Case Study on Lincoln Electric
Lincoln Electric is an American multinational and a leading global manufacturer of welding products, arc welding equipment, welding consumables, plasma and oxy-fuel cutting equipment and robotic welding systems - Case Study on Lincoln Electric introduction. Headquartered in Cleveland, Ohio, Lincoln Electric has more than 40 manufacturing locations, including operations and joint ventures in 20 countries and a worldwide network of distributors and sales offices covering more than 160 countries. 17 Years of Excellence Lincoln Electric’s Tradition of innovative solutions, technological leadership and commitment to customers, employees, and shareholders stems from the vision of its founder, John C. Lincoln and his brother, James F. Lincoln TIMELINE ESTABLISH 1895-1969 * 1895-John C. Lincoln founded the LEC. * 1900-1919 – James F. Lincoln joined the company and implemented the “piece-work system”. 1920-1939 – Lincoln Electric introduced the Fleetweld® 5 coated electrode,
* Lincoln Electric employees earned paid vacations, among the first in the nation * 1940 – 1949 – World War II brought a dramatic expansion of Lincoln Electric’s business * 1950 – 1969- James F. Lincoln continued to enhance Incentive Management promote “formal merit rating CRUCIAL 1970-1993 George E. Willis was named chairman and Donald F. Hastings became president. Mr. Willis pursued an energetic course of foreign expansion; eventually, Lincoln Electric obtained a controlling interest in manufacturing operations located in 16 countries.
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PROSPERITY 1994-2012 * 1998 was a year of expansion, acquisition and product development for Lincoln Electric. * 2001-The Company expands its operations in South America with the acquisition of Messer Soldaduras de Venezuela, the country’s leading manufacturer of consumable welding products. * 2011- Sales of $2. 7 billion in 2011 were the highest in Lincoln’s history, resulting from higher global demand as well as growth through acquisitions. How Lincoln successfully transplanted its DNA to Mexico Policies to be implemented from LEC 1. Piece work (action taken) 2.
Merit ratings (action taken) 3. Bonus Plan (action taken) Problem that was encountered Mexico was a highly unionized nation (action taken) Difficulties in Implementing Lincoln System in some foreign operations 1. Germany (problem) 2. Brazil (problem) 3. Venezuela (problem) Overall Problem “Cultural Differences, Lincoln tried to do, too much, too fast. Lincoln forgot to consider the different cultures, laws, attitudes of variance nations. ” Solution “Changing of Management, acquiring senior executives from outside (or from the nation where they put their plant). ” Analysis
A large portion of Lincoln Electric’s success can be credited to this distinctive and efficient management style which ultimately leads to a competitive advantage. Structurally, Lincoln Electric aims to flatten the hierarchical structure and eliminate nonfunctional middle management positions. To do this, Lincoln Electric has promoted an “open-door” policy between production workers and executives as well as created an Advisory Board that has representatives of the workers who meet with executives twice a month. James Lincoln though of a plan on how to get the employees motivated.
And then Incentive Management System came, this system offers to motivate all employees through bonuses that redistribute a large portion of the corporation’s yearly profits. This new system results into two things; first there is a sharp sense of ownership in the company from top to bottom because if the company as a whole does well, everyone is compensated for it respectively. And secondly, there is increased personal performance. This performance boost is the result of a sort of quiet competition within each work group. Strategy Incentive system played a large role in productivity, workers had incentive to work harder and produce more. Year-end bonuses averaged close to 100% of regular compensation.
Management built success of company on two factors: 1) Producing more of a progressively better product at a lower price 2) Employee earnings and promotion are in direct proportion with company success Profits were fairly split amongst workers, customers, and management. Savings were passed along to customers. The problem was that Lincoln tried to do too much, too fast. The company bought nine businesses and constructed two new plants within a five-year period between the late 1980s and early 1990s.
In its haste, it neglected the very factor to which it attributes its success; which is the people. It did not adequately plan for cultural differences and how they would affect its management systems, and it was stretched too thin to transfer the systems properly. Furthermore, it paid premium prices for the properties in Europe despite the onset of a worldwide recession. It did so because multinational companies, who wanted to have a manufacturing presence in Europe before all internal European tariffs were eliminated under the European Union, had created a strong demand for these assets.
After Lincoln purchased these properties, however, the recession caused massive redundancies in their production capability. As a solution to this problem, Lincoln Electric should have a change in their Management Style. Their “promotion from within” policy should be diverged. Instead of getting executives in the higher ranks but have little international experience, they should start to recruit senior executives from the outside, who have extensive international experience. I think Lincoln is required to widen its existing culture for cooperation and for open communications, between its worker and management.
This will comprise ethical relationship with business partners between peer units, and within society to attain the common good and to seek long term financial sustainability. Lincoln also needed to expand the existing culture for training and mentoring to practice holistic knowledge management and to facilitate meaning-making personal growth for workers. Management saw no need to change strategy or worry about the future. Employees trusted them and the need for their product would always be there. The biggest challenge is to keep up with technology and to maintain profit. .