How Mutual Commitment Leads to Excellence: The Lincoln Electric Story

My last post The Race to the Bottom: Demolishing Corporate Pensions was a bit of a depressing–yet realistic depiction–of what is happening in many Western countries when it comes to the economic blight being imposed on workers. Today’s post is more upbeat, profiling an amazing American company based in, of all places, Cleveland, a city (and more broadly the state of Ohio) that has been decimated by offshoring and the recent Great Recession. (As a sidebar, while growing up in Montreal during the 1960s and early 1970s, I used to frequently visit my cousins in Cleveland, partaking in baseball games with the Cleveland Indians. Great memories).

Cleveland’s steady economic descent is a sad story, but what I share today is both inspiring and indicative of how effective managerial leadership can retain jobs in America in the face of growing low-cost producers around the world.

Lincoln Electric is the largest manufacturer of welding equipment in the world. The company has been in existence for over 100 years, priding itself on producing products and solutions for its customers around the world. Headquartered in Cleveland, with a Toronto office in Canada, Lincoln Electric was founded by John C. Lincoln in 1895 with only $200 capital investment. He produced electric motors as his first products, which he designed himself. The Canadian subsidiary was created in 1916 to distribute American-made products. The following year the Lincoln Electric Welding School opened its doors, and since then has trained over 100,000 students.

The company remains non-unionized, yet it was one of the first in America to offer its workers paid vacations in 1923. Two years later it introduced an employee stock ownership plan, and in 1929 an employee suggestion program. Incentive bonuses followed in 1934, and during the Great Depression the wages of employees actually doubled.

Lincoln grew rapidly during the 1940s and 50s, opening an office near Paris in 1953. The company continued to innovate, staying true to its core business. During tough economic times, employees have stepped up to the plate to work with management to find solutions to problems. In the past decade, Lincoln has opened plants in such countries as China, Germany, South Africa and Turkey, specializing in specific areas. But Cleveland is the headquarters and maintains a huge plant.

On April 11, I listened to a CBC radio interview with Fred Koller, author of the new book Spark: How Old-Fashioned Values Drive a Twenty-First-Century Corporation: Lessons from Lincoln Electric’s Unique Guaranteed Employment Program Koller has visited the Cleveland plant numerous times. The plant is massive (over a mile long); very basic when it comes to working conditions; where management eats in the same rustic cafeteria as workers; and where the coffee is terrible.

What’s fascinating with Lincoln in a modern organizational context, is that it has not had a layoff since 1948 (the last estimated time). Employees are paid on a piece-rate basis, something usually abhorred in business. Yet workers can earn about $150,000 USD a year. The 2008 employee bonus was a whopping $29,000!

Lincoln doesn’t have a fancy management philosophy or teamwork posters adorning the plant’s walls. It has very clear performance standards and a three-probationary period. However, by committing and performing for the company Lincoln reciprocates by committing to its employees.

At the heart of this is leadership: how it is practiced on a daily basis. The consequence of Lincoln Electric’s focus on quality, innovation and tailored solutions to its worldwide customers is a company that has entered its third century. It has been around a very long time, during which hotshot high-tech firms have come and gone; and Lincoln will no doubt be around even longer.

What Lincoln Electric has accomplished is not rocket science. Its senior leaders, however, understood long ago that it is people who are the defining key characteristic of whether a company succeeds in the long-run. It’s unfortunate that other North American companies have yet to figure this out.

Next Post: The Cream of the Crop: Leadership and Corporate Social Responsibility While Making Ice Cream

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