Hrm Lincoln Electric Case

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.

Lincoln Electric Company was founded by John C Lincoln in 1906 starting with a start up business in a one room, 4th floor factory to a bigger building and started to expand his workforce to 30 people and had a great expand in their sales as it grew over $50,000 a year. He was humble, preferably to be an engineer and inventor rather than sitting around being labelled as manager. The company also gave each of their employee as paid-up life insurance policy in the 1915. After 2 years, welding schools are introduced. A year after the success of forming a welding school, employee bonus plan was attempted.In the 1919 's, Lincoln Electric 's employees association are formed to introduced some social activities and health benefits to care for the workers. After becoming General Manager, in 1925; a purchase stock plan are enable for all employees. Lincoln bonus plan was finally accepted as a trial by the Advisory Board in 1934.

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 had a unique organizational strategy with numerous creative ideas. First, to keep and better motivate its employees, the company implemented a special incentives system which effectively distributed profits inside the firm. These incentive “were expressions of mutual respect for each person’s importance to the job to be done” (Lincoln, 1961, p. 11).

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

Lincoln Electric Company also believed in a lean labor force to lessen workers hours as the demand dropped and then compensated for that with overtime hours in periods of busy demand, where the workers could make more wages.

Finally, the current Scanlon plan, while initially successful, has many design flaws. The plan currently pays out bonuses so regularly that workers began to perceive the bonus as part of their regular paycheck, instead of associating the bonus with their own increased efforts (“Engstrom”, 2008, p. 2). Thus, the plan, which originally was designed based on positive reinforcement, used a method of continuous rewarding, which reduces the durability of its results (Bauer & Erdogan, 2013, p. 112).

Primary features of the Lincoln Electric business model and employment system are displayed through the company’s overall strategy, philosophy, compensations and benefits policy, leadership, and communication within and outside the organization.

Lincoln serves their customers first, and stockholders last. Lincoln's goal is to evolve continually to offer better quality products at a lower price point. These views have not changed since the very humble beginnings of the company. The company's motto is the actual is limited, but the possible is immense. James Lincoln began managing this business by asking employees to elect members to weigh in decisions about company operations in a twice-monthly meeting. This practice still continues. The turnover is nearly nonexistent, with the exception of retirements and employee relocations. And the list of benefits available to employees is extensive, including job security for a guaranteed amount of hours and stock purchase option, bonuses, and

Lincoln electric’s approach to management contributes to its employee’s high motivational rate. According to (Draft, 2010), Lincoln electric motivates it’s staff with “strict performance goals to achieve pay, precisely defined task and a powerful incentive control program which is based on a piece-rate bases and merit-pay which is based on performance”(p.562). Other motivating factors are annual bonuses and stock purchase plans which all employees are offered (Draft, 2010). Another contribution to its success is their organizational culture which is “based on openness, trust, shared control and an egalitarian spirit” (p. 562-563).

In conclusion, this incentive system was crucial for Lincoln Electric Company’s success. However, it is difficult for the others to copy because it is based on the culture of competition and justice, which was set up in the very beginning. In the future, the effects of this system might be comparatively lower because machines, which don’t have incentive, are replacing workers in production. However, it still has advantage as there are people in the company, and their innovation in production line design will also benefit the company for long.

Lincoln Electric has been on top in relating to the country’s culture of the United States. James Lincoln realized that treating people fair and realized their needs will sustain the company for the long haul. For an example, in 2008 when the United States was in recession, many major corporations laid of its employees. The feeling of discontent was high in the United States. However, Lincoln Electric did not lay off one person. Instead, the company lower their hours until the recession is over. Not only this method saved the employees’ jobs and it also sustain their morals and spirits.

After analyzing the story of Lincoln Electric Company I’ve come to the Conclusion that their organizational culture they practicing is People-oriented culture. Because the company values fairness, supportiveness and they respect individual rights. There is a greater emphasis on expectation of treating people with respect and dignity.

In order to make future international plants more successful than previous acquisitions, Lincoln Electric’s managers may consider re-evaluating their management control approach; carefully evaluating the international labor laws and regulations of the plant prior to deciding whether or not to invest in it; and providing increased training and development to managers and workers of both the parent company and host company to ensure understanding of both sides’ cultural values and beliefs.

As stated in the assignment profile, Lincoln Electric is considered one of the best managed companies in the world. I believe this to be partially attributed to their hiring process. Lincoln Electric has strict requirements to weed through unqualified candidates who will not buy in to the company culture of excellence. This is an especially important aspect of their hiring process particularly due to the fact of leadership – a trait that plays a vital role in implementing and sustaining a company’s culture.