Models for Startups: Guaranteed Employment?

Saturday, 20 March 2010
In our last issue we discussed the benefits of patterning startups personnel policies after Fortune's 100 Best Companies to Work For, as well as other lists such as Working Mother's Top 100.

Today we suggest another personnel policy that could serve to strengthen one's company and foster employee loyalty. It's guaranteed employment.

Recently there have been a few stories on public radio about a unique company, Lincoln Electric. This is an older company that is publically traded and has a unique contract with its employees. Basically they tell their employees that as long as we're in business and you fulfill your job description, you will not be laid off. In exchange, employees agree to a variable pay rate that is subsidized at the end of the year by a large bonus that has ranged from 30% to 78% of their base pay, depending on the company's financial health.

Lincoln has never failed to pay a bonus, even during the Great Depression. And they've never laid anyone off. They continue to exceed market expectations despite having such a policy.

So here's the lesson for startups. Be careful not to over-hire at first, but when you do hire, make a similar contract with your employees. Let them know that how much they earn will depend on how much the company earns, but their job is secure as long as the company survives, so they don't have to worry about missing mortgage payments or losing health insurance.

For more on this unique concept, see the following link to a story that appeared on yesterday's edition of PRI's Marketplace, heard on many NPR and other public radio stations. http://marketplace.publicradio.org/display/web/2010/03/18/pm-spark-q/
POSTED BY JOHN WINGSPREAD HOWELL AT 10:28 AM
LABELS: BUSINES MODELS, EMPLOYMENT POLICIES, LAYOFFS, LINCOLN ELECTRIC, NXTARROW
http://arrowgram.blogspot.com/2010/03/models-for-startups-guaranteed.html
In our last issue we discussed the benefits of patterning startups personnel policies after Fortune's 100 Best Companies to Work For, as well as other lists such as Working Mother's Top 100.

Today we suggest another personnel policy that could serve to strengthen one's company and foster employee loyalty. It's guaranteed employment.

Recently there have been a few stories on public radio about a unique company, Lincoln Electric. This is an older company that is publically traded and has a unique contract with its employees. Basically they tell their employees that as long as we're in business and you fulfill your job description, you will not be laid off. In exchange, employees agree to a variable pay rate that is subsidized at the end of the year by a large bonus that has ranged from 30% to 78% of their base pay, depending on the company's financial health.

Lincoln has never failed to pay a bonus, even during the Great Depression. And they've never laid anyone off. They continue to exceed market expectations despite having such a policy.

So here's the lesson for startups. Be careful not to over-hire at first, but when you do hire, make a similar contract with your employees. Let them know that how much they earn will depend on how much the company earns, but their job is secure as long as the company survives, so they don't have to worry about missing mortgage payments or losing health insurance.

For more on this unique concept, see the following link to a story that appeared on yesterday's edition of PRI's Marketplace, heard on many NPR and other public radio stations. http://marketplace.publicradio.org/display/web/2010/03/18/pm-spark-q/
POSTED BY JOHN WINGSPREAD HOWELL AT 10:28 AM
LABELS: BUSINES MODELS, EMPLOYMENT POLICIES, LAYOFFS, LINCOLN ELECTRIC, NXTARROW
http://arrowgram.blogspot.com/2010/03/models-for-startups-guaranteed.html
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