This case study "Lincoln Electric Co. (B)" focuses on the operational and managerial practices and the system as well as other organizational policies adapted by Lincoln Electric Company and how effective they may be when applied in other organizations.
John B. Matthews Jr.
Harvard Business Review (378216-PDF-ENG)
March 01, 1978
Case questions answered:
- Consider how Lincoln Electric Co.'s strategy and organizational policies depend on each other.
- Why does their motivation system work for them?
- How applicable is their approach to other organizational situations?
- Can one readily adapt their methods to your client’s (same industry) situation? What concerns should your client have about whether Lincoln Electric’s methods are applicable to your clients right now？
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Lincoln Electric Co. (B) Case Answers
Using your knowledge of motivation, compensation, and work attitudes, provide an analysis of Lincoln Electric Co.’s sustained successful economic performance and competitive advantage. In doing your analysis, consider their strategy and how they organize production.
QUESTION 1: Consider how Lincoln Electric Co.’s strategy and organizational policies depend on each other.
The strategy of the company is to concentrate on producing products with progressively better quality at a lower price, for a larger group of consumers.
To produce with higher efficiency, Lincoln Electric’s organizational policies target on making workers more efficient. As the founder believes that “through competition and adequate incentives, every person could develop to his or her full potential”, Lincoln Electric Co. orient its policies around such measures.
By giving a piece-rate salary and a large amount of bonus depending on evaluation, the company encourages workers to compete with each other and promote the most efficient worker. The company also give workers shares of the company, to make their efforts correlated with their income, and to provide a sense of belonging and pride. Lincoln Electric Co. also introduced promised employment, to lower employee turnover rate, lower hiring cost, etc. The company also have flatter management, so workers could talk to the CEO easily. This helps employees feel more related to the company and provide incentives.
These organizational policies ensured cheap price with high-quality products. But the strategy also helped the implementation of organizational policies, since, without enough earnings, the bonus, high salary, and promised employment is not plausible. So, we see that the strategy and organizational policies depend on each other.
QUESTION 2: Why does their motivation system work for them?
The motivation system provides high levels of workforce competition, increase monetary incentives through compensation and psychological incentives by changing work attitudes.
High level of competition:
Lincoln Electric Co. encourages workers to compete with each other through its reward system and promote the most efficient worker. The most efficient workers’ salary is…
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