1. What is Lincoln Electric’s strategy?
Lincoln Electric’s strategy relies on its low cost to manufacture and low overhead. The company has been able to achieve this by continually improving its labor productivity. Its innovative management style and incentive based pay system has been at the core of Lincoln’s strategy.
The company’s success relied heavily on the culture in which it created. The founder was focused on erasing any heirarchical distinctions and creating an environment that fostered production and innovation through trust, openness and shared control. To gain the employees trust, Lincoln sought to gurantee the workers employment by instituting policy prohibiting lay-offs. They did this by producing invnetory and if demand didn’t pick-up would scale back employee hours. This was not only an efficient model, but reduced overhead costs otherwise endured by competitors. Lincoln was not faced with the costs associated to recruiting and the retraining of its workers. The company fostered creativity with its open-door policy by allowing its experienced production workers to openly share complaints and ideas for improvement with management. An Advisory Board elected employee representatives to share feedback, which was later posted on bulletin boards throughout the facility. Many of the company’s workers are hired straight from high school and trained to perform in many roles. To further gain loyalty from its workforce, many of Lincoln’s executives were employees that were promoted from within. This created a culture in Lincoln that was unmatched by its competitors.
The company’s pay system incentivized its production workers to work not only harder, but also smarter. Nearly all of Lincoln’s production workers were not provided any base salary, but rather, paid on the number of pieces they produced. Defects were factored into whether or not