When a recession or a business crisis hits, many companies turn to layoffs. Thousands of people can lose their jobs overnight as firms cut costs. Against that backdrop, Gand Company, a US manufacturer of electrical materials, stands out: it has run its business for 75 years since its founding without laying off a single worker.
The company was started in 1951 by Ed Gand, a former candy seller. For more than seven decades it has kept an operating model in which, when demand falls, it changes how it manages production and labour rather than taking away workers’ jobs.
Gand now employs about 1,300 people and has annual sales of roughly $400 million. Over the past decade it has grown by an average of 18 percent a year, and its profit margin has doubled over the same period. It makes high-grade insulation and electrical components for large companies such as General Electric and Rockwell Automation.
Top executives and chief executives from several countries are due to visit its operations in St Louis to see how a company can sustain steady growth without layoffs.
Seeing Gand’s success only as an example of humane leadership misses the full picture. Analysts say the no-layoff policy rests on planned cost management, flexible use of the workforce and a particular strategy for handling swings in demand.
One of the company’s central rules is not to hire large numbers of new workers whenever demand rises. Instead, it tries to meet extra production through overtime by existing staff. That leaves room to cut working hours, rather than jobs, when demand falls.
The company controls labour costs by reducing overtime, freezing new hiring and relying on workers who leave of their own accord. In a typical factory, such steps can cut annual working hours by as much as about 18 percent when demand falls, according to the analysis cited. That means an ordinary economic downturn may not require layoffs at all.
Workers get a share of ownership
Another important part of how Gand manages its people is transparent pay and the chance to own part of the company. Even an entry-level factory worker earns an average of $55,000 to $65,000 a year before overtime and profit-sharing, according to the report.
Pay bands for the company’s positions are published internally, and its financial statements are shared with staff. Workers therefore understand the company’s financial position, and their interests are tied to the success of the business.
In 2009 the company introduced an employee stock ownership plan, under which workers own 30 percent of its shares. It has recently moved to launch a new global share scheme to give ownership to its international staff as well, including those working in China.
Staff turnover is relatively low. In the United States, fewer than 10 percent of the company’s workers leave, most of them in their first year in the job.
Where Gand differs from others
Lincoln Electric, Nucor and Barry-Wehmiller are also named as companies that follow a no-layoff policy. But the past shows how hard such a policy can be to keep during an economic crisis. In the 2009 global recession, some of these companies, facing sales drops of 30 to 40 percent, imposed unpaid leave or cut working weeks to 30 hours.
In Gand’s case, steady growth and demand for electrical components have played an important part. With demand in the markets for power infrastructure, transformers and grid-related products, the company has been able to keep production and employment in balance.
Its success cannot, however, be put down to the no-layoff policy alone. Market demand, production capacity, the kind of products it makes and its financial management are also important drivers of its growth.
The challenges ahead
Despite its long record of success, Gand faces some new challenges. A recent management meeting heard that workers are less willing than before to take overtime shifts. If that continues, the company may have to hire new staff to meet extra demand, which could make it harder to keep its present flexibility in production.
Rapid expansion is also putting pressure on the company to develop skilled managers and supervisors. And applying the same workforce and share-ownership policies at its eight international sites outside the United States, including in China, could prove legally and administratively complex.
The biggest test may come if the market turns down. Demand for electrical transformers, power grids and related products is currently working in the company’s favour. If that demand falls suddenly, the key question will be how it keeps running without layoffs.
Gand Company’s 75 years show that avoiding layoffs is not only a humane decision. It is bound up with hiring policy, production planning, cost control, worker ownership and the realities of the market. How well the model holds up in the long run will depend on future economic conditions and on the company’s ability to adapt.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report