Day 28 in MIT Sloan Fellows Class 2023, Organizational Processes -3 Lincoln Electric
Lincoln Electric
Lincoln Electric Holdings, Inc. is an American multinational and global manufacturer of welding products, arc welding equipment, welding consumables, plasma , and oxy-fuel cutting equipment, and robotic welding systems.
The Fortune 1000 company is headquartered in Euclid, Ohio, United States, and has a worldwide network of distributors and sales offices covering more than 160 countries. It has 42 manufacturing locations in North America, Europe, Middle East, Asia, and Latin America. It also operates manufacturing alliances and joint ventures in 19 countries.
So, in a nutshell, this company has performed very well for a long time, with unique corporate culture and a unique wage system.
Piece rate
AB 1513 - Piece-Rate Compensation - FAQs
The American Heritage Dictionary defines the term piece-rate as: “Work paid for according to the number of units turned out.” Consequently, a piece-rate must be based upon an ascertainable figure paid for completing a particular task or making a specific piece of goods.
This kind of scheme is illegal depending on countries. (In Germany, it is not a legitimate scheme.)
Surprising company culture
https://www.youtube.com/watch?v=EftYWQOs_cU
The system established company culture. All the employees feel more independent and become more competitive, but sometimes they must be collaborative.
Always compete with people in similar operations, but you must collaborate with others in different layers.
They are incredibly diligent because the number of your production would directly reflect how much you earn.
Thanks to this benefit system, this company recorded a deficit only two times (International expansion and financial crisis) and rarely fired employees.
What are the downsides of this financial benefit system?
I don't think this scheme works for truly creative businesses. The goal and path to the goal should be explicit in such a wage system( very operational). It is like 500 meters splint race.
Also, there is a significant impact on employees' mental health. There is intense pressure every day.
You can find some comments about harassment in the Glassdoor review.
https://www.glassdoor.com/Reviews/Lincoln-Electric-Reviews-E3658.htm
Power of incentive design
However, this company successfully incentivized its employees and established seemingly impossible capabilities.
Low-cost but high-quality goods in the industry)
What makes this tough challenge achievable is the reward structure establishing a hard work culture and accelerating continuous innovation to be efficient and productive.
