The Lincoln Electric Company Case Analysis

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The Lincoln Electric Company Case Analysis

Lincoln Electric Company is a manufacturing company, which has been focusing on welding products for the recent 30 years. The company had outstanding brothers leading the company to success. John was a technical genius and he brought the best skills in production and James was good at management and he was working on the employees' incentives. The company gained its reputation through the world war till present as the welding equipment supplier with higher quality and lower price at the same time. For the production aspect of welding equipment, it is an advanced production line with continuous flow with high flexibility and low idling time. Incentive System

Lincoln Electric Company has a unique system to incentive its employees to work much beyond the industry average, not only with faster speed but also with less turnover rate. Employees are encouraged to express their suggestion about the present production plan. Under such system, with John Lincoln's patents and technology, the company maintained its productivity and quality advantage in the market, and improved the production line all the time. James Lincoln built up the company’s image by introducing his philosophy to the company. He concentrated on the importance of competition and clearance of reward and punishment method during daily operating. He played well with 5Rs and gained unbelievable efficiency in production line. The system was the key to the decade success of Lincoln Electric Company. * Rewards

James set up a new payment plan called straight piecework plan, each worker on the assembly line got paid by his finished work. He also introduced a year-end bonus plan which could equal or exceed individual's annual regular pay. The bonus pool was determined by a semiannual "merit rating", which include dependability, quality, output, ideas and cooperation. These are great compensation strategies to encourage workers to work harder. Apparently, the workers themselves would try their best to reach his best capacity and efficiency to earn the most. * Rules

To make the system fair enough to every worker, James set up many rules. For example, piecework prices couldn’t be changed just because, in management’s opinion, the worker was making too much money. Piecework prices could only be changed when management had made a change in the method of doing that particular job and under no other conditions. Both of the piecework prices and the ‘merit rating’ could always be challenged by everyone. As a result, employees were satisfied with this fair incentive system by the help of all these rules.

* Relationships
The employees in the company felt that they were their own bosses as long as they do their jobs. They always had the right of challenging the policy and were welcome to bring up their advices. Also, the guarantee of employment made the employees more willing to improve the production and efficiency. All of these greatly drove the workers to build relationship with others and communicate with supervisors or management anything in mind to optimize the production. * Resources

Lincoln Electric Company provided stock shares to the employees to offer them the resources by company's capital and profit situation and therefore encourage them to have more concerns about their works. They would be more to think about the interests and improvement of the company. This decision could help the company easily control and make good use and of all the resources among the workers. * Roles

All the above James did was to set up the Role for the workers, and awake their sense of competition. James established the life-time employment for the Lincoln Electric Company, every worker on the assembly line felt that they would be forever a part of the company, their salary was determined by the productivity, and the only way to get promotion internal was to stand out among the workers. They were set an extremely...
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