In the late 1800s, Cleveland was a lot like the Silicon Valley of the 1990s. Inventors, entrepreneurs and venture capitalists were creating new and exciting technologies. But, instead of the Internet driving business, it was the electric light and the
lamppost.

Laborers and factory workers drove the nation’s economy then, and industrial turnover was at 300 percent because of backbreaking work and little regard for worker happiness. But Lincoln Electric was different. In Spark: How Old-Fashioned Values Drive a Twenty-First Century Corporation, author Frank Koller examines how the company’s founding principles have kept it strong for 115 years.

The company’s early leaders, brothers James and John Lincoln, realized that by treating their workers well and sharing the rewards of their business, they would have more productive workers and a more profitable enterprise.

So they came up with a plan: They created an open-door policy, paid factory workers based on productivity, established an annual merit-based bonus system and profit sharing, and ultimately guaranteed employment for those who qualify. The approach was revolutionary, and Spark recounts how Lincoln had to fight Congress, the Federal Trade Commission and the IRS to convince Washington bureaucrats that its employee programs weren’t a scheme to avoid taxes.

But Koller doesn’t just toe the Lincoln line. He also talks to disgruntled employees, addresses the company’s detractors and points out that not even Lincoln could escape the nation’s economic pain — the company made news when it trimmed 10 percent of its work force last year.

What the 200-page book does best is drive home the fact that the approach the Lincolns designed for 19th-century factory workers fits as well today as it did then: Be good to your people, and they’ll be good to you.

Here are a few other lessons we learned from Lincoln along the way.

Be diversified. Lincoln has two divisions: One makes very expensive welding machines; the other makes relatively less expensive welding rods and other materials that companies need all the time. This makes the company less susceptible to market dips when heavy equipment purchases get shelved.

Get rid of poor performers. Anyone with three years service to the company is guaranteed a job (with some caveats), but it’s not easy to make it that long. “I make it very clear to the managers that if you have low-performing people who are taking up space and costing money, get rid of them,” says CEO and chairman John Stropki.

People are selfish, but that’s not always bad. The company’s annual bonus and piecework pay systems are effective because employees want to take home as much money as possible. Of course, the entire team must be on board to reach that goal.

Stand by your word. Piecework rates reward employees for productivity as long as their work meets quality standards. The rates are set by a complicated formula and are seldom changed, even if management realizes they overpaid. “I’d lose my long-term credibility just to start re-timing things when we make a mistake,” Lincoln general manager of consumables Doug Lance says in the book. “You just can’t go in there and make workers feel like they’re being screwed.”

Cross-train your employees. Instead of hiring extra people then laying them off when work gets light, Lincoln runs with a lean staff so it can more easily respond to market demands. Employees are guaranteed employment, but that work might be on the factory floor, in sales and or even miscellaneous duties such as painting the hallways, depending on the company’s needs.

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