Spark: How Old-Fashioned Values Drive a Twenty-First-Century Corporation: Lessons from Lincoln Electric's Unique Guaranteed Employment Program | 
 enlarge | Author: Frank Koller
Publisher: PublicAffairs
Category: Book
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Rating:  4 reviews
Sales Rank: 69919
Media: Hardcover
Pages: 272
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Dimensions (in): 9.3 x 6.4 x 1.2
ISBN: 1586487957
Dewey Decimal Number: 338.762197709771
EAN: 9781586487959
ASIN: 1586487957
Publication Date: February 23, 2010
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Product Description
While factories across the Midwest shutter their doors, Cleveland-based manufacturer Lincoln Electric has thrived for more than a century. In addition to being profitable and technologically innovative, through good times and bad, the company has fulfilled its unique promise of -guaranteed continuous employment.- Workers are viewed as assets-not liabilities. Through flexible hours and job assignments, as well as a merit-based bonus system, Lincoln Electric-s employment policies have proven healthy for the company-s bottom line its employees and its shareholders. In Spark, veteran journalist Frank Koller tells the story of how this unusual and profitable Fortune 1000 multinational company challenges the conventional wisdom shaping modern management-s view of the workplace. Through insightful storytelling and extensive interviews with executives, workers, and leading business thinkers, Koller uses the Lincoln Electric example to illustrate how job security can inspire powerful growth and prosperity in our communities.
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| Customer Reviews:
 Excellent Look at One Company's Employment Policy April 11, 2010
Gregg Eldred (Avon Lake, OH USA)
4 out of 5 found this review helpful
The author of this book, Frank Koller, and I share something in common. He learned of a company named Lincoln Electric, headquartered in Cleveland, as he was listening to an interview of the CEO on National Public Radio (NPR). I learned of the book as I was listening to an interview on NPR of the author. As I live in Cleveland, I am familiar with Lincoln Electric, however I didn't know about some of the things that make them extremely unique, not only in Cleveland, but in the world. Frank Koller, in his book, Spark: How Old Fashioned Values Drive a Twenty-First Century Corporation: Lessons from Lincoln Electric's Unique Guaranteed Employment Program, exposes the world's number one manufacturer of welding machines key strength; its Guaranteed Employment Program. Yes, you read that correctly; if an employee passes the three year probation period, and meets performance standards, they are guaranteed a job for as long as they want to work. Most of the employees retire after 30 to 40 years and, much like manufacturer's of the past, it isn't uncommon for generations of families to work at the company. How is it possible that, under a guaranteed employment program, Lincoln Electric has survived since 1895?
Contents:
Preface
Chapter 1: "Tossed Out on the Street Like Worthless Scrap"
Chapter 2: "If We Tried Harder, Could the Company Pay Us More?"
Chapter 3: "Understanding What the End Game is All About"
Chapter 4: "The Proper Step Forward"
Chapter 5: "Layoffs Aren't A Big Deal Anymore"
Chapter 6: "A Terribly Nonoptimal and Inefficient Policy"
Chapter 7: "This is Not About Altruism"
Acknowledgements
Notes
Index
Lincoln Electric was started in Cleveland by John Lincoln, who had been laid off from a small electric motor company even though he invented a highly profitable product for the company. At the time of the founding, 1895, America was experiencing a severe recession; credit was nonexistent, banks were failing, millions out of work, and the government appeared helpless. In 1907, John made the decision to recruit his brother, James, to run the company while he worked to invent electric arc welding equipment. James was just what the fledgling company needed; a business leader, charismatic, motivational, and respectful of anyone that worked hard. It was here, in the early days of the company, that the values that would keep the firm growing were born. The Lincoln's believed that workers were important as people, jobs were important to the worker's families and well being, and that was important to the long-term success of the company. Those values continue to this day. While guaranteed employment wasn't an official policy until 1958, Lincoln hadn't laid any off for several decades prior to that.
Interviewing current and past Lincoln CEO's and employees, management and financial market experts, Harvard Business School professors, and more, Koller examines the effects of guaranteed employment on Lincoln, it's workers, and the general business environment. There are many striking insights in this book. Among them:
1. At its most basic, Lincoln employees trust management. They know that if they work hard for the company, the company will work hard for them. This isn't just an empty promise, it is backed up in the culture of the company.
2. The number one bestselling Harvard Business School case study is one on Lincoln Electric.
3. When asked if he would want to run Lincoln Electric, another CEO said "I don't want to work that hard."
4. While most people are upset with CEO compensation, only five people at Lincoln make more than $1 million a year.
5. Keeping institutional knowledge is key to the long-term productivity and viability of an organization.
6. Lincoln employees are extremely flexible. Most know several jobs, and are transferred to other areas of the factory as demand changes for a product.
The saddest aspect of this book is that I believe few people will read it, especially those in management positions. Most of those managers, as Koller's research proves, cannot or will not believe that an organization can survive by guaranteeing their workers employment or building trust with them. It isn't easy, and it goes against "conventional wisdom," but the long term benefits of guaranteed employment has a huge effect on Lincoln Electric, its employees and their families, the cities in which it operates, and Lincoln's customers. Spark: How Old Fashioned Values Drive a Twenty-First Century Corporation: Lessons from Lincoln Electric's Unique Guaranteed Employment Program is one of the best business books I have read, though most people will view Lincoln's program as "quaint" or not applicable in current market conditions. Highly recommended.
Disclosure:
Obtained from: Library
Payment: Borrowed
A real-company profile of progressive management March 8, 2010
Alan F. Sewell
6 out of 8 found this review helpful
This is the story of Lincoln Electric (LECO), an industrial products manufacturer in Cleveland, that practices the type of progressive, employee-centric management that most other American companies pretend to practice but secretly sneer at.
The management of the typical American company operates on the principle that employees are a low-value "resource" that are to be acquired, consumed, and disposed of like any other raw material. The typical American executive has been programmed to believe that profitability is obtained primarily through cost-cutting: reduce product quality by using the cheapest materials and hire the cheapest labor to process them.
The difficulty with this method of operation is that the company eventually stagnates and goes into decline because it no longer employs experienced people who know how to build a quality product that anybody wants to buy. In moments like these the typical American company sends its CEO off to Washington to beg for subsidies to stave off bankruptcy. If the subsidies are granted the executives stuff the money in their own pockets and the company usually goes bankrupt anyway.
American companies like Enron, Arthur Anderson, Worldcom, GE, Citibank, Countrywide, GM, and many others seem to delight in hiring this type of imbecilic management that drives their enterprises to extinction, thus endangering not only their own enterprises but the American economy as a whole.
Lincoln Electric is different kind of company that operates on the opposite principles that were originated by its founding brothers back in the late 1890s:
1. Employees are a high-value resource. "Treat employees like you (management) would want to be treated." Employees who perform their jobs up to company standards (which ARE rigorous) are paid according to the quality and quantity of their work. employees should not have to worry about losing their jobs in tough economic conditions, although they should expect to have hours and compensation curtailed.
2. The key to profitability is paying high wages commensurate with highly productive work. During times of full employment Lincoln Electric pays its most productive people bonuses of70% and 120% of their base wage. Many assembly line workers earn $90,000 during flush times.
3. The company is a team and employee input into the business is essential for continual improvement. Employees make their voices heard through the Employee Advisory Board and the Open Door Policy whereby any employee may talk to the President. Employee bonuses are enhanced by the amount of productivity-improving ideas they originate.
4. In a global economy the above rules are the ONLY way to guarantee profitability and survival of the business. Companies that imagine that layoffs will make them more competitive are likely to discover that bleeding themselves of experience makes them less productive.
The theme of this book is that Lincoln Electric, which might have degenerated into a decrepit enterprise like so many other American industrial has-beens, remains a dynamic enterprise because its employee-centered principles of operation are also the most effective ones for business.
My own opinion is that companies that treat their employees fairly are also less likely to hire the types of egomaniacal CEO's that bring sudden death to an enterprise by stripping the company of its material and human assets while using its capital to engage in reckless speculations. Thus, in so far as possible I try to invest in companies that are aligned with Lincoln's principles.
This book has a great message, but I am sure it will receive scant attention in the United States where most of our CEO's are too greedy and unimaginative to improve the businesses they operate. They have been programmed by business school MBA's to believe that their job is to scam the profits out of the company while stripping its human and material assets. They are not likely to give up the behavior that rewards them with obscene compensation packages for cheating their employees and customers, then crying to the government for protection when their business decays.
My only complaint is that the book is longer than necessary. The first 25% captures the essence of Lincoln Electric and why it has been so successful by every measure of profit, ethics, and employee relations.
Good, But Should Be Condensed to an Article - March 5, 2010
Loyd E. Eskildson (Phoenix, AZ.)
6 out of 7 found this review helpful
Koller opens by reporting that the best-selling Harvard Business School (HBS) case study of all time is about the Cleveland-based arc-welding manufacturer Lincoln Electric - actually, the HBS has created 8 cases about Lincoln Electric. With 14% of world market-share, it is the largest in the world, and has survived the Great Depression, globalization and the decline of industrial America, and the recent Great Recession. Like Toyota, there are no designated parking spots, special entrances, or eating places for management. Any employee with over three years of tenure is promised the company will do everything it can to avoid layoffs for economic reasons - and for more than 60 none have. Lincoln Electric also has paid a profit-sharing bonus every year for 74-straight years. The amount has almost always exceeded 60% of an employee's base earnings.
Lincoln Electric's story begins in 1895 when John C. Lincoln was laid off from his job at a Cleveland manufacturer of electric motors. Lincoln decided to go into business for himself, and by 1907 had expanded into welding machinery. John's brother, James, soon joined and took over management - John was an inventor. James is the one that implemented piece-rate payment, open-door communications, and the annual bonus. James was accused by various congressmen for years of using the bonus system to avoid paying U.S. taxes. The first payout, in 1934, represented 22% of worker pay. The company has now settled on a standard payout of 32% of earnings before interest, taxes, and bonus.
James also initiated an Advisory Board of elected representatives from throughout the factory, meeting every two weeks. Neither James nor his successors always agreed with the representatives, but they did as much as possible to accommodate the group's requests.
Employees have the right to challenge new piece-rate standards, and the standards cannot be raised unless a new method or materials are introduced. Merit ratings for bonus purposes are based on productivity, quality, adaptability/flexibility (workers have to change assignments when requested), dependability, and awareness and compliance with environmental, health, and safety priorities. Persistent ratings below 80 result in discussions about one's future at the firm, and possible eventual termination.
The 'no-layoff' policy began in 1958. Thirty-hours/week is considered the minimum; standard staffing calls for about 45 hours/week. (Minimum hours are lower in Canada, which has a more liberal unemployment policy.) Lincoln Electric recently implemented an early retirement program to get through the current downturn. The company also has new facilities in China and 17 other nations.
Author Koller asked Lincoln's current leadership if it was concerned that guaranteed employment made workers overly complacent - management admitted that was a concern, and was aware of potential competition from laser welding and some sort of super-adhesive.
Bottom-Line: Lincoln Electric has developed an envirable relationship with its workers and maintained that over the years. However, that bond will be tested as more and more competitors expand production in Asia. I hope Lincoln continues to succeed.
 Dry, out-of-date, misleading July 19, 2010
Concerned Citizen (Anywheresville, USA)
1 out of 1 found this review helpful
Frank Koller worked for years to convince Lincoln Electric management to allow him in to interview management (and a few management selected top workers), so that he could write a book about this company, the inspiration for a series of Harvard Business School case studies in the 60s and 70s.
It's apparently a mystery how this old school manufacturing company (they make industrial welding equipment) can survive and even thrive in a billion dollar international corporation, while supposedly paying 70-100% bonuses, paying $90K a year for jobs that ordinarily pay $20K in their market (depressed Cleveland, Ohio) and while supposedly never laying off an employee in their long history.
Koller reveals some of the mysteries behind the curtain and lo, they are not very mysterious at all. The "no lay off" policy only applies to SOME employees (you must work there at least 3 years and have a spotless record) and consists of a minimum 30 hour week, apparently doing menial work such as painting halls or cleaning bathrooms. If your boss doesn't take a shine to you, or simply wants you out, or management wants to let a few employees go without calling it a layoff -- easy-peasy, just award that employee insufficent "points" on an arbitrary scale.
The huge bonuses are subject to management discretion, so can be within or cut back at any time...PLUS, Mr. Koller reveals only the last chapter that NO employee of this much-vaunted company receives health insurance benefits...that's ZERO, never, nothing. This is important, as it is a big part of our current national discussion and the recent reform bill, which STILL makes health care an employee benefit and not a universal right of citizenship (like in Canada). Apparently, each Lincoln employee MUST pay for individual private policies (at sky high rates) out of their bonus -- it's mandatory and a condition of employment, never mind if you are a single person in good health or have a family member with an expensive chronic condition (too bad!) -- so that giant bonus isn't worth nearly what it seems. And you don't get a bonus the first couple of years, so what do you buy your health care with THEN? What happens when your insurance company refuses you (pre-existing condition!) or jacks your rates up to the sky or drops you? This is a huge, huge disparity between the picture of the "perfect company that magically can pay triple wages" and reality.
There is no attempt to interview or investigate other similar companies, such as Lincoln's chief competitor in the US market, Miller Electric. Do they have to pay triple wages or 70% annual bonuses? Do they also forego paying health insurance? We don't know, because Koller's curiousity stops at the Lincoln front gate.
Koller, perhaps as a condition of being allowed inside the company, only speaks to Lincoln executives, and a tiny group of handpicked company employees -- all of them lifers, some whose entire family is employed at Lincoln for many decades and one woman who is "employee of the year" and earns over $90,000 a year for what is a very basic assembly line job, that would normally pay roughly $18,000 a year (she assembles welding gun nozzles). Anybody with a negative experience such as disgruntled employees or people who were fired or "laid off" or unhappy working at Lincoln are marginalized and not even worth talking to. So OF COURSE Mr. Koller hears nothing but "happy stories" of people thrilled to work at this job...he never considers that if one of these people spoke openly, they'd be severely reprimanded (or even fired, using the dreaded "point system") or not receive their full bonus -- AND in addition, the livelihood of their ENTIRE FAMILY, including parents and children, would be jeopardized.
There is a sense here of "how CAN they do it?" -- how does Lincoln pay such stratospheric wages and bonuses -- yet remain competitive with companies that can't possibly do so, companies that have the decency to provide group health insurance. Koller gives no answers to this enigma.
Living in the Cleveland area, I know some people who have worked at Lincoln Electric -- happy and not happy people. Since I was not a writer nor in a position of power or influence, they spoke openly to me. I know for a fact that part of the "no-layoff" scam is that they have hired mostly temps and contract employees for years, except in a couple of key departments. The supposedly "egalitarian" lunch room is a fiction: executives sit at their own tables, away from the riff raff, and employees are harshly discouraged from leaving the "campus" to eat lunch. (Being as little as two minutes late coming back from lunch, even in a blizzard, is grounds for dismissal.)
I'd have been very interested to hear what employees had to say about not having health insurance coverage, especially in the first couple of years of employment before their giant bonuses kick in -- but Mr. Koller considers having no health insurance so unimportant that he buries it in the last chapter of the book, and brushes it aside as if it were a meaningless token. All the bonuses in the world, IMHO, count for little if you are a family crushed by catastrophic health expenses or rescission.
Lastly, I have to really wonder about a high tech manufacturing facility, in the 21st century, that runs on PIECEWORK, something abandoned industrywide by all but the most primitive substandard Asian or Indian companies who have things like child labor. Is Koller suggesting that piece work is the path to the future of American manufacturing? A way to bring back our economic health or lure companies back to our shores? If so, he tells us precious little about what it does to employees, to be constantly under the gun -- to be driven to work at high speeds -- or threatened under some point system of losing their sweet bonus deals.
I don't know. What I do know is that good investigative journalism demands more of a writer than to simply regurgitate propaganda or to prepetuate company legends and fictions to the public. No wonder Lincoln allowed this writer "access"; he must have promised them that he would tell their story, their way...better than any paid advertising agency. That's a sweetheart deal. It's not journalism.
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