The Lincoln Electric Company Case Solution

1. Why does their ‘system’ work? Is it ‘sustainable’? Why?

John Lincoln was the founder of Lincoln Electric. John was a high tech dealing with machines and technology, whereas his brother James had expertise in business and management. This was the leading welding manufacturers by World War 2. They then stopped the production of electric motors and gave their full time to welding. The company held the strategy of producing higher quality at a low cost which would eventually benefit and profit the shareholders and also the employees. According to the Lincoln incentive system, the employees would be rewarded for their contribution in the best possible ways. They would be given a bonus by the end of the year on the basis of merit. They'll be judged on their efforts, contribution and their ideas. James also proposed that each worker be paid after he finishes his work; therefore, such policies increase the efficiency and the productivity of each worker, which would add on to the company's progress and prosperity.

Company philosophy: James held a very strong opinion about competition. He quoted many times that a man can only progress if he is competent enough to do so. 

Compensation policies: There were no wages or monthly salaries, but the employees were being paid immediately after they produced an item or product, and this is called piecework. This is good in a way that it does not depend on whether the employee has earned too much. It solely depends upon his skills and efforts. The second component of their policy was a bonus which was granted at the end of the year. It was solely based on merit, where the employee’s record was matched and compared with others. The third component was the guarantee of employment because if the workers were not guaranteed about their jobs, they would always have a fear of losing their jobs which would resist new ideas of innovation and would be an obstacle in the progress of the company

2. What have they done in Economic terms to the structure of the organization and to their financial and cost structures?