Lincoln Electric Case Study

Lincoln Electric (LE) manufactures and sells arc-welding equipment and electrical motors. The company’s objective is to produce quality products at a low price. This objective was to help LE build up their reputation. Therefore their key success factor is their cost leadership. This was achieved through their highly productive employees. LE believed that in order to satisfy customer’s interest, the employees are the only people who can make it happen. As a result, LE created an attractive bonus for the employees and paid them on piece rate basis. To prevent employees from sacrificing quality over quantity with the piece rate system, employees were evaluated twice a year and warranty claims were traced back to the employees who must pay for the damages. Furthermore, communication was promoted within the company. Open-door policy was practiced throughout the company, and an advisory board who were elected by the workers, was set up to meet with the chairman and the president to discuss about employees innovations. Lastly, to create loyalty from the workers, LE treated everyone fairly. Executives had no preferential benefits, promotions occurs internally and LE did not pay for training and education outside the company because they believed that there was unequal access. Through this, LE hopes to achieve higher productivity and performance by creating employee loyalty, so through this loyalty, employees will be intrinsically motivated to outperform its competitors. These programs produced dividends. Employee morale and productivity was good and turnover was non-existent. In fact, outside sources have confirmed that levels of productivity were more than twice those for others manufacturers from 1945 onwards. Even college management texts referred to Lincoln as a model for achieving higher worker productivity. As a result of there superior model, the company thrived. Although it can be argued that since they were one of the best companies known for its