4. 4. Should Lincoln borrow money and pay bonuses to avoid breaking trust with its U.S. workers? Why or why note Imagine having a management system that is so successful people refer to it with capital letters—the Lincoln Management System—and other businesses benchmark their own systems by it. That is the situation of Ohio-based Lincoln Electric. For a number of years, other companies have tried to figure out Lincoln Electric’s secret—how management coaxes maximum productivity and quality from its workers, even during difficult financial times. Lately, however. Lincoln Electric has been trying to solve a mystery of its own: Why is the company having such difficulty exporting a management system abroad that has worked so well at home?

Lincoln Electric is a leading manufacturer of welding products, welding equipment, and electric motors, with more than $1 billion in sales and 6,000 workers worldwide. The company’s products are used for cutting, manufacturing, and repairing other metal products. Although it is now a publicly traded company, members of the Lincoln family still own more than 60 percent of the stock.

Lincoln uses a diverse control approach. Tasks are precisely defined, and individual employees must exceed strict performance goals to achieve top pay. The incentive and control system is powerful. Production workers are paid on a piece-rate basis, plus merit pay based on performance. Employees also are eligible for annual bonuses, which fluctuate according to the company’s profits, and they participate in stock purchase plans. A worker’s bonus is based on four factors: work productivity, work quality, dependability, and cooperation with others. Some factory workers at Lincoln have earned more than $100,000 a year.