineer, was vacationing in Maine. He became so obsessed that he pursued the company for some time before its CEO agreed to cooperate on “Spark: How Old-Fashioned Values Drive a Twenty-First Century Corporation.”
At first, I feared this book would be drenched in “business speak.” But “Spark” is clear, vivid and compelling – almost a page-turner.
Lincoln Electric is not a household name. The company is, however, the world’s biggest manufacturer of welding equipment, with plants in 20 countries. In the United States, its employees work flexible schedules, and even flexible jobs, to allow the company to make quick changes when the economy shifts.
So when demand booms, workers put in 15 and 20 overtime hours a week. When production lines slow, walls get painted. Hours never slump below 32, however, and paychecks keep coming. There are no traditional unions; instead employees elect representatives tgo meet regularly with management.
Koller perceives Lincoln Electric as a 19th-century company that has held onto its founding principle: the Golden Rule. The point of that? Said founder james Lincoln: “I knew that if I could get the people in the company to want (it) to succeed as badly as I did, there would be no problems we could not solve together.”
Even the basics at Lincoln Electric shout “we’re all in this together.” Everyone walks into the plant through the same door. Everyone stands in the same cafeteria line. Most managers don’t have windows.
Another tradition that keeps workers working: Since 1934, it has paid its employees an annual holiday bonus that occasionally tops 100 percent of their base salaries. Even in the recent grim December of 2008, the bonus was 61 percent of base – an average of almost $29,000.
“Spark” – named for arc welding’s signature flash – is not a love letter to Lincoln Electric. Koller interviews happy and unhappy employees, and quotes extensively from economists, analysts and others who portray Lincoln as an anomaly, unable to be copied, like a once-in-a-lifetime comet.
But Koller, a proponent of more social responsibility in management, describes the lasting devastation of layoffs, on the health and morale of individuals as well as companies. He offers miniprofiles of companies that have tried guaranteed employment, and failed or (so far) succeeded.
One is Hypertherm, a New Hampshire manufacturer that has held on to its no-layoff principle since it began in 1968. “This is not about altruism,” said founder Dick Couch. “But it is not a straight line, and that’s the expectation that is the most damaging in public ownership, the belief that every quarter must yield good news.”
Ager, a former columnist for the Detroit Free Press, lives in Michigan.
“Veteran journalist Koller goes inside Lincoln Electric, a Cleveland arc-welding equipment manufacturer dating back to 1895, a company that promises that no permanent employee who meets the firm’s performance standards will ever be laid off due to lack of work. This promise is so sacrosanct, it’s included in the employee handbook and in the organization’s annual report. The company has also paid out profit-sharing bonuses without fail since 1934, bonuses which almost always exceed 60% of an employee’s basic earnings. Koller offers a fascinating glimpse into this remarkable yet, in many ways, ordinary organization, which survives, even thrives, in a sunset industry where overseas outsourcing is the norm. Readers follow the company through the days of Carnegie and Rockefeller, recessions in the 1950s, and the present crisis, and witness how it weathers challenges. Instructive and heartening, this book offers a proven model for companies that not only want healthy bottom lines but also satisfied, dedicated employees.”
“This book is about the Lincoln Electric Company, a manufacturing firm that makes arc welders. It is also, more broadly and more significantly, an examination of the management of American business. John Lincoln founded the company in 1895. He was joined by his brother James in 1907, and Lincoln is now the largest maker of arc welding products in the world. It is also the subject of a best-selling Harvard Business School case study published in 1975. Lincoln employees work on a system that pays for productivity and rewards employees with bonuses based on profits. In 2008, the average bonus was $28,873, and the average worker’s total compensation was $70,000. Along with substantial incomes, Lincoln workers who pass probation are guaranteed lifetime employment. Koller’s well-documented, informative account of the company’s evolution provides a valuable perspective for evaluating our employment system in a time of crisis. The important fact about Lincoln is its commitment to values and principles, especially fair treatment for all employees from production workers to executives. Koller weaves historical background and current events into an eminently readable narrative about one company’s journey through the landscape of American capitalism.”
Norman A. Berg, Professor Emeritus, Harvard Business School:
“Frank Koller has done a remarkable job of presenting both an economic and a moral argument for the value to society of the unusual policies followed with great success by Lincoln Electric for over a hundred years. The book is excellent in both the historical overview and the numerous interviews with current and past employees. There is much that modern management can learn about the benefits to employees, customers, shareholders, and communities by examining the role of the ‘old fashioned’ culture of Lincoln Electric.”
(Norm Berg is the author of the classic case study on Lincoln Electric that was first published in 1975 and that remains, to this day, the best-selling case in HBS history. It is taught in MBA programs around the world although, sadly, often as a portrait of an interesting anomaly, rather than as an exemplar of good management for the 21st century.)
What could you learn from a 115-year-old welding equipment maker? Plenty.
In the late 1800s, Cleveland was a lot like the Silicon Valley of the 1990s. Inventors, entrepreneurs and venture capitalists were creating new and exciting technologies. But, instead of the Internet driving business, it was the electric light and the
Laborers and factory workers drove the nation’s economy then, and industrial turnover was at 300 percent because of backbreaking work and little regard for worker happiness. But Lincoln Electric was different. In Spark: How Old-Fashioned Values Drive a Twenty-First Century Corporation, author Frank Koller examines how the company’s founding principles have kept it strong for 115 years.
The company’s early leaders, brothers James and John Lincoln, realized that by treating their workers well and sharing the rewards of their business, they would have more productive workers and a more profitable enterprise.
So they came up with a plan: They created an open-door policy, paid factory workers based on productivity, established an annual merit-based bonus system and profit sharing, and ultimately guaranteed employment for those who qualify. The approach was revolutionary, and Spark recounts how Lincoln had to fight Congress, the Federal Trade Commission and the IRS to convince Washington bureaucrats that its employee programs weren’t a scheme to avoid taxes.
But Koller doesn’t just toe the Lincoln line. He also talks to disgruntled employees, addresses the company’s detractors and points out that not even Lincoln could escape the nation’s economic pain — the company made news when it trimmed 10 percent of its work force last year.
What the 200-page book does best is drive home the fact that the approach the Lincolns designed for 19th-century factory workers fits as well today as it did then: Be good to your people, and they’ll be good to you.
Here are a few other lessons we learned from Lincoln along the way.
Be diversified. Lincoln has two divisions: One makes very expensive welding machines; the other makes relatively less expensive welding rods and other materials that companies need all the time. This makes the company less susceptible to market dips when heavy equipment purchases get shelved.
Get rid of poor performers. Anyone with three years service to the company is guaranteed a job (with some caveats), but it’s not easy to make it that long. “I make it very clear to the managers that if you have low-performing people who are taking up space and costing money, get rid of them,” says CEO and chairman John Stropki.
People are selfish, but that’s not always bad. The company’s annual bonus and piecework pay systems are effective because employees want to take home as much money as possible. Of course, the entire team must be on board to reach that goal.
Stand by your word. Piecework rates reward employees for productivity as long as their work meets quality standards. The rates are set by a complicated formula and are seldom changed, even if management realizes they overpaid. “I’d lose my long-term credibility just to start re-timing things when we make a mistake,” Lincoln general manager of consumables Doug Lance says in the book. “You just can’t go in there and make workers feel like they’re being screwed.”
Cross-train your employees. Instead of hiring extra people then laying them off when work gets light, Lincoln runs with a lean staff so it can more easily respond to market demands. Employees are guaranteed employment, but that work might be on the factory floor, in sales and or even miscellaneous duties such as painting the hallways, depending on the company’s needs.