2. Recognition of employees for good and productive work and giving them rewards for it, is very important because it motivates them to work. Production workers are paid according to the number of good pieces they make, which means the compensation is based on the output.
The reason why the Lincoln Electric is motivating its employees is to keep them satisfied with their job, to present a good performance and good customer service, to reduce the costs, to attain the high quality of their products, which generally means creating a more profitable company.
The main motivation point of Lincoln Electric’s is recognition of good work and paying the workers for it. Which means the pay is basically skill based. If the employees are highly motivated, their performance is also high. The workers are classified every six months. The classification is based on the quality of their work minus days of absence, on the quantity of their work minus customer rejections, on dependability, and on their ideas and cooperation. The employees have daily drives to reach high performance, they have guaranteed employment after three years of service, after two years employees begin to participate in the year-end bonus plan and other benefits. This strategy is motivating because “workers under piecework system should be producing as much as it is possible (in order to earn more money) because scientific management assumes that people are motivated only by money.”
“Monetary Incentives that give a drive to people to work:”
-
Bonuses: Cash and stock options.
-
Profit Sharing: Distribution of profits.
-
Gain Sharing: Reward for company performance (cost reduction and quality
improvement).
-
Incentive Systems: Measured day work, meaning that the pay is based on the standard
time.
Piece rate, meaning that the pay is based on the pieces produced.
Skill based pay.
Low cost of high wages.
Problems for Management and Employees:
Apparently, this system can also create problems in company. According to some employees, this system can cause a negative competition. A certain number of merit points is assigned to every department and an extremely high rating for one person can cause a lower rating for another person. This problem urged Lincoln Electric to start to consider the changes in the system. This problem was also positive because it led to increasing productivity. The overall Lincoln’s productivity was about double higher than its competitors’.
Another problem would be “Globalization”. A cheaper labor from abroad can result in lower bonuses and lower pay for domestic workers.
Lincoln’s system would have great difficulties in:
- tall organizations
- non-flexible organizations
Types of employees would be happy working at Lincoln:
Employees that would be happy working for Lincoln are the ones that are loyal and highly dedicated to work, those that what to learn new things and want to work, and the ones that are able to work in teams.
The reasons why is Lincoln Electric successful:
- Lincoln’s consider their main goal the customer’s interest.
- All the workers are given sufficient training and education.
The two key elements in Lincoln’s HR system:
- they give employees responsibility
- they give employees recognition for work
Human Resources are supporting Lincoln’s overall strategy in a way that they give employees responsibilities (attendance, earning power, self-management), they give them recognition for good work and pay them for it, then by stock ownership, financial management and other policies.
Transferable parts of Lincoln’s system:
- Human Resource Management
- Stock Ownership
- Work performance and employee attitudes
Recommendations:
“Types of Human Resource Management practices:”
-
Employment Security: successful organizations are characterized by commitment towards
their employees, career development, and internal advancement
opportunities.
-
Information Sharing: if people are a source of competitive advantage, they need to have the
necessary information about what is required to be successful.
-
Participation and Empowerment: using a good judgement in all situations; there will be no
additional rules.
Resources:
(http://mgtclass.mgt.unm.edu/Kime/MGT300/chap%2010.ppt)
(http://mgtclass.mgt.unm.edu/Kime/MGT300/chap%2010.ppt)
(http://www.csupomona.edu/~hco/Cases/LincolnElectric.pdf)
(http://iexchange.london.edu/html/w_-_lit_-_remun.html)