Last year the Levi Strauss Corporation announced the closure of 11 U.S. factories. Six thousand employees-one-third of its North American workforce-would lose their jobs. Just another downsizing American corporation, prowling the globe for low-cost labor to replace its unwanted domestic workers? Hardly. In what The New York Times called “an extraordinary gesture of largesse,” Levi’s softened the bad news for its employees by providing remarkable severance benefits. All the laid-off workers, the company said, would be given eight months’ notice, three weeks of pay for every year worked, and $6,000 in benefits to cope with the dislocations of job loss. And unlike the case with most severance packages, the workers could collect even if they found a new job the next day. In addition, the company announced that it was making gifts totaling $8 million over three years to the communities affected most severely by the retrenchment. Even union officials praised the company’s handling of the layoffs: “By far the best severance settlement apparel workers have ever gotten,” said one.
While Levi’s gesture was extraordinary, it wasn’t a departure for the company. Treating its employees fairly and valuing their contributions have long been hallmarks of the way Levi’s does business, and the company is well known for offering its employees opportunities for growth and for sharing with them the wealth created by its successes. These core values are also reflected in the company’s principal business strategy since the 1980s-upgrading what had been a very basic, inexpensive commodity, blue jeans, into a range of high-priced fashion products. When coupled with investments in new technology and with new manufacturing methods, this strategy has enabled Levi’s to retain many of its domestic manufacturing jobs long after most other apparel-makers outsourced their operations to low-wage countries.
Levi’s powerful commitment to its employees’ welfare has served the company well, helping it to post 10 consecutive years of record sales between 1986 and 1996-almost tripling revenues during this period. And Levi’s is not alone in either the strength of its values or their consequences. The research done for my new book, The Productive Edge, from which this article was adapted, suggests that an enduring, deep-rooted commitment to a handful of core beliefs about corporate identity and purpose helps to explain the accomplishments of other durably successful companies too. The specific content of those beliefs varies from firm to firm, but in each case they are understood by everyone in the company and infuse almost every action it takes. They have guided and inspired successive generations of employees. In effect, they are the glue that has held these companies together and enabled them to grow over long periods.
Ultimately, even Levi’s couldn’t completely insulate its employees from the effects of cutthroat global competition and technological change (and, in this case, the fickleness of fashion). Though the Levi’s workers helped the company create new economic value-in which they themselves shared-their future roles couldn’t be ensured. The events at Levi’s bring into especially sharp relief the forces now sweeping the whole U.S. economy as it confronts the historic challenges of global integration and the digital revolution. Each presents tremendous opportunities for economic growth. But for the American workforce each also means more volatility and a loss of control.