lincoln electric case 12
Long, He, Stephanie Rivera ACCT 521: Case Analysis
Chapter 12: Case 12-1 Lincoln Electric The Lincoln Electric Company, the largest manufacturer of arc welding products and a leading producer of industrial electric motors, employs about 2,400 workers in the US and more worldwide. The firm is known for its incentive management plan. Despite the death of James Lincoln and the recession of 1982-1983, the management system prevailed with high profits and bonuses, high productivity, good employee morale, and little to no employee turnover. Market share was stable and high stock dividends were being paid out. The founder of Lincoln electric, John, was more concerned with the engineering and innovation more than the management so, James Lincoln took the reins and moved forward with the creation of an Advisory Board that would report to the CEO every two weeks regarding the operations of the company. James Lincoln was also the first to establish innovative personnel policies. Courtesy of the Advisory Board, the working hours were reduced from 55 hours to 50 hours a week. The company was also able to offer each employee paid-up life insurance policy and a medical plan along with retirement. In 1919, the Lincoln Electric Employee’s Association was developed and provided employees with health benefits and social activities. By 1923, a piecework pay system was established. The piecework system let employees earn money by completing products. Employees could make many products by working efficiently. Although the incentive to be more productive exists within a piecework, system there also exists the potential for employees to reduce the quality of the product in favor of completing more products for more pay. 1925 saw the start of a stock purchase plan for all employees. In 1929, the board of directors began a suggestion system that awarded points to employee’s year-end bonuses. In 1934, the favored bonus plan started and prospered. The first annual bonus started at
Chapter 12: Case 12-1 Lincoln Electric The Lincoln Electric Company, the largest manufacturer of arc welding products and a leading producer of industrial electric motors, employs about 2,400 workers in the US and more worldwide. The firm is known for its incentive management plan. Despite the death of James Lincoln and the recession of 1982-1983, the management system prevailed with high profits and bonuses, high productivity, good employee morale, and little to no employee turnover. Market share was stable and high stock dividends were being paid out. The founder of Lincoln electric, John, was more concerned with the engineering and innovation more than the management so, James Lincoln took the reins and moved forward with the creation of an Advisory Board that would report to the CEO every two weeks regarding the operations of the company. James Lincoln was also the first to establish innovative personnel policies. Courtesy of the Advisory Board, the working hours were reduced from 55 hours to 50 hours a week. The company was also able to offer each employee paid-up life insurance policy and a medical plan along with retirement. In 1919, the Lincoln Electric Employee’s Association was developed and provided employees with health benefits and social activities. By 1923, a piecework pay system was established. The piecework system let employees earn money by completing products. Employees could make many products by working efficiently. Although the incentive to be more productive exists within a piecework, system there also exists the potential for employees to reduce the quality of the product in favor of completing more products for more pay. 1925 saw the start of a stock purchase plan for all employees. In 1929, the board of directors began a suggestion system that awarded points to employee’s year-end bonuses. In 1934, the favored bonus plan started and prospered. The first annual bonus started at