Lincoln Electric Case Study

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Roshanee Bindra

Lincoln Electric: Venturing Abroad into New Possibilities

Value in the Individual

A large portion of Lincoln Electric's (LE) success can be attributed to its unique and effective management style, which ultimately leads to a competitive advantage [1a]. No matter the economies of scale a huge corporation such as Westinghouse, and BOC can offer, the increased productivity level of a properly motivated individual production worker can easily compensate for it.

• Structurally, LE aims to flatten the hierarchical structure and eliminate nonfunctional middle management positions. To do this, LE has fostered an "open-door" policy between production workers and executives.

• Strategically, LE pushes for an integrated approach of maximizing output and reducing costs. The role of James Lincoln's Incentive Management System provides a tool to motivate all employees. Each tenet of the Merit Rating (including Dependability, Quality, Output, and Ideas/Cooperation) is a reaction to the common shortcomings of a traditional production worker [1b]. The Merit system also serves to increase coordination by rewarding teamwork while at the same time introducing an element that is historically known to be one of the greatest efficiency drivers of all time: competition.

This comprehensive Incentive Management System unifies the direction of the workforce and leads to a balanced and efficient set of goals that yields a strong competitive advantage over rival companies. In a commodity industry it is the process, not the product that must prevail and be differentiated. Lincoln Electric has found the perfect process.

Cost Reduction and Market Expansion

The blind pursuit of profit can easily lead to poor decision-making. Lincoln Electric first expanded to Canada by opening a manufacturing plant in Toronto in 1925. About twenty years later, LE Canada adopted the Incentive Management System (IMS) including its annual bonus and piecework facets...
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