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One year ago, we promised you an update on the ambitious expansion of the Lincoln Electric Company into foreign markets. Could this venerable firm, one of the first companies in the United States to install a successful productivity-based incentive system for all employees, expand its company culture and compensation practices to new holdings around the world? Would the world-wide recession of the early '90s overwhelm the company's efforts to "remake" its global acquisitions in its own image?
A prior article, which appeared in the November/December 1993 issue of Compensation & Benefits Review, left the company in the midst of a struggle to steer a profitable course through a turbulent expansion. Now, in true cliff-hanger style, it's time for a recap and the next installment of the Lincoln Electric story.
Who Is Lincoln Electric?
Founded in 1895 by John C. Lincoln, the Cleveland-based Lincoln Electric Company originally manufactured electric motors and generators. In 1911, Lincoln Electric began producing arc welding equipment. Today, arc welding machines and supplies account for approximately 94% of its sales, with electric motors representing 10% and oxy-fuel and plasma cutting tools another 6% to 7%. Lincoln is also the leading producer of self-shielded cored-wire electrodes, with over 90% of the world market.
It was the philosophies and beliefs about workplace relations of James F. Lincoln, John's younger brother (who joined the firm in 1907) that shaped the existing culture. In particular, the company's "incentive management system"--rightly given much credit for the company's long history of outstanding marketplace and financial performance--was shaped and molded during James Lincoln's tenure as head of the company from 1914 to 1965.
The nearly 100-year-old firm has had only five leaders and promoted management mostly from within. This leadership continuity has served to preserve core values and a reservoir of trust between workers and management.
The Incentive Management System
The compensation package for factory workers at Lincoln Electric consists of a piecework system for base wages and a year-end bonus.
The piecework system. The piecework system rewards higher productivity. Each factory job is rated according to skill, required effort, and responsibility. The company then assigns a base wage rate to each job comparable to the rate of similar Cleveland-area jobs. The time-study department sets piece prices so that...