In this unique company, every worker has a self-interest what profits are highest possible.
By Blake Clark
25 years ago, Nellie Griffiths, a young Irishwoman emigrated into America, was engaged to the factory of Cleveland of the Lincoln Electric Co ., the biggest manufacturer of material of arc welding of the world. Nellie rained in this new frame and specialized in the grinding of matrices, work which consists in giving to these details(rooms) polite one complete(perfect).
Most of the plant workers have a great deal of difficulty in putting a little money(silver) aside for difficult days. Now, having crossed(spent) 20 years to the Lincoln Electric Co ., Nellie was able to allow to return in Ireland, where she bought, at the edge of the ocean, a property including a big house of ten rooms(chambers), greenhouses, hangars with boats and stables. His acquisition was settled(adjusted) in cash, he had still enough money(silver) for tranformer the house in hotel of holiday resort.
Ernest Tait, an ex-sergeant of the American army, entered to bobineur in Lincoln Electric 45 years ago. He became a leader of the workshop(studio) of winding. When it(he) withdrew, his wife and made(did) him(her) a journey around the world. The pension of the company(society) keeps silent about touch at present and has on top of a substantial capital, a fruit of its saving.
These examples, rather exceptional in the industry generally, do not so to speak go out of the common in Lincoln Electric where the staff participates in a probably unique(only) degree in the results of its work.
One has good reasons for considering that 60 % of the employees used(employed) on this company(society) have incomes resulting from investments made(done) with their savings. A roadsweeper, whose employment(use) passes to be the lowest of the salary scale, is an owner of several houses which it rents(praises). A bookkeeper bought a commercial building forming a whole block. During the years, hundreds of qualified employees managed to accumulate an important capital by investing(surrounding) a part(party) of their salaries.
What is the secret of these schemes? All this result from an original formula of cooperation between workers and managers, finalized(worked out) by the company Lincoln Electric, and thanks to which the employees and the direction(management) act of concert to lower cost prices and realize savings that they are divided. According to James F. Lincoln, his(her) creator, this system manages to double and even to quadruple the production.
But how can one incite an employee to have constantly the spirit on the alert to look for means to reduce the spending(expenditure) and to increase the production? Here is the process used(employed) by James Lincoln. When this sturdy engineer became, in 1914 , managing general of the company(society) based by his brother, he gathers(reunites) the employees and asked them to elect representatives who would be of use to him(her) as councillors.
I knew, he declared to me, that if I could them bring to wish as ardently that I the prosperity of the affair(business), no problem would be insoluble.
The consultative advice(council) appealed to the intelligence of all the employees. The members met every 15 days and got(touched) every time a 4$ token. The duration of a mandate could not exceed(irritate) one year, a big number of employees was so brought to take part in the responsibilities. All the questions were approached: reduction in cost prices, new manufactures, sales, particular advantages for the staff. The suggestions streamed freely. Lincoln attributes(awards) the prosperity of the firm mostly to the ideas so collected.
This first year, the company(society) adopted the piece work and reduced the weekly duration of the work at 50 o'clock instead of 55 hours(o'clock) normal for the time, while increasing the salaries of 10 %. She contracted, besides , at her(its) expenses of the life insurance for all her staff, unusual advantage 47 years ago. Afterward, she(it) established a system grace(favour) in which the worker having made(done) an interesting suggestion to lower cost prices received a substantial premium. During the years ' 30, she(it) adjusted salaries and salaries to the cost of living.
It is in 1934 when was emitted(uttered) propositron of a lot the most important. Somebody suggested the payment to all the staff of a bonus of the end of year. Lincoln accepted, provided that this premium is (effectively won) by the employees. It(he) imagined then a method guaranteeing a fair distribution of the possible bonus. Every employee was noted twice a year by all those which(who) were capable of appreciating the return. These notes served for fixing the part of the bonus and conditioned(packaged) its promotion.
At the end of the first year, one noticed that, having taken the reserves and 6 % of profits for the shareholders, it was possible to distribute a bonus equivalent to 26 % of the amount of the annual salaries. In this fourth year of the big economic crisis, it was of much superior one to had been able to hope for. Lincoln called back the employees who the accalmaient: < This bonus is not a present of the direction(management). It(he) results from the increase of your production >.
The continuous reduction in cost prices and the exceptional quality of the manufacture, recognized by the clientele, allowed to increase regularly this premium. For several years, she(it) reaches(affects) between 80 and 100 % of the total of salaries.
Does one well realize what it means? At the end of the year, the worker of Lincoln receives, on average, at one go a sum of money about equivalent in the totality of what he gained(won) during the 12 months précécents! How long is it necessary for most of us to put aside one year of salary? Even the employee who gains(wins) 10,000$ a year has a great deal of difficulty in putting aside 1,000$ every year. That's why, in this factory, the employees have generally a second source of incomes, resulting from the capital which they accumulate. Many of them used a part(party) of this capital to buy actions of Lincoln Electric. Those that invested(surrounded) so 550$ a year, from 1935 till 1954, were to possess each near 25,000$ at the end of this period of 20 years by taking into account dividends and rise in prices.
One often asks Lincoln if this prosperity does not spoil a man. What he answers that more the men(people) have of responsibilities more they show themselves it deserving. They buy houses, push the instruction of their children, assume civil homework(duties). The main advantage of the system is, he thinks, that it stimulates the latent capacities of the employees.
< Each of my workers has the appropriate(clean) capacities, he says. If one wants that the prosperous affair(business), it is absolutely necessary to use them >.
As it(he) intended to draw up the plans of a new factory, Lincoln asked two years in advance to his(her) staff to emit(utter) suggestions concerning the way she should be ordered so that the quality of the work is improved. It(he) resulted from it an unique factory, conceived to decrease certain cool, handling, control and surveillance among others. Needs in shops and in inventories were reduced at least.
Let us quote an example: in the section manufacture of machines, a hall includes certain number of conveyer belts 500 feet long, one for every type of machine to weld. Along each of these chains(channels) are arranged the small studios(workshops), at the rate of one by element to be gone(taken) up. The worker, or sometimes a team of two or more, makes(does) the complete assembly of this element, in the style of a sub-entrepreneur, to incorporate him(it), ended, into the chain(channel).
The other example: Jim Macy, a strapping lad who approaches about fifty, makes reservoirs with gas. In a space of 12 feet on 12, surrounded with the raw materials which it(he) needs, it(he) welds pipes, weld in the bow the walls of the reservoir, makes(does) the attempts for the compressed air, add the supports of fixation and proceed to a thorough clean-up of the reservoir ended before putting him(it) in the circuit.
When the new factory was constructed, Jim Macy was only a welder among many of the others. Each of the details(rooms) necessary for the work was brought back(reported) to him(her) of a different store. It was necessary to establish borderaux, to verify them, to classify them. A foreman crossed(spent) the commands(orders) according to a program of production. Now Jim consults himself the program and gets organized as a consequence. It(he) has its(his) inventory under eyes and treats(manipulates) only raw materials.
Jim can also do without controllers. It(he) is in details(rooms) and guarantees the quality of its(his) work. The company(society) supplies him(her) tools and materials and, in fact, he buys one certain counts of elements of a quality given to an agreed price. It is so independent that he could almost settle down on the other side of the street. Instead of having, as previously, a specialized and limited activity, it(he) became completely responsible for its(his) production and can directly collect the profit of its(his) spirit of initiative and its(his) ingenuity. So he says with a smile which hides badly its pride: < I am entitled " general manager " of the section of reservoirs. >.
The notion of economy reigns in all the rungs, including that of the direction(management). No department head, not even the manager of sales responsible for 60 million commands(orders) a year, has a private secretary. Most of the offices(desks) and seats result from the former(ancient) building, left here is 12 years. There is a caféteria but no private dining room. No (break - cafe). No soothing music in offices(desks). Inaudible in the ear, the only melody is the distant ringing of the dollars of the bonus of Christmas.
The absenteeism, very weak, is about 1.5 %, and the staff is very stable. For years, the percentage of rotation is very lower than 1 %, while it was, in 1959 , 3.3 % for all the factories of the United States. Why would the staff leave the company(society)? In 1959, the annual earnings of the typical worker of Lincoln were on average of 10,467$, while average dress rehearsal of the American industry amounted to 4,589$ only.
The good agreement which reigns among the employees and the direction(management) is striking. New machines and change in the methods of work are accepted without any trouble, because they represent an increase of the production and, leaving, the higher bonuses.
James Lincoln regrets the current split which reigns generally among workers and bosses and reprimands these last ones of their past carelessness, which led(drove) them not to interest more the staff in the profits of the company.
< The worker, says, was obliged to resort to syndicates to obtain the improvement of his level of life and his condition, which his boss would have had to grant him(her) automatically >.
To prove that the clientele takes advantage also of this collaboration, thanks to which of the welders become capitalists, James Lincoln quotes figures. In 1934, the model with dynamo of 300 amperes of the company(society), one of the machines of soldering most usually used, was sold 655$; at present the price is 535$. Now, at the same time, salaries almost quintupled, the copper costs four times as expensively, the prices of sheet steels and the bars of steel widely tripled. The increase of these basic elements was compensated with the concern of every worker to improve its return, concern which ended in the settling of techniques, methods, conceptions and new machines and also in the development of the personal capacities of each. Thanks to what, the cost price of machines having decreased, it was possible to lower the selling price.
Lincoln respect that most of the problems of the industry could be resolved by the methods which it(he) used(employed). North America sees at the moment number of her products excluded from the world market because of their high price. The reason which one gives it generally is that our salaries are far too much high with regard to those that are current in the rest of the world. Now the experience(experiment) of Lincoln denied(contradicted) this assertion. The company(society), while paying(pouring) salaries from three to six times higher than those of the foreign countries, sells its production all over the world. She(it) even managed to get in Germany where the manufacturers are also among the first ones to make of the material of arc welding and have as much experience(experiment) in this domain as whoever in the United States. It is not the high salaries but the wasting and the ineffectiveness that deprive us the access to the outer markets. One can surmount this obstacle only in the daytime when the direction(management) and the manpower will have a direct interest to reduce cost prices.
< With the reduction in cost prices, the world trade will take a considerable development, predicts Lincoln. To answer this expansion, needs in manpower will increase ceaselessly. The prices will fall, salaries will rise, new markets will open, the professional knowledge will go by perfecting, and each will see his existence growing rich from the point of view of the work, the leisure activities and the human values. Companies variously use, with some variants, the methods Lincoln. In 1930, one found in the United States and in Canada only hundred of companies(societies) endowed with the profit-sharing system; one counts it 40,000 today. During the financial year 1960-61, about 4,800,000 persons removed 1,300,000,000$ thanks to these plans. According to the conclusions of an inquiry pursued during five years by a company(society) of investment and concerning 23 of these companies registered on the New York Stock Echange, these firms were for the better better posture than those chosen by Dow-Jones to establish the general averages of the classes(courses).
If our system of freedom of the production should progress, it is necessary that each becomes capitalist or at least that one allows him(her) to remove its part of the advantages resulting from a creative and effective work. The example of Jim Lincoln showed that it is possible.
From Selection of the Reader's Digest, August, 1962
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