The History of Lincoln Electric Co. and Its Incentive Plan

Article excerpt

Engineer John C. Lincoln established Cleveland-based Lincoln Electric Co. in 1895. In 1907, his son, James F. Lincoln, began working for the company for $50 a month, plus a 2% sales commission. Right away, James began developing new technologies. He saw a need for employee commitment to be able to implement his ideas. Therefore, he asked the employees to elect representatives (one representative for every 100 employees) from each department to serve on an advisory board and advise him on the company's operations.

Before World War 1 began, Lincoln's staple product was the battery charger. When the war caused a temporary end of the electric vehicle, however, Lincoln's battery-charger business came to an abrupt halt. In its place, the war brought to the forefront the potential of arc welding. Lincoln Electric had started experimenting with arc welding in 1902 and produced its first welding machinery in 1912. Arc welding became the company's mainstay.

The company's long-range goal was eventually to specialize in the welding process. With this vision, Lincoln saw the need to train his people in the use of welders. Therefore, in 1917, the company created the Lincoln Electric School, from which more than 70,000 welders have graduated during the last seven decades. The school continues to enroll new students on a regular basis.

In 1915, the company gave each employee a paid life-insurance policy. Four years later, the employees organized an association for health benefits and social activities. By 1923, the company also was giving employees two-week paid vacations. By this time as well, the shop was operating with a piecework plan that enabled workers to make more money for more effort. In 1929, the advisory board devised a suggestion system.

In 1928, James F. Lincoln became president of Lincoln Electric. Being in the beginning of the Great Depression, the company devised a technique that resulted in 50% price reductions. However, the Depression still took its toll, creating shorter work hours for employees and scarce sales for the company.

By 1934, work hours again increased. …