Wednesday, October 13, 2010

Washington Post columnist argues that lower wages offset layoffs; wind power farms; Michelle Rhee resigns

Steven Pearlstein has a sobering column in the Oc. 13 Washington Post, “Wage cuts hurt, but they may be the only way to get Americans back to work”, link here.

Pearlstein offers, toward the end, the comment that market economies offer efficiency (and therefore a higher standard of living), not fairness. Otherwise, Wall Street would take even more hits (or executives would give up more unearned bonuses). Donald Trump always says “Life isn’t fair.” You could say this about a lot of things, like inheritance. (The far Left makes a lot of this.) We could think like Chairman Mao in the 60s and make everyone (except the Chairman) take turns being peasants. Welcome to North Korea. (It’s interesting how this comes down to defining morality in terms of individual obligations rather than those of countries, companies, or even unions.) Seriously, people like Robert Reich have a point. If the middle class does better, the economy grows with much more stability.

Back in the early 90s, after the “first Bush recession” of 1991-1992, some companies like Lincoln Electric in Ohio had experimented with piecework pay to avoid layoffs, with some success.

In other news, it’s great to see the announcement of Google’s Atlantic wind project, for sustainable energy (as well as the driverless car).

Also, Michelle Rhee will resign as the head of the Washington DC school system. Watch her “burn ‘em again” with another school district in California. Governor Schwarzenegger can hardly wait.

Update:  Oct 14:  Frank Koller's book on Lincoln Electric (see comment) has Amazon link here.

1 comment:

Bill Boushka said...

Comment from Frank Koller:

I saw your reference to Lincoln Electric today in response to Steve Pearlsetin's piece on wage cuts and flexible compensation.

I thought you might be interested in my recent book on Lincoln Electric, which came out last winter. (You can see excerpts from the reviews from across the US and Canada at the end of this email.)

SPARK How Old-Fashioned Values Drive A Twentieth Century Corporation is a look at the competitive advantage and social importance of no-layoff policies. The no-layoff policy is a key component of Lincoln's "incentive management system" - the other important elements include the use of piecework (as you wrote), a real open door policy across the firm and a merit-based profit sharing bonus.

There is also a company-wide understanding that in tough times, the pain will be shared equally - hours cut, salaries cut, everywhere - but in better times - and since the 1930s, there have been decades of "better times", the gains will also be shared equally across the firm.

Since the 1930s, Lincoln Electric, a Cleveland, Ohio-based multinational, has remained the world’s largest, and leading edge, manufacturer of arc welding technology, a Wall Street favorite with investors (it's long been part of the Fortune 1000, Forbes 400, etc.) as it has steadily expanded around the globe - and yet almost impossibly these days, a member of America's corporate elite that refuses to lay off its workers in tough times through its unique “guaranteed employment policy.” Lincoln has been in Canada since 1916 with a production and research facility in Toronto and sales offices across the country.

The last layoff for economic reasons at Lincoln Electric was at least as far back as 1948, perhaps even as far back as 1925 and that includes no one laid off over the past two horrible years.

Lincoln's embrace of a no-layoff policy has little to do with altruism: it's about a business strategy that is extraordinarily profitable for all concerned, decade after decade. But at the same time, it is about trust, ethical business values and a real, rather than rhetorical, commitment to workers, their families and their wider communities stretching back to the start of the firm in 1895.

If any of this is remotely interesting, you can also see "inside" Lincoln Electric via a couple of recent US network TV shows.

ABC TV’s World News ran a story on Lincoln Electric and SPARK. Have a look:

In July, PBS-TV also ran a story on the company and the book: This one’s longer, about 9 minutes.

Okay .. enough self-serving promotion. Nice to meet you on the internet.


Frank Koller
FRANK KOLLER see for information about buying Spark, Lincoln Electric, the Author and upcoming appearances