Cleveland, Ohio is ground zero for a region called the Rust Belt. This area is known for its steel and manufacturing production that once dominated the American landscape. Many of these businesses have long since disappeared as manufacturing jobs have emigrated to other centres of cheap labour. In the midst of this troubled region stands a wind turbine that powers the ultraclean and forward thinking Lincoln Electric Company.
Lincoln Electric is the world’s largest manufacturer of electric arc welding machines. The brand is so ubiquitous that welders who inadvertently ground themselves, resulting in an electrical shock (the equivalent of sticking your finger in a socket) jokingly say they “shook hands with Lincoln”
Started back in 1914, it was the younger brother James Lincoln who had the vision of building a business where undereducated men and women could develop their talents. He wrote, “I knew if I could get people in the company to want to succeed as badly as I did there would be no problem we could not solve together.“ More than a century later, Lincoln Electric is a 3 billion a year business and employs 6000 people in 19 countries. In the USA, Lincoln workers earn three to four times the average workforce income. How do they do it?
Author F Koller, states that James Lincoln was a both a conservative and an advocate of free markets who believed in a classless society within his company. He believed a leader’s job was to create conditions under which people could develop their talents. To make this a reality James Lincoln created what he called “the incentive management system”. Here’s how it works:
- Employee Advisory Board: An employee elected advisory board meets every two weeks with Lincoln’s top management team. The advisory board can make suggestions, lodge complaints, criticize management and suggest any sorts of improvements. It was the advisory board who recommended foreign expansion as a necessity for long term viability.
- Performance Bonuses: Approximately 1/3 of Lincoln’s workforce are factory workers and their base salary is like that of other union workers. Where things differ is there is no upper limit on additional pay workers can earn based on number of pieces produced. The system also encourages employees to work themselves out of a job through automation by promoting those that do so to other jobs requiring human skills.
- Profit sharing: Each year approx. 1/3 of the company profits are distributed to employees through merit bonuses. These bonuses make up about 1/3 of an employee’s pay.
- Guaranteed employment: Employees with over 3 years of service are guaranteed 30 hours/ week of work even when demand is low. In exchange workers clock in the overtime when demand is high.
Since 1947 Lincoln has not laid off a single permanent employee. It’s a mainstay of the much-maligned Ohio economy and does it all while being a good environmental steward. It’s amazing what one can do when we create strategies that develop peoples’ talents and encourage people to succeed together. Does your strategy do that?
- Frank Killer “Lessons from Lincoln Electric”