Case Study: Lincoln Electric

Case Study #2: Lincoln Electric

Meagan Craven

1. What factors do you see as crucial to Lincoln’s success in the U.S.? What role do Lincoln’s employment and incentive systems play in this success? Are there certain elements of these systems that are the most important? 

One of Lincoln’s strategies was to create and foster a family-like atmosphere involving the managers and employees sharing mutual respect. Communication was shared and valued between one another. This strategy enforced everyone working together leading to new suggestions, innovations, ideas and improvements. This atmosphere encourages teamwork and healthy competition. Lincoln valued their employees and customers greatly. An example of this is ‘win-win-win’ scenario which involved the company making a profit, leading to employees receiving a fair share for their work, resulting in lower prices for customers.

Another successful strategy implemented by Lincoln was their incentive system. This system had four main elements: guaranteed employment, limited benefits, annual bonuses and piecework. Guaranteed employment prevented Lincoln from having to lay off employees. Instead, Lincoln would assign employees to tasks requiring attention or causing a problem. Limited benefits are medical plans with restricted benefits. This was a cost advantage to Lincoln because it lowered benefits paid by the company. Annual bonuses are additional paid earned typically at the end of the year in accordance with performance, contribution and dependability. Piecework is when a worker receives pay according to the amount of product produced, assuming it is high quality. This element motivated employees to create quality work and work more efficiently to produce a greater quantity. Plus, there was not limit on how much you can produce, encouraging the workers to work hard.

1. To what extent and in what ways did culture and cross cultural considerations play a role in Lincoln’s difficulties in previous international ventures?

Lincoln’s international ventures demonstrated cultural ignorance. Cultural ignorance is when individuals have no knowledge of cultural differences (Earley, P.C. & Mosakowski, E., 2004, Cultural Intelligence). Lincoln’s first international venture was with Canada who adopted they unique incentive system. Next, Lincoln expanded into Australia and France who also adopted the incentive system with a few modifications like holiday paid leave as mandated by that country. Company executives hardly monitored these three international ventures due to their relatively small size and their dependability on the U.S. Lincoln plant for many equipment pieces. This is a red flag because company executives aren’t managing the international branched nor did they possess any useful international experience. It seems like the expansion happened but no research was put in to ensure the company’s values would align with these countries or any preparation to adjust Lincoln’s current company culture to the foreign countries, almost ignoring any cultural differences between these international ventures and the U.S. branch, demonstrating cultural ignorance on behalf of Lincoln’s managers and headquarters.