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Lincoln Electric’s 2011 bonus – and still no layoffs

December 13th, 2011

For The 63rd Straight Year (At Least), This Remarkable Company Says “No” to Layoffs

from The Motley Fool and AOL Daily Finance (13/12/2011), written by Brian Richards:

Yesterday, Jefferies (NYSE: JEF ) announced that it is cutting 11% of its workforce amid fears that it cannot exist as an independent investment bank, Fox Business reported.

Jefferies’ management is doing a painful yet prudent thing here — in the face of uncertainty it is slashing expenses. But in an era of near-9% unemployment, it’s worth noting that there’s another way…beyond the layoff lever.

The Lincoln model
In June, I highlighted Cleveland-based Lincoln Electric (Nasdaq: LECO ) , an industrial equipment manufacturing company. Lincoln designs and develops arc-welding products and systems and remains the world’s technological leader in its industrial sector.

You can read the full story of Lincoln, but the short story is this: The company hasn’t laid anyone off for lack of work since at least the 1940s, and it offers employees generous pay and an open-door management policy. It’s not idyllic, but the Lincoln culture of trust really does work.

Frank Koller is an expert on the company, having profiled it in his excellent book Spark: How Old-Fashioned Values Drive a Twenty-First Century Corporation (which I’d recommend). Last week, Lincoln Electric had its annual bonus distribution ceremony in the cafeteria of its Cleveland headquarters.

Koller told me via email that:

  • 2011 is the 78th consecutive year Lincoln Electric has made a profit.
  • The total “bonus pool” of profits distributed among U.S. employees was $84.3 million (32% of pre-tax profits).
  • The average bonus per employee was $30,775.
  • The “bonus multiplier” was 63.75%. That is, each and every employee received a bonus equal to 63.75% of her/his base earnings.
  • The average total compensation of a U.S. Lincoln Electric employee was $79,050.

And perhaps most impressively, no worker who met the firm’s performance standards was laid off for lack of work in 2011 — meaning Lincoln’s no-layoff policy has been intact since at least 1948.

The next time you find yourself nodding your head about the necessity of layoffs, think about Lincoln Electric: a rule-breaking company that’s managed to retain its workers and stay profitable over the very long run.

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