Lincoln Electric - Venturing Abroad: Case Study Discussion Questions

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1.What is the source of Lincoln's competitive advantage? Lincoln derived its competitive edge through a combination of its unique management technique and incentive compensation method. These were based on the belief's of the founder, that a person can reach his fullest potential through a system of proper incentives designed to encourage competition as well as team work, complemented by faith in individual by management and equality of management & workers. The Incentive system had four key components - Piece work - There was no base salary. Workers were paid on the basis of what they produced. Each worker would ensure his own quality. There was no limit on how much one could produce. Annual Bonus - This was not a gift, rather it was ...

... of the workers and hence may result in protest/dissatisfaction. The company should pay competitively to attract the best talent. The options that Gillespie can consider are - pay minimum wages, pay prevailing rates with 2 months bonus, try to implement piece work. However a combination of these approaches can be used to develop a system that suits the needs as well as solves Gillespie's worries about traditional management methods as well as ethics and public relations. I would suggest the following:- *Pay the prevailing rates (250K) as base salary. *Publicize the piece work - worker can make more pieces than average and earn extra cash. *A fixed bonus of 2 months to be given, however people who have higher

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