Lincoln Electric Co.

, a leading producer of industrial electric motors and high-tech cutting equipment, is the world's largest manufacturer of arc-welding products. Although the majority of the company's equity remained in the hands of Lincoln family members in the early 1990s, the firm commemorated its 1995 centenary with a $100-million public stock offering, the first such stock offering in the company's history. The mid-1990s were also marked by a return to business profitability for the company. After suffering back-to-back net losses in 1992 and 1993, the company scored record sales and earnings in 1994. Many industry analysts attribute the company's long-term success and resiliency to its methods of managing and rewarding its workers, who rank among the world's highest-paid and most productive. Lincoln headquartered in Cleveland, Ohio, Lincoln Electric has 40 manufacturing locations, including operations and joint ventures in 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries. Australia Belgium/Belgi Canada Colombia Croatia/Hrvatska Czech Republic/Cesk republika Denmark/Danmark Estonia/Eesti Finland/Suomi France Germany/Deutschland Greece/Ellda Hungary/Magyarorszg Italy/Italia Latvia/Latvija Lithuania/Lietuva Mexico - Espaol Netherlands/Nederland Norway/Norge Poland/Polska Portugal Romania/Romnia Slovakia/Slovensko Spain/Espaa Sweden/Sverige United Kingdom

Lincoln Electric is perhaps best known for its unique strategy for handling employee relations, known as the Lincoln Incentive Management System. This program evolved during the first half of the twentieth century, and has remained virtually intact during the second half of the century. It focuses on six themes that are interwoven throughout the company's history:

1. People as assets An advisory board comprised of elected representatives from each department within the firm. Although no authority was delegated to the group, its members could bring literally any issue, large or small, to the floor for discussion. This management technique was one practical outgrowth of Lincoln's goal to treat people as assets deserving respect. 2. Christian ethics Lincoln's Congregationalist upbringing undoubtedly contributed one of the fundamental tenets of the Incentive Management System: Christian ethics. This precept on a simple exhortation from the Sermon on the Mount: "Do unto others as you would have them do unto you.". A New Approach to Industrial Economics, Lincoln called this "program" (widely known as the Golden Rule), "the complete answer to all problems that can arise between people." 3. Principles In the Lincoln evaluation program, each employee starts the year with 100 points. Points are added or subtracted in the course of semi-annual reviews. For the most part, its a zero-sum game: workers compete for a limited number of points in all areas but quality. If one loses a point, another has a chance to earn it. Moskowitz and Levering contend in The 100 Best Companies to Work for in America, however, that "Lincoln's competitive incentive system has not fostered a dog-eatdog environment, but rather one where people seem to be working harmoniously." The bonus system and evaluation process embodied two of Lincoln's cherished precepts: decision-making based on unwavering principles and "the universal benefits of competition." The institution of these and other programs supported continued growth for Lincoln. 4. Simplicity Lincoln management belief that simplicity in design contributes to organization management. 5. Competition In order to promote the concept, Lincoln started a welding school (which would become America's oldest and most reputable), sponsored design competitions, published books, conducted seminars, and wrote articles in trade journals. They also began applying the techniques to his own products. The use of arc welding during the manufacturing process helped Lincoln Electric gain up to 50 percent cost reductions on the production of electric motors and the welding machines themselves. 6. Customer satisfaction. It's a well known fact that no business can exist without customers. It's important to work closely with your customers to make sure the site or system you create for them is as close to their requirements as you can manage. Because it's critical that you form a close working relationship with your client, customer service is of vital importance. Lincoln Electrics approach to employee compensation remains controversial, perhaps in part because of a lack of understanding of what it entails, in part to stereotypes

generated by organized labor, and in part to horror stories from countries such as India and China where piece-rate brings a new meaning to the abuse of workers. The first bonus was paid in 1934, with the range being from a low of 25% to 120% over the years, with the average being 77%. The average bonus paid in 2008 was $28,873. Its not uncommon to see Lincoln employees earning between $80,000 and $90,000 a year in total income. Also the employee bonus plan has yielded extraordinary dividends for workers. Workers are given merit ratings every six months based on four categories: ideas and cooperation; output; dependability; and quality. If a worker makes a suggestion that saves the company $10,000, say, that will be reflected in the merit rating for that period. At the end of each year, workers receive an overall merit rating. This typically falls between 80 and 120 points. Lincoln Electrics guaranteed employment policy, introduced in 1958, has garnered international attention. However, some clarification is in order. Nothing is ever quite as it seems, although it is indeed an extraordinary policy. In effect, this is a contract that precisely explains the obligations of workers and managers AND the penalties when obligations arent fulfilled. As the president of the Clevelands operations explains: People misunderstand guaranteed employment as a job for life, and it doesnt say that. What it means is that we wont lay people off for economic reasons, but when the economic climate changes, we will eliminate people based on performance standards. Lincoln in Egypt. Is Egypt ready and willing to match up with Lincoln Electric's strategy, or will it repel the incentives that are the key competitive differentiators? No annual bonus because the economy is so shifty and volatile that it would most likely not affect daily effort. Guaranteed employment would exist through the understanding that economic change would not threaten a workers job. Job security would encourage intense loyalty and be a strong factor in building a consistent workforce. By nature, the Egyptian society are religious, and so if the religious ethics are formalized in the proper way, it will quit fit within the organizational structure and employees.