Lincoln Electric Company

Lincol Electric Company is a very successful company on the market. It has a good market share due to its productivity. Productivity is the key element of a firm to be successful. Lincoln Electric created a system to pressure employees for a higher productivity. The pressure that this company uses is not psychological, it is the motivational one. The management motivates its workers with several bonus opportunities for either good work or good productivity. The same works also the opposite way as the penalization.

Of course not everyone would be willing to work in such environment, there are also people who are paid by regularly, instead of according to number of products produced. There is also a doubt whether such a system would work in different types of businesses as there as different conditions. But nomatter what, there are some parts or elements of this effective system that can be used also in other types of businesses. How is labor standards used to establish an incentive system such as this? Labor is the most important part of every organization.

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Qualified, good organized, loyal and productive labor is a huge benefit for the firm. It can bring the company to positive numbers, in harder times it can support the company and make it able to survive and in good times it can bring even more and more profits. It is the management?s duty to create such an incentive system. If the labor system does not work, it is all failure of the management.

The basic is the communication between management and representatives of labor force. They need to find out what are the motivation instruments that force workers for higher productivity, better quality.

It is also the duty of human resources department to find worker, who are able to cooperate and help each other for common success. Last but not least important factor is to set the actual reward that will be used as the motivation. How and why does Lincoln’s approach to motivating people work? Because they can influence their wage. In a common labour system are employees paid on a monthly basis. That mean that they are sure, that they will get exact sume of money every month. So why they would bother to work on 100%?

Of course they realise, that they need to work to dont get fired, but they dont have to put an extra afford while doing their job. Lincoln system is differnt. It provides them with more opportunity to higher their income, but on the other hand it makes employes more uncertain. They surly will ask them selves questions as for example: will I work enought to earn money I need? It means that they are not sure about their wage, unlike the people who work on regular monthly basis. I asumme, that Lincoln is adventageous for employers.

By introduction this kind of system, they will certainly increase productivity of their company as the Lincoln system motivate employes to work more and efficiently. For employes is adventage that they can directly influence their income but in the same time there is a great dissadventage that they will probably work under the stress. What types of employees would be happy working at Lincoln? For this system would appriciate to work employe who is manualy skilled, laborious, competitive, intensive. Employe who needs to be rightly recognized for his job.

In a company with common system would be all workers at the same level get the same wage. But is it right for all employes? No. For example, one will produce 100 pieces of product per day, other one will produce only 47 pieces, but they both will earn same amonth of money. So of course Lincoln system would suite the first worker, but not the other one. Why has Lincoln Electric been so successful? What are the key elements in their HR system? How do they support Lincoln's overall strategy? Well, this question is not easy to answer. Successful can be only an organization, which has all its departments fullfilling their duties. Read about role of multinational corporations in global economy

The most important part of an organization is the labor force; these people produce the final product that has to have the appropriate quality to be competitive on the market. As we can see Lincoln electric has a close and strong relationship to its employees. Due to this relationship, the organization can strengthen its productivity, which is in final effect one of the highest among this segment in U. S. Because of the high productivy Lincoln Electric may reach higher sales, and raise the profit. The key element of Lincoln?s human relationship system is the relationship between the management and their employees.

This relationship includes the communication between directors and workers, reward and penalty system, motivation, loyalty, worshipping each other, and the team work. The team work is absolutely the most important part here. And the firm is very dependand on it. This copany created a system that not only motivates, but also pushes the workers to cooperate between them and to try to their best for the common goal. The combination of reward and penalty system is absolutely incredible, and makes the single employees strongly dependand on their colleagues.

This also creates a trust between them. If one of them does good, the whole group is rewarded, but if one of them does bad, the whole group is penalized. This also supports the strategy of the whole business. The overall strategy is easy: to make as much money and to sell as many products as possible. If the employees have good atmosphere and are pushed to produce doable amounts, the strategy of the whole firm is supported in a good way. What problems does Lincoln's system create for the management and the employees? The problems could be severe.

For the management it could bring some complaints from workers, if they feel that the work is not divided in appropriate way to all employees. And some of them may feel that others can work more and therefore get higher bonuses. Furthermore it can raise legal problems to management, if there are employees working already over maximum overtimes. Of course these workers want to earn as much money as possible, but on the other hand they can cause troubles to their employers. This is connected to problems that could be created to workers.

If they work many overtimes with the goal of earning some extra money, they may also cause healthy problems to themselves. Another problem can arise, when more workers are willing to work extra, but only few places are available. A conflict is a problem for both employees and the management. In what kinds of industries would Lincoln's system have great difficulty? This Lincoln?s system is hardly adjustable for any kind of industries and businesses. It is not adjustable mostly in services, which is the tertiary sector of industry. Here you can not measure the employee’s outcome in numbers of products produced or sold.

The more important element here is the quality. For example for a law firm it is much more important to win a case where not the money is the purpose of winning the case, but the reputation, which can bring new clients, maybe big multinational corporations, instead of winning twenty cases about a traffic fines. Another example is in education sector. It is not possible to implement Lincoln?s motivation - reward system for teachers and professors, because very often it is not their fault that some students don ?t graduate. So you can not motivate teachers with a reward to “produce” more graduates.

They could be two excellent professors, but one of them gets lazy students, and the other gets genuises. A very good example of sector where this Lincoln?s system is impossible is the stock trading. Just imagine a situation of two stock brokers with starting point one million dollars. Both of them buy stocks of only one company (not the same one) and compare after a one month. Broker?s A stocks have now the value of 1. 1 million and broker?s B worth is only 1. 05 million. According to Lincoln?s system we should give higher reward to broker A. But suddenly the CEO from company A swithes to company B and stocks A fall down to 9. , while stocks B flies to 1. 2 million. To illustrate this more precisely, this Lincoln?s system can not be functioning in industries where the producers (workers, employees) are not able to influence the number, value, or the quality of the final product or service. What parts of Lincoln's system are transferable? Well it would be nice to be able to transfer all parts of this system. A prove that this system works is the Lincoln Electric itself. As we can see, to transfer the whole system to any kind of business is impossible, but we need to define at least some parts, that are transferable.

The Lincoln?s stock owning system could work in other kinds of companies as well. If the management of the company does not llook for speculative stock owner, but wants to have the whole firm under “one roof”, this system would be very effective. Furthermore the implementation of the three major responsibilities would be very welcomed in many goods producers: • “Responsibility #1 - Attendance If employees do not come to work, they are not paid and they are penalized. • Responsibility #2 - Earning Power Production workers are paid on a piecework basis.

They must guarantee the quality of each piece they produce. If the piece is not good, they are not paid for it. • Responsibility #3 - Self-management the company feels that all workers must manage and all managers must work” (Debra Sherman). What should the CEO be worried about? What recommendations would you make? As the document shows that Lincoln Electric did not have to lay off any worker in last almost 60 years, it seems that this Lincoln?s system is good working. Well as the times change and rights of the employees are becoming wider and wider, the CEO should be worrying only about few fears.

The first is, if the employees get all together and will be trying to get more and more from the management. Now it seems that everybody is happy, it may come the time when workers would want more. The worst view is the strike and long handling between employers and employees. Another fear is, if a direct competitor would implement same incentive and would try to hire Lincoln?s qualified labor force. It may end the same way. Well to summarize, the fact is that Lincoln Electric Company is a very good working, productive and successful company.

It pays great attention to its own employees, supports and rewards them. The firm gives them opportunity to be in the structure of the firm, be able to influence the run. On the other hand the management expects the same from their workers. So far it works, employees are a very good team and the firm is making a tremendous business. People in this firm and it does not matter whether they?re in management or workers are aware of the fact, that the closer they stick together, the higher productivity they may create and therefore bigger money they can get from it.

Of course some problems may arise, because not always absolutely everybody is willing to adapt to the rules. But as long as these rules are valid, the Lincoln Electric Company should not be afraid of losing on its profits. I would recommend this incentive system to any firm producing and selling commodities, we have here a very good example how and why it works. In other words I would recommend to Lincoln Electric not to change anything in their system as long as it works and the firm has good effect of it.