Case Study Analysis Lincoln Electric: Venturing Abroad

Essay by solterdaUniversity, Master'sA+, March 2004

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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 successors to James Lincoln continued with this successful philosophy even during hard times. This incentive system provided Lincoln Electric with a significant competitive advantage over its domestic competitors. This incentive system plus the bonus allowed Lincoln employees to earn more than their counterparts at other firms, which contributes to employee motivation.

One additional aspect of Lincoln's incentive system was that of limited benefits. James Lincoln developed a system of minimal company paid benefits, where he rationalized that; fewer benefits would equate more funds available for employee bonus and compensation. The successful incentive program and participative management style provided an environment where a Lincoln plant could produce many times (up to three times-with half the personnel) that of a similar manufacturing plant. The employee involvement program and the incentive program at Lincoln were significant contributors to their capability to maintain a solid reputation as a high quality producer, which has driven brand loyalty.

When combined with the approachable and participative management style, Lincoln's culture was able to continuously leverage changes from their employees. The management at Lincoln provided an environment where employees were free to make suggestions or complaints, these ideas became changes and...