ANALYSES OF LINCOLN ELECTRIC CASE STUDY
Abstract
Lincoln Electric is one of the leading producers and manufacturers of Arc Welding Products and Electric Motors. It is undeniable that the success of Lincoln Electric lies on the foundation of the various company policies introduced by James Lincoln.
Organizational Strategy
Lincoln Electric had a unique organizational strategy with numerous creative ideas. First, to keep and better motivate its employees, the company implemented a special incentive system which effectively distributed profits in the firm. These incentive “were expressions of mutual respect for each person’s importance to the job to be done” (Lincoln, 1961, p. 11).
Then, the annual bonus element was also very important for the employees were awarded in accordance with their contribution to the company’s performance in terms of output, ideas, cooperation, dependability and quality. To prevent layoffs, Lincoln didn’t just give money to the employees, but opened a welding school to enable some of the employees add value to themselves.
Even though Lincoln is very authoritarian, employees are given the opportunity to participate in management in several ways. The company tries to keep a family-like atmosphere where managers and employees respect each other. The hierarchical barriers are kept at a minimum and open communication is valued. This system results in 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.
This method of management has provided Lincoln with various suggestions, ideas, innovation and improvement.
Lincoln Electric Principles
Lincoln Electric’s foundation is based on values of trust, overt nature of management, self-reliance, commitment and inter-collaboration. These beliefs and code of conduct formed a powerful base of Lincoln’s culture and management regularly providing the rewards to deserving employees. According to Lincoln “Labor and management are properly not warring camps; they are part of one organization in which they must and should cooperate fully happily” (Lincoln, p.4). The company always updated their employees about the company’s functioning and financial achievements which encourage the hard work in employees. James Lincoln firmly believed that customers are a valuable asset to the company and that the company’s primary goal should be in the interest of customers. Lincoln’s gives priority to his customers rather than shareholders, he believed that shareholders own his company’s stock because it is profitable to invest their money than in any other way.
Company Culture
The Lincoln Electric company upholds the motto of producing the best quality products at the lowest cost. It is the world’s largest manufacturing company that primarily makes welding products. It has also become one of the world’s leading manufacturers of arc welding equipment since World War II. The company’s organizational culture and philosophy are still consistent and continues to persist. Lincoln’s culture and philosophy have made it remain successful over the years. The company’s approach to motivate employees is both simple and unwavering. It has built a condition that that fosters individual growth, continual improvement, and productivity and has implemented a clever incentive system.
Financial Policies
Lincoln’s attempt to be financially dependent plus an idea of eliminating lazy and incompetent workers moved it to allow ownership of stocks by employees. The organization believes that allowing the employees to own part of the company would make them become extra determined, perform better and become more efficient. This program benefits Lincoln electrical in many ways, the employee’s stock ownership plan is a way for LE to enhance organizational performance, help employees prepare for retirement and allow LE to meet succession or diversification goals. The employee’s stock ownership program has made it possible for LE to tie most of its profits inside the company.
Cost Optimization Strategies
The cost of products in LE is always kept at a minimum to ensure the best interest of customers. Efficiency is the key in Lincoln Electric’s cost minimization strategies. Products are manufactured with as high efficiency as possible, which in turn ensured the minimum amount of wastage and maximum output for a fixed amount of raw materials. The production process system is highly structured at LE because of the efficient management and worker doing their job efficiently as per the job description. Transportation costs are reduced to a minimal by storing the raw materials to be used close to the workstation, this reduce wasted time and money. The layout of the company also plays a significant role in the efficient manufacturing process. These crucial factors allow LE to manufacture products at very low prices in the market, hence beating its competitors in terms of quality and price.
Lincoln places emphasis on anticipating and solving customer related problems. Sales representatives at LE are given technical training to understand customers’ needs, help customers understand and use Lincoln products. This customer focus is backed by attention to the production process through the use of strict accountability standards and formal measurements of productivity, quality, and innovation for all employees.
Creating and Maintaining Organizational Structure at Lincoln Electric
Lincoln Electric has made itself into a global manufacturer and a market leader of the highest quality welding, cutting and joining products. The company passion for development has motivated it to apply the various advancement in technology to create complete solutions that enable their clients to be more productive and successful. Lincoln Electric is in business to satisfy its customers because the customers enable the organization to attain its goals. The company understands that the consumers are essential for the growth of any business hence, they are the source which the accomplishment of the corporation rests on.
For LE to achieve success that depends on a highly motivated and productive team. LE understands that in order to satisfy customer’s interest, the employees are the only people who can make it happen. As a result, LE created an attractive bonus for the employees and paid them on a piece rate basis. To prevent employees from sacrificing quality over quantity, employees are evaluated twice a year and warranty claims are tracked back to the employees who must pay for the damages. Executives at LE have no preferences, promotions occur internally and LE doesn’t pay for education and training outside the company because they believe that that will cause unequal access.
In conclusion, it can be argued that a large portion of Lincoln Electric’s success can be credited to its distinctive and efficient management style which ultimately leads to a competitive advantage. An open-door policy is practiced throughout the company, and an advisory board who is elected by the workers, is set up to meet with the chairman and president to discuss employee innovations and all employees are compensated respectively.
Reference;
Carpenter, M., Taylor, B., Erdogan, B. (2009). Principles of Management. Nyack, NY: Flat World Knowledge
Retrieved on April 8, 2016 from http://my.uopeople.edu/pluginfile.php/105458/mod_resource/content/5/BUS%201101Textbook%20%281%29.pdf?forcedownload=1
THE LINCOLN ELECTRIC COMPANY
Retrieved on April 22, 2016 from http://my.uopeople.edu/pluginfile.php/105473/mod_book/chapter/78302/Lincoln_Electric.pdf
2009 Annual report- Lincoln Electric Retrieved on April 26, 2016 from http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTEzMzg2fENoaWxkSUQ9MTk1MTg4fFR5cGU9MQ==&t=1 