North American Oil & Gas Pipelines

FEB 2017

North American Oil & Gas Pipelines covers the news shaping the business of oil and gas pipeline construction and maintenance in North America, including pipeline installation methods, integrity management innovations and managerial strategies.

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Page 20 of 43 FEBRUARY 2017 | North American Oil & Gas Pipelines 21 ncoln Electric to the Forefront Together Four principles rule Lincoln Electric's business model, and two of those were implemented more than a century ago. These practices were well documented in the 2010 book "Spark," by Frank Koller, a former foreign correspondent and economics specialist for the Cana- dian Broadcast Corp. "I believe Lincoln Electric's success can serve as a symbol of hope at a time when the American economy doesn't seem to be working well for many citi- zens and their communities," Koller wrote in the conclusion of his book. The first of these guiding principles is the company's advisory board, made up of rank-and-file employees and manage- ment. Along with a stated open-door policy with the company's leadership, the advisory board allows workers to air concerns and propose ideas for the company. The advisory board has met roughly every two weeks since 1914. Second is the company's reliance on piecework labor since 1915, a manufac- turing model that has largely fallen out of favor in today's economy. In short, Lincoln Electric factory employees are paid based on the number of products they produce. However, there are strict standards in place to ensure quality and efficiency. These standards are part of a merit rating employees receive. Third is a merit-based annual bonus presented to all Lincoln Electric employ- ees each year around Christmas. The amount each employee receives is based on their aforementioned merit rating, based on productivity, quality, atten- dance and other factors. The company has given out bonuses every single year since 1934. The bonus has ranged from as low as 25 percent of an employee's base pay to as much as 120 percent, av- eraging well over 50 percent since 1955. The fourth principle, the company's guaranteed employment promise, was officially instituted in 1958, but had been in place for years prior. The guaran- tee states that employees will not be laid off for "economic reasons." Employees must work at Lincoln Electric for three years to qualify for guaranteed employ- ment. They also must agree to be placed in jobs as needed, giving the company flexibility to adjust its workforce to meet market trends. The company has not laid off anyone for economic reasons since 1948. Some of these principles gained pop- ularity in the days of Andrew Carnegie and John D. Rockefeller and came to be considered "welfare capitalism." How- ever, some of these same ideas were lauded as cutting-edge in the 1980s with the rise of the Japanese-inspired "high performance workplace" model. Lincoln Electric's somewhat unique business model was the subject of a best-selling Harvard Business School case study (HBS Case 376-028), written by Norman Berg and published in 1975. Aside from the four core business principles outlined above, another te- net of Lincoln Electric's success is a fo- cus on continuous improvement, says Matt Fleming, manager of construction and rental sales at the company. The company has followed this principle to improve and expand its offering to the oil and gas pipeline market, even amid a downturn in the industry. Welding Pipelines Pipelines have always been a core market for Lincoln Electric, Fleming says, and the company has what he be- lieves to be the largest and most knowl- edgeable sales force in the industry. "We have 200 sales people in the field in North America at all times," he says, "and they're all trained on how to weld." Made up largely of engineers, the company sales team understands the technical aspects of the product and how that translates to the needs of the customer.

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