Founded in 1895 by John Cromwell Lincoln to manufacture electric motors and generators, The Lincoln Electric Company shifted its resources into manufacturing arc-welding products in 1911. Today, welding products account for more than 90 percent of net sales and range from basic units for light manufacturing to highly sophisticated machines used in robotics applications and high-production welding and fabrication. The remaining income is generated by electric motors and oxy-fuel and plasma cutting tools. The company is also the leadin

High wages, high productivity, and a high level of trust between management and workers characterize the laborer-employee relationship and this culture at Lincoln. Policies such as the "open-door" policy helps build this trust and while encouraging the employees to bring suggestions for improvement also helps the management to have non edited, raw data from their workers.

In this paper, I will explain the unique pay-for-performance compensation system of Lincoln Electric as well as investigating this system in our class context, also explaining the international expansion of the company.

As new global markets are emerging for Lincoln's business, the company has started questioning and reviewing their one-of-a-kind pay system. The company is by no means ready to completely change or get rid of the incentive plan, which once paid employees 100% of their annual wages in annual performance linked bonuses. But now with the new markets that the company is in too, the executives are considering ways to move toward a more traditional pay scheme and away from the regular percentage-bonus formula, or may be a mixture of the two. "The bonus program is a good program, and it has worked well, but it's got to be modified some," says director David C. Lincoln, whose father John C. Lincoln founded Lincoln Electric. So, the question is for how long more Lincoln's pay plan can survive rapid growth of the company and globalization?

With its over a 100 year existence, Lincoln Electric has had a successful past with a few downtimes, like the one during the 1991 recession because of an ill-conceived foreign-acquisition spree. Even during this time, the company kept its promise to its U.S. workers to pay their bonuses and went to extremes such as borrowing $100 million in 1992 and 1993, even though it lost $84 million in those years. The retired CEO Donald F. Hastings quoted saying: "We can't break our trust with this group because of management mistakes and recessions elsewhere." From this unique example, we can understand the company's genuine commitment to its compensation system. However, some argue that, after the 1995 sale of 40% of the company's equity to public, this traditional close-knit relationship between management and the workers got affected.

It is true that millions of American workers, from sales representatives to truckers, are paid on a commission basis or according to their output. Many others collect annual bonuses tied to their employers' profits and revenues. But Lincoln is nearly unique among large American companies, paying all shop-floor workers according to a formula based on how much they produce and how much the company earns.

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Approximate Word count = 2894
Approximate Pages = 12 (250 words per page double spaced)