Case Analysis: Lincoln Electric
Case Analysis
Case: Lincoln Electric in China
Case assignment questions:
1. How do you explain Lincoln Electric’s success in the
United States? What is its business model? What role do the company’s HR practices play in its success?
The success story of Lincoln Electric in the United States could be easily explained as
“Lincoln Way” – The largest manufacturer of welding equipment in the world, Lincoln motivates its American employees through a distinctive compensation system and a culture of cooperation between management and labor, based on one of the founder’s fervent beliefs in self-reliance, the necessity of competition for human progress, and egalitarian treatment of managers and employees. Introduced by family management in the 1930s, the incentive system is based on piece rates and annual bonus linked to profits that can amount to over half of employees’ income. To determine the bonus, production employees are appraised on four criteria: output, quality, dependability, and ideas / cooperation.
The belief of James Lincoln was: “Expect that incentive management will cut costs by half or more. Expect that it will make your company dominant in its field. Expect that there will be unlimited progress because of the plan. Expect that your company will write a new chapter in industry.”
The business model of Lincoln Electric is to through the high productivity combined with highest flexibility in the production and high quality products to generate the customer value. The successful core is the elasticity of its cost structure – the ability to transform fixed costs into variable costs, essential in an environment with high volatility of demand.
Lincoln’s major capabilities in the US were the extremely high productivity of its workforce and the consistent high quality of its products. Equally important was the firm’s high level of operational flexibility as US employees’ pay was tied to firm’s and the workers agreed to adjust their working
Case: Lincoln Electric in China
Case assignment questions:
1. How do you explain Lincoln Electric’s success in the
United States? What is its business model? What role do the company’s HR practices play in its success?
The success story of Lincoln Electric in the United States could be easily explained as
“Lincoln Way” – The largest manufacturer of welding equipment in the world, Lincoln motivates its American employees through a distinctive compensation system and a culture of cooperation between management and labor, based on one of the founder’s fervent beliefs in self-reliance, the necessity of competition for human progress, and egalitarian treatment of managers and employees. Introduced by family management in the 1930s, the incentive system is based on piece rates and annual bonus linked to profits that can amount to over half of employees’ income. To determine the bonus, production employees are appraised on four criteria: output, quality, dependability, and ideas / cooperation.
The belief of James Lincoln was: “Expect that incentive management will cut costs by half or more. Expect that it will make your company dominant in its field. Expect that there will be unlimited progress because of the plan. Expect that your company will write a new chapter in industry.”
The business model of Lincoln Electric is to through the high productivity combined with highest flexibility in the production and high quality products to generate the customer value. The successful core is the elasticity of its cost structure – the ability to transform fixed costs into variable costs, essential in an environment with high volatility of demand.
Lincoln’s major capabilities in the US were the extremely high productivity of its workforce and the consistent high quality of its products. Equally important was the firm’s high level of operational flexibility as US employees’ pay was tied to firm’s and the workers agreed to adjust their working