Critical Analysis of Lincoln Electric

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Lincoln Electric: Critical Analysis on the Philosophy of Control Kaplan University

Shannon Blair

Introduction

The purpose of this paper is to analyze a case study related to issue of control and how organizations can utilize different approaches of control in order to improve quality and performance in all arenas, domestic and global. The focus of this case revolves around Lincoln Electric, an Ohio based company that has set the bar for how to develop and implement a successful management system. This paper will use the Lincoln Electric case analysis to present recommendations on how managers can use control methods to enhance employee performance, increase employee participation and empowerment, and improve organizational quality in all areas. Lincoln Electric, a manufacturer of welding products, welding equipment, and electric motors is a leader in the welding manufacturing field, with sales over $1 billion and 6,000 workers worldwide (Daft, 2012, p. 566). While the company is publicly traded, the Lincoln family still holds a large portion of stock. The company’s founding values are still very much a part of its’ corporate culture today and include: honesty, openness, loyalty, accountability, and self-management (Daft, 2012, p.566). Lincoln promotes trust within the organization and its’ employees by encouraging communication between all levels of employees, encouraging workers to challenge management if practices or compensation rates appear unfair, by hiring workers with little to no experience and investing in their training and development, and by following a “no layoff policy” for which no workers have been laid off since 1951 (Daft, 2012, p. 566). While these practices point toward a decentralized control approach, other practices such as strict performance goals, defined tasks, and clear manager/employee differences suggest a form of hierarchical control. Daft (2012) describes the kind of extrinsic reward system that Lincoln has in place as hierarchical, although the pride workers take in their workmanship as well as employee contribution and feelings of involvement points toward the decentralized method of control. For the U.S. Lincoln Electric plants, the incentive and control system works extremely well for increasing productivity. Workers are rewarded for meeting and exceeding productivity standards. Moreover, workers are eligible for annual bonuses which are based on not only work productivity but also the quality of their work, their dependability, and how well they work with their peers (Daft, 2012). What also works for Lincoln Electric is their open-book style of management. Open-book management “allows employees to see for themselves” (Daft, 2012, p. 555). Lincoln Electric is not afraid of sharing information with employees related to operations and financial performance. This allows employees to see the big picture and how their performance impacts the overall organization in reaching its’ strategic goals. Analysis

In this case analysis, the main problem revolves around Lincoln Electric’s inability to translate its’ successful U.S. management system overseas to plants in Japan, South America, and Europe. This failure left the company needing to borrow money to pay the workers’ annual bonuses. In transferring the control philosophy to international plants, Daft (2012) concludes that some international managers have difficulty using control methods such as open-book management due to the differences in attitudes and standards in other countries (p.555). These differences in attitudes and standards also impact work productivity. For example, Bloom and Van Reenen (2010) conducted a study that compared cross sectional management scores from countries around the globe such as the U.S., Japan, Italy, Germany, Russia, and Greece. They found that the U.S. had the top score for management practices (based on a survey of middle managers consisting of 18 questions, several of which focused on...
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