Lincoln Electric Company

Lincoln Electric Case

The Lincoln Electric Company is one of the most studied companies of all time in Master of Business Programs (MBA) (Siegal and Larson 2007). The Lincoln Electric Company operates in a relatively unique environment where profits are derived primarily from individual labor productivity (Siegal and Larson 2007). The primary reason the company has been studied so thoroughly is that it has experienced consistent financial success over a significant period of time. The company uses management techniques that are uncharacteristic in the manufacturing industry. To understand the differences, a comparison can be made between a typical operator at an automotive assembly plant and an operator at Lincoln Electric. An automotive assembly line runs at a fixed rate. No matter how fast an individual operator does their job the line still runs the same speed. If the operator does not keep up with the line rate, the vehicle may go to the next station missing a part or having a component partially installed. There is no incentive for the automotive assembly line operator to improve their speed of assembly. At Lincoln Electric the line rate runs as fast as determined by the individual operator. In the industry, this is typically called ‘piece work' (Chilton K. 1994). You can make 100 widgets a day for certain amount of money; if you make 120 widgets a day you are rewarded with more money. This is part of the incentive philosophy Lincoln Electric utilizes in their operations. The purpose of this paper is to identify some of the key management techniques under which the company operates that contributes to its continued success and how improvements may be introduced to enhance their performance.

HISTORY

Lincoln Electric was founded in 1895, the company's principle manufacturing products are welding machines and the consumables that go with welding operations (Siegal and Larson 2009). There are four principal components that have contributed to Lincoln Electric's leading management system (Siegal and Larson 2009):

• Piece Work Wages

• Discretionary annual bonus based on individual and company performance

• An individual merit rating used to determine the annual bonus

• Voluntary employee advisory board that works to generate productivity innovations.

Incentive Management

Being paid piece work wages is not a common practice in the United States. There is a documented incident (Lienert 1995) that reports Lincoln Electric approached 150 electrical workers with a job offer. The workers were facing unemployment due to the closing of a General Motors (GM) plant. The only requisite for employment Lincoln Electric