Some Companies Declare a "No Layoff" Zone

The Hypertherm factory sits hidden in the woods not far from Dartmouth College in Hanover.

SFX of cutting

Inside, in a testing room, a jet of super-heated ionized gas slices smoothly through an inch of plate steel. Hypertherm is one of the world’s top makers of plasma cutting tools.

Vice president of manufacturing, Jim Miller, says when the world is making big heavy things, Hypertherm does quite well.

MILLER: Maybe a ship builder, automotive, any place you see flat steel, you would see an application for our products.

Unfortunately, late last year, the making of ships and cars pretty much ground to a halt. The recession cut into sales like – – like plasma slicing through steel. Demand for most Hypertherm products dropped 50%.

How many workers did the company lay off?

None.

It put them to work doing other things.

SFX – blower

Normally, Lindsey Grace works on the production floor. Now, she rakes leaves and maintains the grounds.

GRACE: In the beginning, I was really scared to lose my job. Now I have the opportunity to do something different. To help the company out.

Hypertherm saves money by doing everything in-house that it possibly can from landscaping to plumbing. Plus, it puts workers into training or assigns them to teams to re-jigger the production line. The goal is to emerge from recession in a better position to compete.

Company founder and CEO, Dick Couch, sees no tension between doing well by the employees and doing well by the company.

COUCH: once you have a highly skilled work force, the last thing you want to do is lay them off. This isn’t altruism. It's good business

It might be good business, but it doesn’t come without effort. Workers retain their base wages and the company dips into its capital reserves to make payroll. In fact, a no-layoff policy might sound progressive but it comes with a very conservative balance sheet. Hypertherm hoards cash and carries little debt so it can ride out an extended downturn.

The company also puts a fair bit of time into keeping workers in the loop. Sarah Dwyer oversees personnel at Hypertherm.

DWYER: There definitely was some nervousness. We realized that transparency and communication was critical so we did a lot more of that so that we told them what was going on.

A number of workers here are veterans of layoffs by past employers. Back in the testing lab, I met Bart Holbrook. About three years ago, in his late 40’s and without work after a company downsized, he found Hypertherm by Googling the term “no-layoff”. Holbrook, who’s learned to be suspicious of bosses, has been impressed.

HOLBROOK: They’re not getting rid of experienced people. They’re keeping them and giving them more experience. This is an ideal employer. I hate to say that, but it’s on the cutting edge of the cutting edge as far as being progressive. And I don’t try to be an idealist. I try to be a realist.”

Very few firms fit this mold but Hypertherm is not alone. The granddaddy of the no-layoff companies is Lincoln Electric in Cleveland, Ohio. The maker of welding systems has been around for well over a hundred years . It has over a billion dollars in sales, more than two thousand employees in Cleveland and plants around the world – although it’s foreign factories do not offer guaranteed jobs.

Lincoln Electric CEO John Stropki says people considering this model need to go into it with their eyes wide open.

STROPKI: This doesn’t come without additional pressures and challenges for management, and I would say equally, it doesn’t come without additional pressures and challenges for the workforce.

Managers give up the flexibility to hire and fire as they please. Workers give up knowing what their wages will be. Profit sharing is a big part of the model. When business is good, pay goes up. When it goes down, so does your pay. At Lincoln Electric, the work week shrank to 32 hours.

Labor journalist Frank Koller just finished a book about Lincoln Electric and the no-layoff policy. Koller says this model rubs organized labor the wrong way. They prefer a guaranteed income to a guaranteed job.

KOLLER: Union leaders were very, very suspicious of this. They saw this as a tool for exploitation, and there’s no question that in some work environments, it probably was.

But Koller says today, workers at these companies do very well. The typical Lincoln Electric assembler can make over 70-thousand dollars. Jordan Siegel at the Harvard Business School says company profits and the American economy would benefit if more firms adopted this model of shared gain and shared sacrifice. He’s also studied Lincoln Electric and right now is doing work in South Korea where the recession had relatively little impact on unemployment.

SIEGEL: There has been this shared sacrifice. People sharing some reductions in compensation in order to avoid layoffs.

If these firms both overseas and at home are so successful, why don’t more companies jump on board? Siegel says mainly because this idea is just too alien to American managers. Labor journalist Frank Koller agrees. He says when a company gets into trouble, the default strategy is layoffs, mainly because that’s all that executives know.

KOLLER: That’s the virtue of trying to explain what companies like Lincoln Electric and Hypertherm are all about. It may not work for you but it does challenge you to ask, should I really be pulling the layoff lever this quickly?

There’s no rolling back the clock, but after this recession, as companies rebuild and new companies form, the no-layoff option might find a somewhat larger audience.

For NHPR News, I’m Jon Greenberg.