Critical Analysis of Lincoln Electric

The Lincoln Electric company, under the leadership of James F. Lincoln saw a major shift in the way business was to be directed and operated with visionary mind-set emulating companies like Ford, Wal-Mart, Merck, 3M as focus was towards the customer’s needs and employee’s compensation. Philosophically customer needs become critical as the reason for being in business and the employees also being the vehicle in achieving the needs of the customers as the case study by Sharplin, A (1989, p.3) clearly positions the companies aspirations. James Lincoln places much importance on the relationship with employees that is guided by mutual respect and individual effort.

The founders of the Lincoln Electric Company left a legacy of an organization culture that promotes high productivity through sound management policies which have stood the test of time. The exponential growth of the company after the death of James F. Lincoln was a direct result of the establishment of a rich culture mix based on values that were widely shared and accepted by the members of the organization. Management empowered employees to become part of the decision making process through the contribution of ideas through the Advisory Board which was elected by the employees from amongst themselves. Reward management systems and all the other artifacts of the Lincoln Electric’s distinguished strong organizational culture will be analyzed in greater detail in this essay.

Lincoln Electric (LE) has been a producer of electrical and welding technology products since the late 1800's. The company remained primarily a family and employee held company until 1995, then approximately 40% of its equity went to the public. James Lincoln, one of the founders, developed unique management techniques that effectively motivated the employees. These management techniques were implemented as an unusual (for the era) structure of compensation and benefits called "incentive management". The incentive management system consisted of four key areas: factory jobs based solely on piecework output; a year-end bonus that could equal or exceeded an individual's regular pay; guaranteed employment; and limited benefits. Management

Headquartered in Cleveland Ohio, Lincoln electric’s business model consists of distributing welding consumables, equipment’s and solutions. Lincoln initially traded electric motor cars and steadily moved on to welding. Lincoln’s vision, led by founder John C. Lincoln is to provide high quality welding, joining and cutting equipment’s globally.

The two most important issues that Lincoln Electric is faced with are as follows. First, the inability to meet customer demand because of the shortages in supply creates opportunities for competing firms to enter the industry. What resources and capabilities does Lincoln Electric have that can mitigate this threat of entry. Second, the emphasis put on the monetary incentive plan leaves the company vulnerable in economic hardships. How can Lincoln Electric continue to encourage competition and quality without a high emphasis on monetary incentives?

     Headquartered in Euclid, Ohio, a suburb of Cleveland, The Lincoln Electric Company is a world leader in welding and cutting products, as well as a premier manufacturer of electric motors. The company is well known for its dedicated, talented workforce and its superior technology. Lincoln Electric Company gives its customers total solutions along with a commitment to quality. Lincoln Electric Company is also well known for its incentive management system. Many companies strive to duplicate the success that Lincoln has enjoyed over the years.

Lincoln's competitive advantage lies mainly in its effective compensation and benefits system which put forth three main elements to spearhead the company's efforts. The trinity of elements comprised of piecework, bonus system and guaranteed employment. Piecework provided workers with a sense of autonomy in that now, workers can earn as much as they are willing to work for. The bonus levels in Lincoln far exceeded those of industry peers and were based on their contributions in the form of output, ideas, cooperation, dependability and quality. Consequently, the benefits provided by Lincoln were not extensive as they saw higher wages as substitutes for things such as insurance,

Lincoln Electric Company separated itself from the competitors for its innovative policies. For instance, hours were reduced from to 55 to 50 hours a week. Life insurance was offered to each employee. A welding school was created, which it still exists today. “An employee bonus” was contemplated but was not accomplished successfully. But until now, the employee bonus remains in the Lincoln management system. In addition, employees were empowered to form an association, which let to health benefits and other things. Furthermore, employees received two weeks of paid vacation and raises. These are the benefits that continue up to this day.

The Lincoln Electric Company 's culture is a wonderful example of how to create an exceptional culture within your business. Lincoln Electric has been a leading manufacturer in welding machines and electrodes for over 100 years. During this impressive tenure, the Lincoln Electric Company has adhered to its founders’ philosophy that the customer always comes first, the employee always comes second, and stockholders come third. This philosophy is upheld throughout the entire organization, from the executive team down to its factory line workers and is evident in their daily business culture. Displayed through a plethora of initiatives; including employee compensations, a concentration on productivity, encouragement of management and supervisors to participate in active leadership and a general appreciation for its employees ' input and feedback; the working culture in this organization is the backbone of the company’s continued achievements. Through the demonstration of their philosophy, Lincoln 's founders and management team have created a culture that has become a timeless model of employee productivity for the world.

Lincoln Electric was founded by John C. Lincoln, an engineer and inventor, and was then managed later by his brother, James F. Lincoln, starting in 1907. James applied his christian principles to business management and how the company would be run as a whole. The core of these business practices revolved around honesty and service to the customer and employee. The assumption that he had about his employees was that they required a steady income just as much as the business did, and that the employee and manager should work as a team to be most effective. The employee does not wish to support shoddy work, just as management does not want to pay for shoddy work, and that customers want the best possible value. This translated into the mindset that customer satisfaction is the top priority, employee satisfaction is the second priority, and that stockholders are the third priority.

merit pay plan, the bonus plan, and the management style it is clear to see that the Lincoln

In this case analysis I will be analyzing and summarizing my understanding of the organizational culture of the Lincoln Electric Company, based on key pointers and a Harvard Case Study by Arthur Sharplin. In my analysis I will be using the framework from chapter eight of the textbook “Principles of Management” by Carpenter, Bauer and Erdogan to discern aspects of the company’s culture. The company is said to have a distinctive management culture and manufactures welding equipment. It is located near Cleveland, Ohio USA. Lincoln Electric Company is considered to be one of the best managed manufacturing companies in the world.

After taking the chance to read the Lincoln Electric Company Harvard study case, it is interesting how they viewed taking care of their employees throughout multiple decades, while business today focuses more on outcome-oriented cultures, where employees tend to not have that many benefits, or any benefits at all. The Lincoln Electric Company started poor, but as they took excellent care of their employees, they flourished into a successful entity in the world of business in America. With the enactment of a variety of programs such as health benefits, annual bonuses, paid vacation and a suggestion system that paid workers for great ideas, it is clear that their team-oriented system has paid off in the long run and kept their turnover rate at an all-time low.

Lincoln’s system had been working so well in the domestically, management decided to extend it overseas. Using Lincoln's expertise with management control systems, they planned to run the plants that they either built or purchased 11 plants in Japan, South America, and Europe. To beat local competition by applying manufacturing control incentive systems to reduce costs and raise production managers saw the opportunity. Financial goals as well as production goals were not met. Unfortunately for LE, the results were dreadful and almost ruined them (Lincoln Electric, 2003).

Built into this organizations structure is, job security, performance evaluations, merit ratings, employees taking part in decision making, education and training, and promotion only from within the company. Undoubtedly, Lincoln Electric has achieved success as it relates to a management model known as, “Organizational Cultural Profile (OCP), where culture is represented by seven distinct values” (Principles of Management).