The text explores Lincoln’s exceptional success and longevity in a competitive commodity industry, despite the departure of other significant competitors like General Electric, Westinghouse, and BOC. It prompts us to ponder what factors contribute to Lincoln’s remarkable triumph.
Lincoln Electric achieved success in the challenging industry through the implementation of an innovative incentive program. This program rewarded efficient employees with an annual bonus based on their piecework’s quantity and quality. In addition, Lincoln Electric embraced a guaranteed employment policy and provided limited company-paid benefits to promote self-motivated and satisfied employees who could contribute to the company’s growth. This approach highlighted the importance of individual value and their potential to enhance the company’s performance, resulting in Lincoln Electric surpassing competitors and maintaining prosperous operations. Unlike other companies that focused on reducing costs and job cuts, Lincoln Electric prioritized attracting skilled workers. As a result, they dominated 36% of the $1.5 billion U.S. market for welding equipment and supplies by the mid-1980s, establishing a solid financial foundation for international expansion.
Despite Lincoln Electric’s remarkable success, their attempts to expand internationally in the late 1980s and early 1990s were unsuccessful. There were multiple reasons for this. The company experienced substantial losses of over $80 million within a two-year span, resulting in a significant decrease in stockholders’ equity due to the rapid growth of their international ventures. Furthermore, cash flow visibly declined as long-term debt rose to $217 million. This failure can primarily be attributed to their endeavor to impose American standards on countries like France, Australia, and Canada.
The company’s performance was directly affected by the mismatch between the management style and culture. This caused distress among the foreign workforce, leading to the formation of unions and decreased overall productivity. The workers no longer responded to the incentive program, focusing instead on advocating for better hourly wages and holiday compensation. Additionally, the management, comprised of inexperienced local workers, provided distant and unengaging supervision. The global recession also played a negative role, with overpriced goods and services impacting Lincoln Electric’s operations. As a result, they were forced to reconsider their strategy and adapt to these new cultures.
