Lincoln Electric is the largest manufacturer of welding equipment in the world. In 1895, John C. Lincoln was a technical innovator of electric motors and generators, at a time when electric appliances were still an emerging technology. In 1907, James F. Lincoln, John’s younger brother, joined the company and complemented his older brother’s flair for technical innovation with a proficiency in management and administration. James created an innovative organizational development policy for “incentive management” in Lincoln’s unusual structure of compensation and benefits. Over the years the firm invested successfully in Canada, Australia and France, but when they started to commit half of their sales to build "greenfield" plants in Japan, Latin America, Europe and Mexico the company nearly went bankrupt (Evans, Pucik & Bjorkman).
Although Lincoln’s innovative technology was the initial contributor to the company’s success, it was the technology paired with innovative incentive based HRM system that carried on its success. Lincoln Electric's system has been in place since 1934, and the basic idea is as straightforward as can be: the company pays individuals on the basis of what they produce. Nearly all of Lincoln's 1,800 production employees -- all nonunion -- receive no base salary at all. Their earnings are based on their individual output and on bonuses from the company's profits. (Lincoln's professional people, such as engineers, are on salary, although most also participate in the bonus plan.) The original idea, described in Incentive Management, by James F. Lincoln, brother of the founder, was to give non-management employees direct and powerful incentives to manage their work as efficiently as possible and to be on the lookout for opportunities to do more. That's still the philosophy. And lest employees worry about working themselves right out of a job, the company has a long-standing policy of no layoffs. For more than 50 years,... [continues]
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