Case study: Victorinox

The story
Founded in 1884 in Ibach, a small town in the German-speaking part of Switzerland, Victorinox is a popular brand for its famous core product – the Swiss army knife. Victorinox was founded by Karl Elsener in response to the tough economic conditions in the 1880s that were forcing many Swiss to emigrate. He wanted to provide jobs, and do so in the long term. This has remained a cornerstone of the company culture

Victorinox has been able to grow consistently since its creation, thanks to the high quality of its products and the commitment of staff. As Carl Elsener, chief executive and great-grandson of the founder, has commented, Victorinox has not dismissed an employee for economic reasons for 80 years.

The challenge
After the terrorist attacks on the US in September 2001, new airline safety regulations around the world forbade passengers to take knives on board.

The rules had a drastic effect on Victorinox because sales of pocket tools at airports were important sales channels. Sales also fell in the important corporate market, where pocket tools were no longer desirable as corporate souvenirs. At the start of 2002, sales of Victorinox pocket tools had fallen 30 per cent in just a few months.

The company – correctly – feared that the sudden decline in revenue was likely to be permanent. Victorinox needed to figure out how to survive and how to deal with a superfluity of headcount.

The strategic response
Victorinox decided not to lay off workers, and undertook a series of measures.

It stopped hiring, cancelled overtime and reduced shifts by 15 minutes. Employees were encouraged to take vacation, sometimes in advance of when it was due. Senior managers approached other companies in the Ibach region to ask if they needed highly qualified workers temporarily. In this way, Victorinox kept all the employees on its own payroll while lending 80 or so to other companies for up to six months.

Most of the anti-crisis measures were in place for about two years. In the meantime, Victorinox accelerated investments in new products (such as watches to sell in airports instead of pocket knives) and new markets (Russia, India and China) to lessen its dependence on a particular product and sales channel.

Did it work?
Victorinox not only survived the 2001 crisis, but also consolidated the loyalty of its workforce and diversified into various new product lines, including watches, travel gear, fragrances and fashion – many of which could still be sold in its traditional outlet of airports. These new product lines continued to carry the top quality image of the Victorinox brand and represented up to 60 per cent of company turnover composition in 2009.

As part of its growth strategy, Victorinox acquired its former partner in the US and a Swiss competitor. Now it faces new challenges in instilling its culture at new units around the world.

The key lessons
Having committed workers who understand and share the company mission is the goal of many businesses. But few achieve this. Victorinox is one of the exceptions.

The secret lies in the consistency the company has always demonstrated. Victorinox has matched its words about cultural values with actions. It created some employee-oriented management systems, such as long-term employment, training and development opportunities, and an integration policy which aims to better incorporate young and older workers, immigrants, and people with disability into its workforce. It maintains a 5:1 salary ratio between the highest-paid and average-paid workers.

Most important, Victorinox stuck to its founder’s credo in bad times as well as good. In the past, these included such crises as a sharp decrease in orders from the Swiss army after the first world war and the Great Depression.

This is how Victorinox wins commitment from its workers and was able to develop new top quality products, such as its new line of luggage, that achieved the same excellence.
- Financial Times, 22 Dec 2010