In the summer of 2009, Victorinox CEO Carl Elsener, Jr., had more on his mind than his company’s latest acquisitions. The world was mired in an economic crisis, and he wondered whether the philosophy that had seen the Swiss family company through past hardships would be enough to see it through today’s tough times.

Victorinox has come a long way from its humble beginnings. In 1884, Elsener’s great-grandfather, Karl, began selling knives out of the shop run by his mother, Victoria, who later inspired the company name. Karl delivered knives to Swiss soldiers, and by World War I, his emblematic Swiss Army Knife had become a hit. The popularity of the knives in U.S. Army stores during World War II sealed their international reputation. Soon Karl’s nifty invention, featuring everything from large and small blades to a can opener and corkscrew, was the must-have accessory of every soldier, Boy Scout and executive the world over. In fact, the distinctive Victorinox logo is so branded in public consciousness that many would be forgiven for mistaking it for the national flag of Switzerland.

Determined to be more than a knife maker, in 1979 Karl converted his one-man operation into the family-owned company we know today. Victorinox expanded dramatically throughout the ’80s, employing more than 800 people and generating millions in revenue through new product categories such as kitchen cutlery and accessories. By the early ’90s it had subsidiaries in Japan, Brazil, Chile, Hong Kong, India, Mexico, Poland and the United States. It opened its own watchmaking factory, and through various licensing agreements, began to sell travel gear and launched a fashion line and fragrances.

Then, on September 11, 2001, the terrorist attacks occurred in the United States. Authorities all around the world introduced new flight safety regulations, which forbade the carrying of knives on board planes. Those regulations had an immediate impact on Victorinox, which had been doing a swift trade in airport shops. In fact, the corporate market represented an important sales channel, as business travelers often picked up the pocket tools as corporate souvenirs. In the months immediately after September 11, Victorinox registered a 30 percent drop in sales, and the knife business has never recovered to pre-9/11 levels.

Fighting Spirit Without Sacrificing People
Victorinox had faced trying times before. After both World Wars, and during the Great Depression, there were also sharp drops in sales. Regardless of those crises, Victorinox always stuck to its creed of long-term job stability and long-term financial independence, as Elsener explains: “For the past 80 years, we didn’t dismiss any employee due to economic reasons. We always grew organically, avoiding external debt and remaining independent from the banks as much as possible.”

In order to avoid firing employees, the company put a freeze on hiring, canceled overtime and reduced shifts by 15 minutes. Employees were encouraged to take any vacation time they had accumulated. Top managers visited other companies in the region and lent 80 workers to them temporarily. Victorinox also accelerated investments in new products and markets to decrease dependence on one star product and sales channel.

In 2008, after a century of exclusive cooperation with Victorinox, the Swiss Army invited tenders for 75,000 new soldier’s knives. “With a fighting spirit and a clear objective of retaining that order, we got down to work,” says Elsener. Though Victorinox won the bid, it underscored that nothing was guaranteed.

At the end of the second quarter of 2009, Victorinox was going through an integration process after acquiring Swiss Army Brands, its North American distributor, and Wenger, a Swiss competitor. This involved implementing a differentiated brand strategy in all product categories around the world.

The questions before the board concerned whether and how the culture and values at headquarters should be applied to other branches and offices around the world. There were also concerns that outsourcing production to China could tarnish the brand image, which is synonymous with Swiss quality. Furthermore, its expanded portfolio now puts Victorinox in competition with more established companies such as TAG Heuer and Samsonite.

As Victorinox prepared to mark its 125th anniversary, Elsener wondered how it could juggle this complex list of demands while staying true to its progressive HR commitments: low turnover, a 5:1 ratio between the highest paid and average worker salary, profit sharing for all employees, preference to promote from within, union representation, private pension benefits, and flexible family and children allowances. Would the old philosophy once again carry them through? What new tools must Victorinox pull out of its pocket?