At Lincoln Electric, a Leading Maker of Welding Machines, Jobs Are Guaranteed

No layoffs rule has roots when company was founded during industrial revolution.

CLEVELAND, July 17, 2010 — -- With unemployment hovering just under 10 percent, millions of Americans can only dream of having a guaranteed job. That's exactly the situation for Mark Wells who finds comfort in the fact that he won't be laid off.

"It has been a tough couple of years, and I know a lot of people who have lost their jobs or can't find work," Wells told ABC News at his home in Ohio. "I was on reduced hours, but I was able to go in and go to work every day, and I saw a paycheck coming in.

"And that means a lot when you know you're going to have something there at the end of the day that you can take care of your family," he said.

Wells, a tool and die maker, is one of thousands of employees at Cleveland's Lincoln Electric, which promises that even in the worst of times, no one will be laid off. The $2 billion company is the leading maker of welding machines.

Walking the factory floor north of downtown Cleveland, I asked CEO John Stropki how, in the depths of recession, he could avoid laying off any of his workers.

"Because we don't lay off workers, it's as simple as that," he said. "If you make a commitment that you're not gonna do it, then you find ways not to do it."

It's a way of doing business which dates back to the company's founding during the industrial revolution. In the late 1800s, John Lincoln started making electric motors. A few years later he brought in his brother, James, to run the business. The brothers, sons of a preacher, believed in the "golden rule:" treat people as you would like to be treated.

James Lincoln had an open-door policy, according to Frank Koller, who wrote "Spark," a book about Lincoln Electric.

"The only way to get people to demonstrate what he believed was the innate ingenuity of people, their ability to take risks, to really put themselves on the line for the corporation," he said.

That is, if they didn't have to worry about their income, then they would stay loyal and stay good employees.

"And from that grew the idea of guaranteed employment," Koller said.

Lincoln employees make about 20 percent more than their peers, including an annual bonus which averages about $17,600.

The company funds those bonuses with a third of its profits. Workers are paid for each piece they make, and there are demanding requirements. Employees are even timed with a stopwatch. But piece work allows employees to make more if they work harder.

"With Lincoln, they said somebody works hard they're gonna get paid as much as they earn," Koller said.

Bob Kanapiak's team does some of the time measurement at Lincoln. He saw his father laid off several times at other factories and cherishes his guaranteed employment.

"Put in a good days of work, then you get a good wage, and there is nothing free in the country or in the world," Kanapiak said. "You have to work for what you get. I think that's the real message of Lincoln Electric."

Kimberly Mattina thrives in that system.

"I move faster than other people tend to move, and at least this way I am rewarded for being a little faster than other people," she says as she makes a welding nozzle.

"If I ran a company, I would want to run it this way too. I mean it makes the employees happier knowing that they are going to have jobs," she said.

The CEO admits it may be harder to manage a company that refuses to lay off workers, but it pays off.

"People come to work here every day knowing that if they work hard and if they contribute to the success of the company they are going to have a job," CEO Stropki said. But workers who don't measure up are let go.

"If everybody contributes everybody will be successful, and if you don't contribute you won't be here," Stropki said.

In tough times hours are cut; employees are guaranteed only 32 hours a week. In good times, rather than hire a lot of new workers, Lincoln requires its employees to work overtime.

Mark Wells says he just budgets his family on a 32 hour-a-week paycheck.

Wells is an example of another trait at Lincoln. While many companies discourage nepotism, Lincoln is a family affair.

Wells got a degree in geology but followed his father, Fred, into the factory.

"If you give to the company, they are going to take care of you. Lincoln has always had good management. Especially during hard times. Anybody can lay people off, but it takes good management to keep people working," said Fred Wells, who spent 35 years at Lincoln.

The company has been the subject of business school studies. But few modern companies have followed Lincoln's system of guaranteed employment. Some experts believe layoffs can be good for companies.

"It's a great thing for Lincoln, it's fabulous the way they pull it off, but it would be harmful in some circumstances. It would tie the hands of the organization, for example, inhibit their ability to change," says Paul Ingram a professor at Columbia Business School in New York.

But Koller, who wrote the book on Lincoln, sees another lesson.

"Surely with what we've gone through over the past couple years with hundreds of thousands, millions of people, 8.4 million people, surely we can find ways of organizing the economy where you can make a profit and not destroy people and their families and communities," he said.

Employees at Lincoln couldn't agree more.