Lincoln Electric: A Case Study

Joe Attinello
Cali Cook
Alia Goss
Kurt Oliver
Mark Strom
Mike Torbenson
Business 305
Linda Gibson
October 7, 2005

History and Background

Lincoln Electric today is the worlds leading manufacturer of arc

welding products, and also is one of the leading producers of electric
motors, which was their very first product. John C. Lincoln is the
founder of Lincoln Electric, which opened in 1895. He previously had
been working for the Elliot-Lincoln Company who was a producer of
Lincoln’s electric motors, but during the depression the company had
lost so much he was forced to leave. Using the $200 he earned from
redesigning an engine for Herbert Henry Dow, John opened his new
business, with electric motors of his own design as the main product
(Buller/Schuler, 2006).

During that first few years the company grew but had some
setbacks, which include a fire in the first year of operation. In 1906
John incorporated his business and moved it from a fourth floor room in
a factory he was in, to a newly constructed three-story factory. He
then expanded his work force and the sales grew to over $50,000 a year
(Buller/Schuler, 2006). In 1907, John’s brother James joined him as
a salesman and to help manage the company, as John preferred to be more
involved in the inventing stage and less in the management of the
products and company (www.lincolnelectric.com/corporate/about/history.asp).
Over the next few years the product line was expanded to include
battery chargers for electric cars, and in 1909 the first welding set
was produced. Then in 1911 the company introduced a variable voltage,
single operator, portable welding machine, and the very first in the
world (www.lincolnelectric.com/corporate/about/history.asp ). Jy
(Buller/Schuler, 2006). We will talk more on the bonus plan later.

When World War II started, the company saw a dramatic change in

demand for its welding products, ship hulls needed to be welded so this
created a new market for the company and brought on expansion of the
business (www.lincolnelectric.com/corporate/about/history.asp ). By the
start of the war Lincoln Electric was the worlds leading producer of
arc welding products, and sales grew from $4,000,000 in 1934 to
$24,000,000 in 1941 (Buller/Schuler, 2006). Many of the Lincoln
workers were drafted so the company hired on many women and minority
workers for the first time. Because of the demand for welding products
during wartime, the production of motors was suspended, so the company
could focus its resources on the welding products. During this time
the company saw a doubled productivity level from its workers
(www.lincolnelectric.com/corporate/about/history.asp ).
 The year 1959 marked the death of John Lincoln. Then in 1960
the company brought back its motor product line and introduced a new
award winning design. James Lincoln passed away in 1965, and George
Willis became president. During the 1980’s the company hit hard times,
with the sales dropping by 40 percent, because of inflation, higher
energy costs, and the nation being in a recession, and even though the
company was losing sales they did not any of their employees laid off.
Then in 1986 George Willis was named chairman and Donald F. Hastings
became president. Donald Hastings became chairman, and Fred Mackenbach
was the new president in 1992. They then consolidated and reorganized
all of the foreign operations, and during this time asked their U.S.
employees to increase the levels of their production and sales. Since
1993 there have been sales records set every quarter
(www.lincolnelectric.com/corporate/about/history.asp).

Now Lincoln Electric employs around 4000 people not including

the 200 or so in the sales force, in its U.S. factories and in
factories and sub companies all over the world, including locations in
France, Canada, China, Australia, Indonesia, South Africa, Brazil,
Poland and others. Employees today enjoy pension plans, opportunities
of promotion from within, and continuous employment. Lincoln has
around a 40 percent U.S. market share for its arc welding products. In
2005 the company entered its 110th year of existence (Buller/Schuler,
2006).

Company Philosophy

When James F. Lincoln founded Lincoln Electric he wanted the

company to be recognized for its care of people as much as its
dedication to quality product. This is why Lincoln used Christian
ethics when setting his company philosophy. The company strives to
give the customer the highest quality product considering their needs.
This products cost will then be based on the efficiency of production
and not what the customer is willing to pay; at no time will the
customer be deceived into buying the product at a cost for more than
it’s worth. These ethics also follow Lincoln s ideas that it’s the
customer that finances a company through retained earnings and not the
stockholder (Buller/Schuler, 2006).

To help establish this philosophy of Christian ethics Lincoln

Electric has established six core values. These are: Respond to our
customers needs and expectations with quality, integrity, and value,
Recognize people as our most valuable asset, maintain and expand the
Lincoln Incentive Management Philosophy, practice prudent and
responsible financial management, strive continually to be
environmentally responsible, and support communities where we operate
and industries in which we participate. These six values help dictate
the way Lincoln Electric operates and helps to establish the corporate
culture as well as the organizational behavior (Buller/Schuler, 2006).

Two of the six core values relate directly to the

organizational behavior of Lincoln Electric while four of the core
values relate better to the overall Lincoln Electric business model. By
working to recognize people as their most valuable asset and
maintaining the Lincoln Incentive management philosophy Lincoln
Electric is establishing its commitment to its employees. These
specific core values help increase organizational commitment from
employees because the employees want to work for Lincoln Electric.

Lincoln Electric recognizes people as their most valuable asset

through a myriad of goals including federal standards and company
policies. Lincoln Electric follows safety standards by helping the
employees work in a safe, clean, and healthy environment. Employees
are trained and able to work in multiple departments and
internationally as a way to broaden skills. Lincoln Electric demands
that employees show integrity, discipline, and professional conduct in
all aspects of business and to conduct business ethically. And the
most important aspect of this core value is the recognition of
employees hard work and extraordinary achievement through pay for
performance (Buller/Schuler, 2006). By incorporating each goal Lincoln
Electric is able to emphasize their commitment to the employees.

Lincoln Electric is famous for its Lincoln Incentive Management

Philosophy that recognizes dynamic teamwork and incentive as the most
profitable and cost-effective way of achieving their goals. Some goals
of this plan are committed work ethic and positive employee attitudes
throughout the company, a high quality, low-cost manufacturing process,
and a dedicated and knowledgeable sales and service force. An example
is promoting employee involvement in cost reductions and quality
improvements.

Lincoln Electric has established itself as a desirable employer

because of the company’s high commitment to success and its employees.
The company philosophy has been well supported by the core values,
which work to build up all aspects of the business. Each goal of the
core values has its own importance and helps the balance of the entire
company and brings it in line with the way James Lincoln saw it in
1895. When James Lincoln founded the company he recognized the
importance of having high quality people producing high quality
products and this vision has been passed on since Lincoln’s death in
1965.

Applications

Lincoln Electric has an organizational behavior that has made

them a profitable company and a desired employer. They base their
methods on strong motivational policies through financial techniques as
well as attitude techniques. Organizational commitment and employee
attitude are strong examples of the success of the motivational
policies that Lincoln Electric applies. They also believe in
personality-job fit and ability job-fit. For study of this case
motivation and ability job fit are recognized as independent variables.

Motivation

Lincoln Electric uses many different practices to motivate its

employees. Among these motivators are individual empowerment, an
effective evaluation process, as well as a number of different
incentives. These, when paired with positive employee attitude and
adequate ability-job fit, have proven to work best for Lincoln
Electric’s productivity and overall employee satisfaction. Through
these key motivation practices, Lincoln Electric has found success for
their organization.

Financial Motivation

Employees at Lincoln Electric are offered a wide variety of ways

to stay financially stable while working there. They of course receive
their regular pay rate, but that’s just the beginning to working there.
While being employed through Lincoln Electric employees have the
opportunity to receive stock options, year-end bonuses, and performance
bonuses which double the year-end bonus depending on an employee’s
performance score. Every employee is motivated by different incentives
for why and how hard they work, and at Lincoln Electric it seems to be
that financial reimbursement is the key motivator.

Financial motivation is when a person is driven by a financial

goal or incentive (Robbins, 2005). The idea behind motivation theories
is that a person trades effort for pay, security, or advancement; in
Lincoln’s case it is pay. Financial motivation will also improve
productivity, which ultimately shows up in the bottom-line as part of
profits.

While working at Lincoln Electric you’re on a fixed- interval

schedule. A fixed-interval schedule is a reward that is spaced out at
uniform time intervals (Robbins, 2005). An example of this is
employees receiving their paychecks. It’s given to them at a set day in
the week. The average factory worker at Lincoln earns $16.54 an hour.
Some workers are paid on an hourly wage, but most production workers
are paid on a fixed-ratio schedule, which is where a reward is
initiated after a fixed number of responses. This is also called a
piece-rate basis. Meaning that the number of pieces that are produced
is the basis for pay. This is an example of financial motivation.

Another example of Lincoln’s financial motivation plans their

performance and incentive bonus program. Performance and incentive
bonuses are ultimately linked together. These evaluations are conducted
every six months and include topics such as quality, dependability,
ideas and cooperation, and output. The employees are evaluated on these
criteria by their supervisors, which are converted to a numerical
score, which is usually within the range of 60 to 140, with the average
score being 100. (www.inc.com/magazine/19880801/5934.html) Incentive
bonuses are a portion of annual profits that are set aside and
distributed among employees. They’re usually about 90% of an employee’s
annual wages. Lincoln uses an equation to determine each employee’s
bonus. For example the company will set aside a certain percentage for
bonuses, say about 85%. Performance bonuses are based on a performance
score that an employee receives. This score is determined by
attendance, which is called absenteeism and is defined as a fail

The last financial motivator for an employee at Lincoln Electric

is stock options. Every employee at Lincoln is given an opportunity to
own company stock, which is why they own 50 % of the common stock and
approximately 75% of the employees own stock. Stock is key in this
company and if the company does well then the stock will rise thus
generating success for the employee. Also, by owning stock it gives the
employees a feeling of empowerment. Empowerment is when a manager puts
more responsibility on an employee, by giving them the ability to make
decisions (Robbins, 2005). Linking empowerment to financial motivation
allows the worker to feel that there is less of a gap between them and
their boss, it also gives employees a chance to see how profits are
made and lost and to see how success is won and lost. By allowing
employees to see the success it will drive them to work harder. As well
as seeing the success, an employee with stock ownership will recognize
his/her responsibility in the company and their

With the employees at Lincoln Electric working on a piece-rate

pay basis and performance score, they are almost guaranteed to work
hard so they can take advantage of the financial incentives being
offered to them. If an employee at Lincoln isn’t motivated to be
productive it will only affect the individual because of the piece rate
pay and the graded performance that determines the bonus. The
combination of pay by output, bonus, and job security have worked
perfectly and the hard workers at Lincoln have been known to earn more
then $80,000 in a year(www.inc.com/magazine/19880801/5934.html).
Several employees at Lincoln were asked a series of questions regarding
their salaries and bonuses, each employee said they would not leave
Lincoln for less work because the pay and bonuses they could receive,
the outcome of purchasing stock, and the overall life goals they could
achieve while working at Lincoln Electric were unmatched for their type
of job. For example, in an interview with Joe Trahn an employee who

Employee Attitude

An extraordinarily important aspect of a great work environment

are the employee attitudes. Attitudes are people s views or statements
concerning different subjects, or more precisely, how the employees of
a company view the different aspects of their company. (Robbins, 2005)
Employee attitudes have two areas of concern for an organization. The
first is the affective component of an attitude.
This is the idea that attitudes of employees effect their demeanor, a
negative attitude entails a negative demeanor and vice versa. (Robbins,
2005) If there is an overwhelming consensus of negative attitude
within an organization it will be evident in the feel among the
employees and almost certainly will have an effect on key company
issues, including job satisfaction and productivity. The second
contributing factor of employee attitude is the behavioral component of
an attitude, which is the basic idea that your attitude dictates your
behaviors (Robbins, 2005).

Lincoln Electric has many practices and programs in effect that

contribute to a positive employee attitude. They have recognized that
an effective way to keep attitudes toward the company favorable is to
keep the employees content in their jobs. Lincoln Electric knows that
positive attitudes lead to profitable outcomes for the organization,
including increased job satisfaction, escalated job involvement, not to
mention a stronger sense of organizational commitment (Robbins, 2005).

All evidence points to a high level of job satisfaction among

Lincoln Electric’s employees. Although Lincoln Electric doesn’t
conduct employee satisfaction surveys, it is shown through employee
behavior. Among these indicators are an extremely low and stable
turnover rate and a high level of productivity. Job satisfaction is
promoted through the everyday company practices, such as great
employee incentive programs, increased empowerment, and the genuine
overall feeling
that Lincoln Electric cares about its employees and in turn, the
employees give
back to the company through hard work and dedication.

Lincoln Electric promotes equality and fairness within the

company through everyday
practices. When Lincoln Electric executives drive to work they have to
search for
a parking spot just like the lowest level worker. This is due to the
fact that
they have no designated parking spots. The employees, no matter their
rank, all
share the same cafeterias and bathrooms, not to mention the top
executives cram
into the same small, crowded offices as lower management. (Buller/
Schuler, 2006)
These practices promote a quality of fairness throughout the
organization. Nobody
is better than anybody else in accordance with how they are treated.
This creates
a satisfying work place that is comfortable, as well as gives it a
community like
feel.

Lincoln Electric empowers their employees to promote employee

involvement. The
most notable way in which they exude employee involvement is through
their employee
Advisory Board. Lincoln Electric has had this board in place since
1914. The
Advisory Board consists of employees that were elected by other
employees to
represent them and their ideas or views at meetings with the chairman
and president
on a regular basis. (Buller/ Schuler, 2006) This form of employee
involvement is
known as representative participation. It is the representation of the
employees
through a small group of employees when it comes to decision-making.
(Robbins,
2005) This provides the average employee with a voice to be heard by
management
and the executive board, making no one insignificant.

Lincoln Electric strives to maintain a great relationship with

their employees by
treating them fairly and with respect. The first example of this is
that Lincoln
Electric offers all open positions to the current employees. The only
external
hiring that is done is on entry-level positions. (Buller/ Schuler,
2006) This
gives the current employees a better chance to move up in the company
without
having to compete with external applicants. This also supports the
community feel
of the company. Through the action of hiring within, Lincoln Electric
is putting
people that the employees already know, not to mention the people also
know the
ins and outs of the company, making it a smoother transition. The
second example
is the job security that Lincoln Electric offers. They have a policy
in effect
known as the guaranteed continuous employment policy. This policy
basically
guarantees employees at least 30 hours per week for 49 weeks out of the
year after
they have two years of experience with the company.

Lincoln Electric employees are compensated well for their

productivity. The
employees are given great wages and incentive possibilities. Lincoln
Electric
employees are paid a little over two dollars, per hour, more than the
average
factory worker in their area. (Buller/ Schuler, 2006) This is
encouraging, as
well as motivational to workers because it is similar work for more
money. Lincoln
Electric Employees are also motivated through great incentives that are
offered.
These incentives come in the form of great stock options offered
through the
company and an annual bonus. These monetary incentives help Lincoln
Electric to
additionally motivate their employees through operant conditioning.
This means
that the employees are working toward the incentive, rather than the
other side of
operant conditioning in which employees work to deter punishment.
(Robbins, 2006)
Through positive operant conditioning the employees stay motivated to
get to the
reward at the end of the process, but they know that they

Lincoln Electric bases the employee annual bonuses on

performance evaluations.
These evaluations include the topics of quality, dependability, ideas &
cooperation, and output. The employees are evaluated on these criteria
by their
supervisors, which are then converted to a numerical score. These
numerical scores
are then computed into the percentage of employee s salary that becomes
their
year-end bonus. (Buller/ Schuler, 2006) The evaluation process
considers
procedural justice (the fairness of the process used to distribute the
awards) and
remains fair to the employee s. (Robbins, 2005) The criteria are all-
inclusive
and make sure to fully evaluate the employees concerning all aspects of
the
company. The Lincoln Electric evaluation process is also fair because
the bonus
that an employee receives is based on his or her own worker
performance. The
evaluations of the Lincoln Electric employees feed into the concept of
the
expectancy theory. This theory is the idea that an employee will put
in more

These organizational practices, not to mention the monetary

incentives help to keep
the Lincoln Electric employee s motivated. This is good for the
company because
it keeps their employee s satisfied and productive, which makes
business run
smooth. These are the practices that have worked in the past and will
presumably
continue to work in the future.

Job Satisfaction

One misconception that is well related to Lincoln Electric s

Organizational
Behavior is the theory that job satisfaction leads to higher
productivity (Robbins,
2005). This theory seems to be common sense but in reality credible
evidence
indicates that productivity is a better indicator of job satisfaction.
If this
theory holds true than without interviewing or analyzing the behavior
of people
within the Lincoln Electric corporation it could be assumed that
Lincoln Electric
employees are generally satisfied because of their high level of
productivity.
However, to fully understand Lincoln Electric employees other extensive
research
must be conducted. In the Lincoln Electric case study, the Human
Resource
Department interviewed five employees to get a more accurate
perspective of job
satisfaction and employee attitudes toward the Lincoln Electric
company.

In each of the five interviews employees displayed positive

attitudes toward
management and the way in which they treat Lincoln Electric Employees.
Lincoln
Electric asked four of the five interviewees if they or in their
opinion any
other employee would ever contemplate joining a union and in all
instances the
employee said no explaining that Lincoln Electric workers are
satisfied with
the compensation packages and the overall treatment of
employees(Buller/ Schuler,
2006). The interviewees seemed to be quite knowledgeable and expressed
to
interviewers that they thought Lincoln Electric offered the most
lucrative
compensation packages to factory workers in the Cleveland area and
possibly the
world. The interviewees attributed these lucrative compensation
packages to the
piece rate incentive program that was established in 1923 (Buller/
Schuler,
2006). All the interviewees articulated that they believe the
incentive program
directly motivates employees to be more productive, and in return
generates

Although the compensation to workers is extremely lucrative

there are other factors
at Lincoln Electric that exemplify the positive attitudes and employee
satisfaction. The core value of Recognizing People As Our Most
Valuable Asset
is a reason for employee satisfaction and a concern for Lincoln
Electric management
(Buller/ Schuler, 2006). At Lincoln Electric, management feels that a
good working
environment is critical to the success of the firm s individuals. Part
of having
a good working environment involves building relationships through
speaking and
seeing upper level managers. With many other companies workers never
get the
opportunity to see much less speak to senior executives or upper
managers, but in
contrast to those companies Lincoln Electric upper managers make the
effort to
speak, see, and build relationships with employees within the firm. In
one
particular employee interview Betty Stewart talked about how Mr. Willis
the chief
executive was an instrumental part in helping her choos

Job Involvement
Job Involvement is a form of empowerment and it has major
implications as far as
influencing attitudes and behaviors of employees. Employees who have
more work
delegated to them usually experience a feeling of high self-worth
within the
organization. If compensated properly than workers generally welcome
greater
amount of responsibility within the work place. However, with
empowerment come
greater expectations from management. Employees must anticipate or be
conscious of
expectations from management and behave appropriately to accommodate
these higher
expectations that come with this newfound empowerment within the work
place. The
Self-Fulfilling Prophecy that is talked about in the Organizational
Behavior text
by Stephen P. Robins says that people s expectations determine their
behavior,
which means if management expects big things from the employee than big
things will
be accomplished by the employee (Robbins, 2005). If both the self-
fulfilling
prophecy and the empowerment philosophy hold true th

Executives at Lincoln Electric have been empowering employees

ever since the
beginning of their existence. They believe that empowering individuals
makes for
more involved employees, which thus creates a more efficient and more
profitable
firm. An example of empowerment at Lincoln Electric is evident within
the
manufacturing facility where a single employee has been known to
operate several
machines by himself without the help of other employees and without
regular
supervision from a divisional foreman. While operating several
machines appears to
be a lot of work and in all likely hood is many employees embrace this
elevated
responsibility with the intentions of exponentially increasing their
bonuses
through the incentive program. This method of empowerment is
positively related to
lower absenteeism and lower turnover because of the temptation for
employees to
generate more income through abundantly producing products.
Empowerment could play
a major factor in why turnover at Lincoln Electric is less t

The Self-Fulfilling Prophecy relates to performance

expectations. As alluded to in
the empowerment section, management at Lincoln Electric have high
expectations of
their employees that they delegated power too. As a result they have
constituted a
responsibility performance initiative to prevent inefficient production
from
occurring. Self-Fulfilling Prophecy says, management expectations
determine
employee behaviors, if management expects something and clearly
identifies their
expectations than in all likeliness employees will meet those
expectations
(Robbins, 2005). Expectations at Lincoln Electric are clear, to place
customers
first! James Lincoln says, If fulfilling customer needs is the
desired goal of
business, then employee performance and productivity are the means by
which this
goal can best be achieved (Buller/ Schuler, 2006). Consequently, when
producing
products employees must make the assumption that the customer wants a
well-manufactured product. Through understanding this concept

Organizational Commitment

Organizational Commitment is vital within the work environment,

without commitment
from employees there is a higher probability of inefficiency and a
higher
likeliness of decreased worker performance within the organization.
Decreased
worker performance involves negative rates of absenteeism, turnover, and
productivity, job dissatisfaction, and low morale towards the overall
work
environment. However, if management attains the commitment of employees
through
goal setting, reinforcement, and job design than chances are that rates
of
absenteeism and turnover will significantly be reduced, productivity
and job morale
will increase, and overall job satisfaction will rise. After analyzing
Lincoln
Electric it is obvious that Lincoln Electric takes pride in obtaining
organizational commitment from its employees. Although the company
doesn t
specifically explain what theories of motivation they use to increase
commitment it
is apparent that they do use theory application to increase
organizational
commitment

Although the goal setting theory doesn t necessarily address

absenteeism,
turnover, or job satisfaction it does still play a major factor in
increasing
organizational commitment from employees. Goals are valuable tools in
motivating
employees, employees within an organizational structure need to feel a
sense of
accomplishment and strive for challenging goals to push them to the
limit. However,
if no goals are set than it is impossible for employees to challenge
themselves and
attain that feeling of achievement. Lincoln Electric in 1993 was going
through a
tough situation, their over sea operations were underachieving and
profits were
dwindling. Lincoln Electric was aware that changes needed to be made.
As a
result, they closed down six over seas operations and focused on the
under
appreciated domestic market which they believed was being ignored by
competitors.
To accommodate for the extra production that needed to be generated
Lincoln
Electrics CFO Frederick W. Makenbach asked employees to aid the c

The reinforcement theory is clearly used by Lincoln Electric

management to motivate
employees to be more productive. Lincoln Electric uses a variable pay
format when
compensating their employees. They pay employees the common hourly
wage in
addition to a piece rate wage that recognizes how many products were
produced by
that employee and appropriately compensates that employee with the
deserved
monetary bonus. This method of motivating employees is extremely
successful for
Lincoln Electric. In every interview within the case study employees
said the
greatest advantage of working for Lincoln Electric is the amount of
money that can
be earned through the incentive system (Buller/ Schuler, 2006). These
finding
prove that the reinforcement theory works tremendously well for Lincoln
Electric
and solidifies that money has major implications as far as worker
performance goes
within the Lincoln Electric company (Robbins, 2005).

Lincoln Electric uses the Job Design theory that is talked

about in the
Organizational Behavior book through using the skill variety dimension.
Employees
are encouraged to integrate their numerous different talents into their
job to
increase efficiency and productivity. Management also pushes for
employees to apply
for different positions within the company. Company officials believe
that
employees with multiple talents should not be restricted in their work
environment
and should be permitted to advance and prosper. Management at Lincoln
Electric
encourages that all employees pitch in to do whatever it takes to make
the firm
more successful. Joe Trahan a supervisor at Lincoln who has been
working there for
39 years says, At other places, electricians only do electrical work
carpenters
only do carpentry work. At Lincoln Electric we all pitch in and do
whatever needs
to be done (Buller/ Schuler, 2006). The application of the Job Design
theory
within the Lincoln Electric firm has created a feeling of o

Ability Job Fit

The employees that work for Lincoln Electric must be fast learners and
hard workers
to be successful within the company. According to Buller and Schuler
(2006) the
newly hired workers are given very little on-the-job training when they
start
working for Lincoln, they are expected to jump right in and begin doing
the job they
were hired to do. The entry-level positions are the only positions
that are hired
from outside the company; all upper-level positions are filled from
promotions
within the company. The employees that assemble the parts gain
experience by
working on the factory floor and then can move up in the company.

Ability-job fit is the concept that different jobs have differing

demands and that
the employees differ in their abilities. He also states the specific
intellectual
or physical abilities required for adequate job performance depend on
the ability
requirements of the job (Robbins, 2005). Ability-job fit is related
to an
employees job satisfaction as well. An employee who has the ability
to perform
their specific job will be more productive when compared to a worker
without an
ability-job fit. According to Robbins (2005) a satisfied worker isn t
necessarily
a productive worker; rather a productive worker is a satisfied worker.
Job
satisfaction consists of more than just the feelings and productivity
an employee.
It entails employees being able to interact with coworkers and
managers, meet
performance standards, along with the conditions of their working
environment.
Based on what Buller and Schuler (2006) stated about Lincoln s
employees being
satisfied and having low turnover rates we can assu

Based on the assumption made in the above paragraph we can see how
ability-job fit
would apply to Lincoln s sales team. Who should have the intellectual
ability to
thoroughly understand and explain the manufacturing and engineering
process of the
product, which they are selling. An example of this can be found in
Interview #3
(Buller and Schuler, 2006) where an employee, Roger Lewis, graduated
from Purdue
with a degree in mechanical engineering and is now part of Lincoln s
sales force.
With Roger having the understanding of the Lincoln processes it gives
the
satisfaction and motivation to work harder than most. I don t think
there are
many sales reps for other companies who are putting in 50- to 60-hour
weeks
(Buller and Schuler, 2006).

The ability-job fit concept can also be seen in Lincoln s manufacturing

facilities.
Employees working in the factories should have congruent abilities
with their
career, which would require the employees working in the factories to
have both the
physical and intellectual abilities to operate the large and
potentially dangerous
machinery properly and safely.

Personality-Job Fit Theory

Robbins (2005) states that according to John Holland s Personality-Job

Fit Theory
persons with a realistic personality type prefer jobs that entail,
physical
activities that require skill, strength and coordination (Robbins,
2005). All of
which are skills involved in working either with heavy machinery or on
an assembly
line. With this knowledge we can assume that the employees working in
Lincoln s
manufacturing facilities most likely have realistic personalities.
Robbins
(2006) also records that in John Holland s theory that employees with
congruent
personality types with their job environments are more satisfied and
less likely to
voluntarily resign. Which can be seen in the case presented by Buller
and Schuler
(2006) where they state that Lincoln s employees have job satisfaction
and that the
company has a low turnover rate.

Person-Organization Fit

According to Robbins (2005) it is becoming more important to fit an

employees
personality to the organization s culture more so than with the
characteristics of
a specific job. Reason being that organizations today are facing a
dynamic and
changing environment and requires employees who are able to readily
change tasks and
move fluidly between teams& (Robbins, 2005). By hiring an employee
with a
congruent personality with the company s culture it should result in
higher job
satisfaction and reduced turnover. Using these concepts we can make
the assumption
that Lincoln is hiring employees with a personality congruent with
their company
culture. It can be seen in Buller and Schuler s (2006) statements that
Lincoln s
employees are overall satisfied and that the company has low turnover
rates.

The concepts of person-organization fit can also be seen in Buller and

Shuler (2006)
statements that Lincoln s main factory in Euclid, OH was recently
declared one of
America s 10 best-managed factories by Fortune magazine. When the
Euclid factory
was compared to General Electrics it was described as being cavernous,
dimly lit&
and like stumbling into a dingy big-city YMCA (Buller/Schuler, 2006).
Even Roger
Lewis, an employee working for Lincoln s sales force conveyed the
factory as being
small enough that you could stand at one end and the watch as the
materials came in
one side and out the other as a finished product. While General
Electrics was
dubbed the Hyatt Regency of factories. But what made Lincoln s
factory stand
apart from others was their ability to merge design with manufacturing
(Buller/Schuler, 2006) among other things.

In support of Robbins (2005) concept of person-organization fit we can

see how it
would apply to Lincoln. Employees working in the manufacturing factory
would need
to have the ability to change from task to tasks. They have to be able
to readily
switch from working in design to working in manufacturing. Also with
employees
working in between design and manufacturing they would also need the
ability to move
fluidly between teams of engineers and assembly line workers.

Relationships within Theory Applications

All companies are established with a company philosophy,

business plan, and
policies to help guide it. Lincoln Electric is no exception. They
have a company
philosophy, business plan, and human resource policies that are all
designed to
interact and link the company in a way that makes it stronger and more
successful.
These links within the company are independent variables that can be
controlled on
the individual, group, and organizational level. For the company to
become
stronger each variable must interact with the dependent variables for
that level.
This case focuses on the organizational level.
 The key concept of the Lincoln Electric case is motivation, as
well as job-fit with
job-fit being related directly to productivity. Motivation is an
independent
variable for Lincoln Electric because it affects the company s
absenteeism,
turnover, satisfaction, and most importantly productivity. Each of the
items
listed is a dependent variable because it reflects the company s
motivation
policies. Lincoln Electric has been successful because its dependent
variables are
positively affected by the independent variables which means Lincoln
Electric has
had successful managers in charge of the independent variables.

In Lincoln Electrics use of Motivation as an independent

variable they have created
a successful company with hard working employees. The main tool of
motivation that
is being used is the piece-rate pay system that rewards employees on
their
productivity. The expectancy theory provides the best prediction of
this system as
a motivator. Expectancy theory would predict the piece-rate pay plan
would be
motivational because the employee will work harder based on the
attractiveness of
the outcome of their actions, in this case the outcome for the employee
is money
(Robbins, 2005).

The Lincoln Electric bonus plan falls right into place with the
piece rate pay
plan. The money set aside for bonuses often amounts to more than half
an employees
wage and is based upon a reward/point system. This bonus plan is a
recognition and
financial motivator because employees are given recognition for their
contributions
in the form of points that are used in evaluation criteria and money
based on their
evaluation scores. The reinforcement theory, which says behavior is a
function of
its consequences (Robbins, 2005), is a large part of this motivational
tool because
employees are being rewarded for their contribution in the form of the
bonus as
well as the recognition being received.

Another example of the motivation and how it relates to

productivity is Lincoln
Electrics employee involvement programs. Lincoln Electric has an
employee advisory
board that is elected by the employees and meets with the CEO every two
weeks to
discuss ways of improving operations (Buller/Schuler, 2006). While the
advisory
board doesn t have the power to make decisions for the company it has
the ability
to give ideas and keep employees feeling as if they have some control
in the
company. A second employee involvement program is an employee stock
ownership plan
that gives the employees the ability to purchase Lincoln Electric
stock. This has
been shown to motivate when employees recognize that they have
ownership in the
company. This motivational tool has proven effective for Lincoln
Electric largely
because the success of the company makes the stock successful which
encourages the
employees even more.

A byproduct of Lincoln Electric s motivational techniques is an

effect on the
company s turnover and satisfaction. Studies have shown that
productive workers
tend to be satisfied workers (Robbins, 2005) and because the piece-rate
pay system
promotes productivity employees feel like they accomplish more. This
productivity
leads to the satisfaction of employee s and lowers turnover. Lincoln
Electric s
low turnover is proof that people are satisfied with their job and/or
the
organization. Employee satisfaction builds into organizational
commitment as
witnessed in the Lincoln Electric case by interviews with employees who
say they
would not leave their job for less work and less pay (Buller/Schuler,
2006). The
organizational commitment of employees can only be positive especially
when it
influences other employees who may not yet be entirely committed.

The Lincoln Electric practices of ability job fit are also

examples of motivators.
By fitting people to specific jobs they are setting that employee up
for success on
the basis of the previously mentioned statement, a productive worker is
a more
satisfied worker. Lincoln Electric s ability to match people to jobs is
successful because of their ability to match people to the organization
in the
practice of person-organization fit. Lincoln Electric s low turnover
and job
security are examples of satisfied workers who fit well in the system.

Since motivation is so important for a company to be

productive, Lincoln Electric
has focused their resources on motivating employees as best as
possible. Through
financial motivation, the piece-rate pay plan and bonus system, and
attitude type
motivation, employee stock option plan and employee advisory board,
Lincoln
Electric has experienced very low turnover and high employee
satisfaction. The
results of these motivational tools match what would be predicted based
on
organizational behavior (Robbins, 2005) and the interaction of
dependent variables
with independent variables.

Inconsistencies with Theory Application

The organizational behavior of Lincoln Electric has proven over

the last 100 years
to be a successful model for how to operate a business. The company
has quality
products at competitive prices. Employees are well motivated and loyal
to the
organization. The system though is not entirely consistent with in the
company
policies.

Lincoln Electric says that a Human Resource Objective of the

company is to
promote training, education, and development that broaden employee
skills. This
would be a good motivational tool for employees if they thought that
they would
have the opportunity for continuing education and access to skill
building
experience. Unfortunately Lincoln does not usually pay for off site
education
because it would be inaccessible to all employees. The idea is good
but it
conflicts with the company s policy of only hiring from with-in.
Lincoln Electric
acknowledges that it is getting harder to fill upper level positions
due to a lack
of qualified applicants (Buller/Schuler, 2006). It is motivational for
employees
to feel that they have equal opportunity to be promoted but it is
challenging for
them to get all of the proper skills.

Lincoln Electric is an international firm, which adds different

dimensions to its
challenge of being productive and successful. Some of the tools that
are effective
in America such as incentive pay and employee advisory boards may have
little to no
effect in other countries with different cultural values. Americans
value money,
recognition and success while employees in another nation might value
something
entirely different. These differences are challenges of organizational
behavior
and are something that Lincoln Electric must pay attention too.

Lincoln Electric is a firm with a good business plan and

company philosophy. It
follows many of the organizational behavior predictions that would be
assumed of
it. While some predictions might be off a little from the real,
predictions about
Lincoln Electrics motivational tools are accurate as shown by the
employee loyalty
and satisfaction.

Conclusion

Lincoln Electric has established itself over the last 100-years

as a successful
company and a desired employer. Lincoln Electric has developed a set
of techniques
and policies that help to make it a desirable employer; these include
the
piece-rate pay program, the year-end bonus and incentive program, as
well as
employee involvement programs. Each of these tools serves as a factor
between the
dependent and the independent variable. The independent variables were
defined as
motivation and ability-job fit while the dependent variables were
identified as
absenteeism, turnover, job satisfaction and productivity.

Lincoln Electric is a unique company that found a way for

organizational behavior
theories to apply to its business. Lincoln Electric employees
experience
piece-rate pay that in theory is a very effective motivator and at
Lincoln Electric
proves to be the most effective motivator because employees have some
control over
their pay level. During interviews employees established that pay was
the main
reason for their loyalty to Lincoln Electric. The reason that piece
rate pay is
effective is because the employees have an established expectancy
theory that
follows predictions established by research. The employees do behave a
certain way
in the expectation of a certain outcome. In this case they work hard
because they
expect to be rewarded with money.

The independent variables for Lincoln Electric seem to be

generalized in the
manufacturing field because it is very easy to pay employees on a piece
rate
system. The variables may not be very general if the system was to be
implemented
in a different field because the pay system wouldn t transfer very
easily, but the
other aspects (i.e. bonus program and employee advisory committee) of
the system
would be able to move easily from industry to industry. It is Lincoln
Electrics
independent variables that positively affect the dependent variables,
turnover have
been very low, satisfaction is high, and productivity is also high.

In recent years Lincoln Electric had changed some of its

historically successful
ways and felt a backlash from employees. New workers were making only
75 percent
of what had been the initial salary for their position, senior
employees felt this
was unfair and it wasn t before long that the company raised the wage
of new
workers back to where it had been. Lincoln Electric has also opened a
plant in
China and purchased a German welding company. Lincoln Electric has
continued
growing through their own business as well as acquiring new businesses.
They still
use their incentive plan as well as the piece rate pay system

Lincoln Electric was established with the mindset that

customers and employees are
the most valuable people to the organization. Through the years
Lincoln Electric
has continued to value people and innovation on their way to becoming
the market
leader in Arc Welding. Lincoln Electric works hard to gain and keep
productive
employees and promises not to downsize them. The company s loyalty to
its
employees has been rewarded by their employees loyalty to the company
and people
are the reason that Lincoln Electric has been successful.

Bibliography

Robbins, S. (2005). Organizational Behavior. Upper Saddle River:

Pearson Prentice Hall.

Buller & Schuler (2006). Managing organizations and people: Cases in

management,
organizational behavior, and human resource management. Mason: Thomson
South-western.