How Lincoln Electric Thrives in a Tough Economy

There aren’t very many companies that can boast never laying off a single employee for financial reasons since the end of the Second World War. And then again, there aren’t very many companies that can boast making a profit for all but two of those years of its existence as a company.

Welder Image Source: Lincoln Electric

According to a story with PBS, Cleveland-based Lincoln Electric is one of the few companies that can make both claims.

At a time when companies are not only suffering the loss of profits and workers but closing up shop too, Lincoln Electric has sustained its place as one of the top welding brands. It has also defied conventional business wisdom, leading to eight studies by Harvard University.

How has Lincoln Electric managed to make high quality products, remain profitable, and continually amaze leading business professors across America?

Lincoln Offers Job Security to Employees

Every worker is guaranteed at least 30 hours a week of work after three years if they continue to meet Lincoln’s high standards. That means some workers don’t make the cut, but for those able to handle the tough workload, the benefit of long term security is a strong incentive.

Piece Work Manufacturing Motivates Workers

Lincoln has devised a unique piece work manufacturing system that pays workers according to their productivity rather than by the hour which enables them to better control the amount of money they make. The management determines when they work overtime, but most work schedules average around 45 hours per week.

Profits are Shared

For workers who meet their supervisors’ standards for performance, Lincoln generously shares its profits with employees. One third of its earnings are placed in a bonus pool for distribution according to each employee’s track record.

Employees are Expected to Cooperate

While the piece work system provides a personal motivation for productivity, employee performance is also rated based on being cooperative with fellow employees. This creates a healthy work environment where additional incentives are directly tied to working well with colleagues.

Management Operates a Complex System

Many companies are not willing to manage a tough compensation system like Lincoln’s since it requires a lot of evaluating and personal attention to ensure that employees are compensated according to their performance. The care with which employees are compensated has paid off with high productivity and profits.

Focus on Job Security Over Income Security

Employees at Lincoln will never be out of a job provided they continue to receive positive evaluations and meet their productivity goals. However, they will need to prepare for slumps when there will be less hours at work. Most employees and former employees at Lincoln think that is a good trade off.

Lincoln Electric continues to win the regard of business school professors and welding industry experts. This welding manufacturer is set to make $200 million in profits in 2011. Add on the guarantee of employment for its workers, and you have a great recipe for success.

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