When loyalty becomes your legacy

Welcome to Legacy Beyond Profits, where we explore what it really means to build a business that leaves a mark for the right reasons.

Revenue drops 40%, layoffs follow 40%. The math is clean, the logic unassailable, the outcome predictable. Employees become variable costs to optimize, workforces learn to update résumés at the first sign of trouble, and trust erodes into transactional skepticism that no mission statement can repair.

Building legacy through crisis loyalty requires rejecting this arithmetic entirely. It means maintaining full payroll when every financial model shows it's impossible, lending employees to competitors rather than firing them, and structuring your organization so that extracting value during downturns becomes legally impossible. The counterintuitive insight: the organizations people remember aren't those that survived crises through ruthless cost-cutting, but those that protected their people when protection seemed financially suicidal.

Carl Elsener faced this choice in September 2001 when global regulations banned his company's core product overnight. Revenue collapsed 40% within weeks. Every advisor recommended immediate layoffs. He chose a third path that would prove loyalty earned during catastrophe creates competitive advantages no product innovation can replicate.

From variable cost to permanent commitment

1. Encode protection into law before crisis arrives

The counterintuitive move: don't just commit to avoiding layoffs during this crisis—make it legally impossible to fire people for economic reasons ever. Victorinox established its zero-layoff policy in 1884, not as aspiration but as foundational principle. When 9/11 regulations banned their core product overnight, the question wasn't whether to lay people off but how to keep everyone employed despite 40% revenue collapse. Commitments made in prosperity determine behavior when panic sets in.

2. Save when competitors extract

Victorinox channels 90% of annual profits into foundation reserves, 10% to charity, zero to shareholders—the inverse of typical corporate capital allocation. While competitors optimize for quarterly earnings and distribute profits during boom years, Victorinox builds reserves. This counter-cyclical discipline meant entering the 9/11 crisis with enough cash to absorb 40% revenue collapse without touching payroll. Never borrowing in 140 years transforms people-protection from an impossible ideal into financial reality.

3. Pay competitors to keep your people employed

When Victorinox had insufficient work for 60 employees, they approached neighboring companies with an audacious proposition: keep our workers on your floor, we'll keep them on our payroll. Employees stayed on Victorinox paychecks while contributing to competitors' operations, then returned after the crisis passed. This required treating competitors as partners, trusting employees would return, and willingly subsidizing rivals' labor costs. The alternative—mass layoffs—would have destroyed trust built over generations in exchange for temporary cost savings.

4. Let family sacrifice before asking employees to sacrifice

The Elsener family placed 100% of company shares into irrevocable foundations in 2000. No family member can ever sell shares, take dividends, or extract value. Carl Elsener IV works as an employee, draws a salary only 6x the lowest-wage worker, and shares an office. When crisis hit, the family absorbed financial pain before asking employees to sacrifice. This visible commitment creates reciprocal loyalty that no mission statement can manufacture.

How Carl Elsener protected 900 jobs when airports banned Swiss Army Knives

On September 11, 2001, terrorists used box cutters to hijack four aircraft. Within days, aviation security regulations changed worldwide. Sharp objects, including Swiss Army Knives, were banned from carry-on luggage. Shipping containers began arriving daily at the Ibach factory, each one containing thousands of knives nobody could sell. Airport duty-free stores, Victorinox's largest sales channel, were purging inventory as fast as they could pack it.

Sales collapsed by 40% overnight. For a company where knives accounted for 70-95% of revenue, this wasn't a temporary setback. It was an existential threat to a 117-year-old business.

Carl Elsener IV sat with his father, Carl Elsener III, facing the decision every CEO dreads. Fire 300+ employees immediately to match reduced demand? The math was brutal but clear. Every consultant would recommend the same solution. Every CFO would present the same projections. The company couldn't sustain full payroll with 40% less revenue.

The family could preserve the company by sacrificing the people. Or they could preserve the people and risk the company. In that moment, four generations of promises to workers who'd spent entire careers at Victorinox came down to a single question: what did those promises actually mean when tested by catastrophe?

The Elsener family chose a third path.

"We have never made a worker redundant for financial reasons," Carl Elsener IV stated flatly. This wasn't rhetoric. It was company policy dating to 1884, when founder Karl Elsener opened a cutler's workshop in a region suffering mass emigration. The promise: if you work for Victorinox, economic downturns are the company's problem, not yours.

Survival required creative solutions prioritizing people over profit. All hiring froze immediately while employees took advance vacation to reduce near-term labor needs—production stopped for three weeks to clear inventory, wages continuing at full rate throughout. Most creatively, approximately 60 employees were loaned to neighboring companies while remaining on Victorinox payroll. Carl Elsener IV's proposition to regional employers was audacious: keep our workers on your floor, we'll keep them on our payroll. Companies accepted. Compensation never dropped.

This strategy was viable only because of decisions made decades earlier. In 2000, anticipating succession challenges with 11 children in the Elsener family, Carl Elsener III placed all company shares into foundations. Ninety percent went to the Victorinox Foundation, which reinvests 90% of annual profits as reserves. Ten percent went to a charitable foundation. The remaining 10% of profits funds public welfare projects.

No family member can ever sell shares or take dividends. The foundation structure is permanent and irrevocable. Carl Elsener IV works as an employee, earns a salary just six times that of the company's lowest-wage worker, and shares an office. The family consciously gave up wealth extraction in exchange for organizational permanence.

This structure meant Victorinox entered the 9/11 crisis with substantial cash reserves. While competitor Wenger, lacking reserves and carrying debt, filed for bankruptcy protection after similar revenue drops, Victorinox absorbed the shock without external financing. In 2005, Victorinox acquired the bankrupt Wenger, bringing both Swiss Army Knife brands under one roof.

The zero-layoff decision sent a message employees internalized deeply. "Our people really learned that we do not just write words on paper," Elsener explained. "That if there is a very hard time we do everything possible to keep their jobs."

Accelerated diversification followed. Victorinox had launched watches in 1989 and travel gear in 1999, but knives still dominated revenue. Post-9/11, the product range expanded, new airport-compliant items emerged, and distribution spread beyond duty-free channels. By 2013, knives represented only 35% of sales, down from over 70%. Total revenues doubled through diversification enabled by employee trust and institutional knowledge that mass layoffs would have destroyed.

The loyalty proved reciprocal. Forty-five workers have stayed with Victorinox for over 50 years. One hundred have remained for over 40 years. The company maintains one of the lowest turnover rates in Switzerland. Nearly all 900 employees at the Ibach factory live within a 30-minute commute. Victorinox is the largest private employer in Canton Schwyz.

When asked about the decision years later, Elsener remained matter-of-fact: "We do not think in quarters. We think in generations."

From strategy to legacy

Protecting employees during crisis challenges the assumption that workforce optimization requires treating labor as a variable cost. Victorinox's achievement: the Elsener family built a structure where extracting value is impossible, protecting people is financially viable, and generational thinking replaces quarterly pressure.

This pattern extends beyond manufacturing. Southwest Airlines maintained its no-layoff streak through multiple recessions by building reserves during profitable years. Costco's above-market wages create industry-leading retention and productivity. Lincoln Electric's guaranteed employment policy, maintained since 1958, survived the 2008 financial crisis without layoffs. The insight remains consistent: organizations that protect people during downturns earn trust that becomes their primary competitive advantage.

Elsener's genius: understanding that a Swiss Army Knife company could become a symbol of reliability through visible commitment to people. Victorinox doesn't outcompete through superior knife technology but through institutional knowledge compounded by 100 employees staying 40+ years. The company survived two World Wars, the Great Depression, and multiple recessions by saving during booms and spending reserves during busts. The 9/11 crisis simply revealed what the structure had been designed to do all along: protect people regardless of market conditions.

Employees remember who absorbed the loss when revenue collapsed. And they stay.