Reward Practices Lincoln Electric - Click Here to Get Instant Solution

Question: Discuss about the Reward Practices Lincoln Electric . Answer: Introduction Lincoln Electric was found by John C. Lincoln in the year 1985 to manufacture electric motors and generators and later diversified into the manufacturing of arc welding machines and supplies. In the year 1907, Johns brother James joined the company and they together focused on implementing an effective incentive management system to motivate the employees and increase their productivity so that they contribute in the achieving the strategic goals of the organization (Saks Gruman, 2011). This performance management technique has enabled Lincoln electric to be the leading manufacturer of arc welding machines. They have integrated various rewards and incentives in their unit situated at Cleveland, Ohio which will be discussed further in the report. The objective behind preparing the report is to analyse their existing incentive pay scheme and its implication on the performance of their employees. Employees motivation is very important for the growth of the organization and at Lincoln E lectric they are continuously involved in enhancing the motivation factor by their variable pay system (Hastings, 1999). Reward practices at Lincoln Electric The CEO of Lincoln Electric Mr Don Hastings was responsible for following the principles of the founder John and James Lincoln of sharing organizations profit, guaranteed employment and the welfare of the people working in their organization (Lincoln Electric, 2017). The reward practices prevailing in Lincoln Electric are: Piece work system: The piece work system is based on the concept of more you work or produce output in an organization, the more you earn. At Lincoln Electric, the workers are strictly paid on the basis of output produced by them. There is no base wage and every line worker can earn according to their capacity. They work for themselves and try to earn as much as possible which can surpass the base wage offered. Piece work system is often referred in America as a means to exploit the workforce by offering them less for every piece produce but Lincoln brothers saw this as an opportunity to motivate workers to produce more and earn according to their potential. The major advantage of this following this system is that it lowers the rate of Absenteeism in the factory. The major drawback identified in this piece work system was the workers earned less during the time, the recession hit the economy. Their workers lost $1 on every piece they used to make. Also, the time they spent in the factories were not considered in calculating the compensation. Profit Sharing system: This was another effective incentive plan which is being followed by Lincoln Electric. The management shares risk and rewards with their workers which is commonly known as Share economy in an organization. At Lincoln Electric a large part profits is distributed among its employees as their pay. The major benefit of profit sharing system is that it motivates people to work hard when the times are good and stick to the company during the time of economic downturn. It is a very effective way in retaining the employees during bad times and it also assures employees that their efforts and contribution is valued (Koller, 2013). This profit sharing system can prove to be a disadvantage as during the times of recession when organizations are fighting hard to earn surviving profits, the company has to share them with their employees. Low profits means Low bonus and less employee satisfaction. Year-end bonus: Another effective reward practice of Lincoln electric is their Year-end bonus scheme. This scheme depends on the total profits of an organization and twice yearly grades given to each workers as compared to their competitors. It involves factors like workers productivity, cooperation and performance. All of these factors are analysed by the supervisor and then the bonus amount is decided. As mentioned I the case study the average worker can make more bonus than the basic wages. It works great as a motivation factors for employees but it also create a feeling of unfriendly competition among the fellow workers. Employees performances and bonuses are highly depends on the grade given. Low grades result into low bonus. No layoffs policy: At Lincoln Electric the major reason for their successful performance in the industry are their satisfied employees who have no fear of being laid off even if the times get tough. Lincoln Electric have a great history of maintaining workforce even during the time of depression. Their no lay off policy give a sense of security to employees and it is directly reflected in their performance. Alternative reward practices Family Health insurance: Workers working on the factories have no insurance cover at Lincoln Electric. Though providing health insurance can prove to be a bit expensive for the employer but the employee will feel valued. This will create a sense of responsibility on the part of the employee towards their organization and they will contribute productively to achieve the goals of the organization. Workplace wellness programs: Apart from providing a health cover, the employer can also provide workplace wellness programs so that employees cannot neglect their health while at the workplace. This program has significant benefit on the mental and physical health of the employee. This program may include giving gym membership or other physical activities which can help the employee to take care of their health and stay fit. At Lincoln Electric workers are working in factory which may cause the threat to the health of the employees, a regular health check-up will help to diagnose possible health risks and prevent them from occurring. As a result the rate of absenteeism will be low and they will perform in the best interest of the organization (Johnson, 2016). Offsite employee activities: Offsite employee activity can be an effective performance management tool for the employees. By taking employees outside during their paid hours to engage in any kind of recreational activity will increase positivity among the workforce and they will feel more motivated to do their workplace duty with dedication and commitment. Offsite visit can also include team building activities which will increase unity and commitment between employees working together. When efforts and hard work of all the employees are aligned in the right direction, an organization can easily achieve competitive advantage in the industry (Dattner, 2015). Improving performance management process Performance management is a very strategic tool in order to improve the employees performance so that they can contribute productively in achieving the vision and mission of the organization (Lin Jee, 2011). The main objective of implement an effective performance management process is to enhance productivity and performance of employees by motivating them (Bagul, 2014). A good performance management process has a direct impact on the turnover rate and absenteeism rate of the employees (OMES, 2017). Lincoln Electric despite of having an attractive incentive pay system but still there are some factors which are to be considered. Basic pay: As it has been discussed in the first part, Lincoln Electrical pay their line workers on the basis of the output produced by them. In the case study, the workers were seen complaining about a substantial decrease their piece work wages after the recession. They are making less than what they are earning now. Basic pay which is fixed in nature is very important to support their family. When the times get tough, piece work pay keeps on fluctuating but when employees are assured a fixed pay by the employer it will give them a feeling of security. It will not reduce the attrition rate of the workers but also give them job satisfaction. Non-monetary incentives: Lincoln Electric believes that monetary benefit is the major motivational factor which is true to an extent (Danish Usman, 2010). But there are other methods also such as taking continuous feedbacks from the workers and employees, acknowledging the efforts of the top performer in front of everyone etc. can also help to boost the morale of employees and they may work hard to receive a chance of being a start performers among their co-workers (Feder, 1994). Conclusion From the above report it can be concluded that the secret of Lincoln Electrics policy of no layoffs policy and other incentive pay system is a direct result of their impressive performance management process. They have been quite successful in retaining the workers and employees even though in tough times. They know that whatever the organization earns in terms of profits is a direct result of the efficiency in productivity and performance of the employees and that is why they consider their workforce as an equal partner in their profits. By their impressive performance management system, they have secured a competitive position in the industry. Recommendations The reward and incentives practices of Lincoln Electric have been proven very successful in increasing the productivity and improving the overall output of the organization but the front line workers are quite tensed because of the decline in their piece work rates. The management can ensure them financial security by giving assuring a basic pay also in order to increase the feeling of healthy competition among co-workers, Lincoln Electric can start acknowledging the efforts of the start performers based on the votes of the individuals working in the factory every month. This will help them to boost their self-esteem and produced output (Brown Reily, 2009). References Bagul, B.D. (2014).Scholarly Research Journal for Humanity science English language. Retrieved from https://www.srjis.com/pages/pdfFiles/146771381814.D.%20B.%20Bagul.pdf on 31 March 2017. Brown, D. Reily, P. (2009). Measuring the effectiveness of pay and reward practices How do we achieve more evidence-based reward management? Retrieved from https://www.employment-studies.co.uk/system/files/resources/files/mp84.pdf on 31 March 2017. Danish, R. Q., Usman, A., (2010). Impact of Reward and Recognition on job Satisfaction and Motivation: An Empirical Study from Pakistan. 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