LINCOLN ELECTRIC’S INCENTIVE PAY SYSTEM CLEVELAND’S LINCOLN ELECTRIC WAS

1139 LINCOLN CRESCENT EDMONTON ALBERTA T69 3B2 (780) 2447554
2 CARTA A ABRAHAM LINCOLN PRESIDENTE DE LOS ESTADOS
2ND FLOOR LINCOLN CHAMBERS 31 BROAD STREET ST HELIER

800 LINCOLN WAY AMES IA 50010 5152391111 FAX 5152391639
95 MONKS ROAD LINCOLN LN2 5HR TEL 01522
A DATA COORDINATING CENTER FOR MODENCODE STEIN LINCOLN D

Lincoln Electric’s Incentive Pay System

Lincoln Electric’s Incentive Pay System

Cleveland’s Lincoln Electric was founded by John C. Lincoln in 1895 to make an electric motor he had developed. When his brother James joined the organization in 1907, they began emphasizing employee motivation. Since that time, the company has endorsed the message that the business must prosper if employees are to benefit. Today, Lincoln is a $440-million firm with 2,400 employees. About 90% of its sales come from manufacturing arc-welding equipment and supplies.

The company has encouraged workers to own a stake in their employer by allowing them to buy stock at book value. (The employees are required to sell the stock at book value when they leave.) Approximately 70% of the employees own stock, and together they hold nearly 50% of the outstanding shares. Most of the remaining stock is held by members of the Lincoln family who are not involved in company operations.

Factory workers at Lincoln receive piece-rate wages with no guaranteed minimum hourly pay. After working for the firm for 2 years, employees begin to participate in the year-end bonus plan. Determined by a formula that considers the company’s gross profits and both an employees’ base piece rate and merit rating, it might be the most lucrative bonus system for factory workers in the United States. The average size of the bonus over the past 56 years has been 95.5% of base wages. Some Lincoln factory workers make more than $100,000 a year. In recent good years, average employees have earned about $85,000 a year, well above the average for U.S. manufacturing workers as a whole. However, in a bad year, Lincoln employees’ average might fall as much as 40%.

The company has a guaranteed-employment policy in place since 1958. Since that time, it has not laid off a single worker. In return for job security, however, employees agree to several things. During slow times, they will accept reduced work periods. They also agree to accept work transfers, even to lower-paid jobs, if that is necessary to maintain a minimum of 30 hours of work per week.

The company calls the low cost of high wages its incentive-pay system. Each employee inspects his or her own parts and must correct any imperfect work on personal time. Each is responsible for the quality of his or her own work. Records are maintained to show who worked on each piece of equipment. Should inferior work slip by and be discovered by Lincoln’s quality control people or customers, the worker’s merit rating, bonus, and pay are lowered.

Some employees feel the system can cause some unfriendly competition. Because a certain number of merit points are allotted to each department, an exceptionally high rating for one person may mean a lower rating for another. These pressures have led Lincoln to occasionally consider modifications to the system.

Overall, however, the pressure has been good for productivity. One company executive estimates that Lincoln’s overall productivity is about double that of its domestic competitors. The company has earned a profit every year since the depths of the 1930s’ Depression and has never missed a quarterly dividend. Lincoln has one of the lowest employee turnover rates in U.S. industry. Recently, Fortune magazine cited Lincoln’s two U.S. plants as among the 10 best managed in the country.

DISCUSSION QUESTIONS

1. How are labour standards used to establish an incentive system such as this?

Workers are incentivized by a system which evaluates their work individually and rewards it increasing their income and owned company’s stock.

2. How and why does Lincoln’s approach to motivating people work?

They use an incentive-pay system based on the own responsibility of each work because they want to maintain a big number of motivated employees and to increase the productivity.

3. What problems does this system create for management and the employees?

Employees must accept lower wages, reduced working timetables and even lower-paid works when company suffers from a slow period. Moreover, the paying system may cause competition between workers as they are valued according to the amount and quality of their work and high marks for one worker can involve a lower one to another. This system is difficult to administer without creating a bad atmosphere at work and just achieving productivity.

4. What types of employees would be happy working at Lincoln?

The ones who can do a good work under pressure and competitive people who want to improve themselves.


ABRAHAM LINCOLN FOR ESL STUDENTS BY ELCIVICSCOM ABRAHAM
ABRAHAM LINCOLN WAS BORN ON FEBRUARY 12 1809 IN
‰8[!E4È~ÀHŠ 245901692000159495 BIASETTI ANDREA C MUNICIPALIDAD DE LINCOLN S


Tags: lincoln electric’s, dividend. lincoln, lincoln, system, electric, electric’s, cleveland’s, incentive