How Cutco Changes Its Culture
In previous articles, we have proposed “the Golden Rule of Management” as a framework for changing an organization’s culture. The rule requires that the organization’s management have faith in its people, trust them to perform their jobs and support organizational goals, and treat them with respect. It also requires that workers feel part of a winning team that is inclusive, successful, and with purpose that resonates with their values. We have written about the GM Tonawanda Engine Plant as an example of how the Golden Rule of Management transformed that plant’s toxic culture to a healthy one, energizing its workforce in the process. We would like to share how another company, Cutco Corporation, changed its culture by implementing the Golden Rule of Management.
Our information came from interviews with executives who initiated culture change, the current CEO, a VP of manufacturing, current union leaders, and hourly workers. Here is what they told us.
By way of background, in 1949, Alcas Cutlery (now known as Cutco) was founded by Aluminum Company of America (ALCOA), which partnered with Case Cutlery. From its beginning, Alcas had a difficult relationship with its workers. Many strikes and open hostility between management and union leaders led to a toxic culture and poor performance. In 1982, Alcoa, then the sole owner, sold the company to its management team.
In 1984, the business was failing and in crisis. Several significant events happened that year. Like the Tonawanda Engine Plant, Cutco needed to create a plan to survive. First on the agenda was an effort to lower the cost of doing business. The union agreed to a one-year wage freeze, and management took significant cuts in salary. A year later, the company performed well enough to obtain bank financing, give raises to union workers, and pay salaried workers their lost wages. It also made a significant strategic change: management ended the practice of making products for other companies and focused on its own brand of high-quality cutlery, which was the Cutco brand. Cutco branded products had higher margins, which yielded more profits. This allowed the company to invest in new machinery that fueled further growth in sales and profits.
Soon after the challenges of 1984, the new ownership team initiated some major culture changes to improve the relationship between the union and management. One of the first programs it instituted was to change the existing “gainsharing” program which rewarded workers for reaching certain goals to a profit-sharing program. Management felt strongly that sharing profits was the way to do right by the people who were making good things happen, and it was a method to offer a tangible incentive for them to continue doing so.
Company social events were established where workers and managers jointly celebrated their accomplishments. These events became a huge success and continue today. Leadership training was offered to all managers to encourage better relationships with workers.
Another significant change took place in 1991, when time clocks that registered when workers came to work and left were eliminated. The philosophy surrounding this change was that the continued growth and prosperity of the company was based on a growing trust and loyalty between the company and its employees. Therefore, the company took an actionable step that reflected its faith and trust in the loyalty of its employees and discontinued the use of time clocks.
Cutco’s progress was not without its setbacks, however. Despite the time and effort, the company put into cultivation of this positive labor relations approach, the relationship between the company and its union became strained when, in 2000, the workers elected a president who turned out to be contemptuous of management. This strained climate persisted until 2009, when the adversarial president was voted out of office in favor of a president who accepted management’s offer to partner with the union on major decisions. On the manufacturing floor, optimism replaced negativity, and managers, for the most part, treated workers with trust and respect.
In contrast with other manufacturing companies in Olean, New York, where Cutco was headquartered, Cutco invested time and money into local institutions and programs that aligned the company with its community. The company’s social responsibility was not lost on its workers, most of whom lived in the community. Employee turnover was rare, except for retirements.
It was clear talking with managers and union leaders that they took great pride in working for Cutco. We also talked to workers in a tour of one of Cutco’s major manufacturing facilities. To a person, workers told us they loved their jobs and the company.
Management at Cutco today readily acknowledges that a healthy culture is an ongoing challenge. They are committed to working with their union; treating everyone with faith, trust, and respect; and continuing to invest in a winning business strategy to maintain the financial health of the company. In other words, they have created a great culture that embraces the Golden Rule of Management.