James F. Lincoln: Industrial Peacemaker
Hager, Daniel, Freeman
he dichotomy between labor and management does not actually exist. Enlightened self-interest eliminates contentious factionalism in employment relations. Unfortunately, government has intervened in the workplace to convert it into a battleground and to institutionalize coercive conduct that is akin to warfare. The victims are consumers and the entire American economy.
Those were the views of an industrialist named James F. Lincoln. He applied what he termed "incentive management" in building the Lincoln Electric Co. of Cleveland, Ohio, into the world's largest manufacturer of arcwelding equipment. Lincoln Electric was a provider of top-quality products at prices that undercut the competition. Nevertheless, it paid its workers at about twice the average wages in the overall industrial sector and weathered the New Deal.
Lincoln, who died in 1965 at the age of 82 and hence was spared the Great Society's additional hamstringing of employers, was as harsh on "ultraconservative" industrialists who saw workers as adversaries as he was on misguided government. His management philosophy combined the Golden Rule with athletic metaphors. As he explained in his 1961 book, A New Approach to Industrial Economics, application of the Golden Rule leads to the type of cooperation that characterizes successful athletic teams, where the coaches and players are not antagonists but all pull together for the common goal of victory. Everyone's a Manager In any organization everybody actually embraces both management and labor functions: "All are managers when they operate a machine, an assembly line, a broom, or a punch press, or when they manage the financial, economic, and social activities of the company. All also are labor. Some operate machines, some operate assembly lines, some operate brooms, and some operate the activities with government, with sellers, with buyers, and with the public. There can be no dividing line drawn between them. All are essential to the business and are complementary in their work."1
Lincoln learned about individual development and voluntary cooperative accomplishment while studying electrical engineering and playing football at Ohio State University, where he captained the undefeated 1906 team. The next year, he became a salesman at the small struggling electrical company managed by his brother, John C. Lincoln, a better engineer than businessman. In 1914 at age 31, James Lincoln moved up to general manager of Lincoln Electric and later became president. He solicited employees for advice believing that no one person can know everything and that others have much to contribute.
Development of employees' talents became his goal, based on the foundation that "freedom of the individual is essential. Freedom means responsibility. It means opportunity. It means pride in ourselves and the place that we have created for ourselves in the world. No free man ever allowed himself to infringe on the rights of others."2
His strategies excluded production speedups and even conventional profit-sharing plans, which depend on too many factors beyond the control of individuals to provide them incentives. The New York Times obituary quoted Lincoln's core policy: "There is no limit to the production capacity of a human being. The worker who is assured the fruits of his labor will find a thousand and one ways to increase production."3 The workers themselves devised methods to improve productivity and reduce costs and benefited directly from their efforts. The system of rewarded innovation worked so well that the labor required to produce a 200-amp welding machine dropped from about 113 hours in 1921 to about 16 in 1944. The selling price fell from $1,500 to $200. Between 1932 and 1943 worker productivity increased almost 13 times. Wholesale prices of manufactured goods rose more than 40 percent over that span, but prices of Lincoln's arc welders were cut in half or more. Lincoln said that "The goal of an organization must be this-to make a better and better product to be sold at a lower and lower price. …