MAN 320F 1st Edition Exam 2 Study Guide 2 19 Lincoln Electric case study Harvard Case Study Lincoln is best manufacturing company in the world For more than 30 yrs was for welding products 1974 income was 17 5 million Strategy Was simple and unwavering strength was in manufacturing Management though Lincoln could build quality products at a lower cost than their competitors Strategy was to concentrate on reducing costs and passing the savings through to the customer by cont lowering prices Even did this when shortages Result expansion of both market share and primary demand for arc welding equipment and supplies over past half century And their strategy encouraged exit of several major companies Management thought their incentive system and climate were responsible for increased productivity employees rewarded for productivity and high quality and cost reduction ideas This strategy was unchanged for decades management thought it achieved a great record and didn t see a need to modify it in the future Company Philosophy Their corporate strategy was rooted in management philosophy of James F Lincoln believed through competition and adequate incentives every person could develop their fullest potential Lincoln s faith in the individual was unbounded his personal experience with success of Lincoln Electric was reinforced in his faith with what could be accomplished He thought if the customer doesn t have part in savings of lower prices he wont buy the output the size of the market is decisive factor in costs of products therefore a consumer must get the share of saving He also thought management and ownership are a unit this is far from fact they must get a part of the saving in larger salaries Compensation Policies These were the key element of Lincoln s philosophy of incentive management 3 components o wages based solely on piecework output for most factory jobs o a year end bonus which could equal or exceed an ind s full annual regular pay o guaranteed employment for all workers almost all production workers were paid on a straight piecework plan they had no base salary or hourly wage but were paid a set price for each item they produced each job was rated according to skill required effort responsibility and a base wage rate for job was assigned wage rates were adjusted and determined salaries or hourly wages and in piecework these set prices ensured they would earn best rate for their job bonuses were determined by board guarantee of employment was essential element in incentive plan without it employees would be more likely to resist improved production and efficiency in fear of losing their jobs so with it they agreed to perform any job assigned as conditions required and work overtime during periods of high activity Employee Views Researchers saw they generally liked working turnover rates were low and they rarely left after first month Management Style Felt that open and frank comm bw management and workers were critical factor but also the everyone was equal same parking spots no barriers bw management and workers Company s Advisory Boar consisting of elected employee reps had played very imp role in achieving this o Board met twice a month providing a forum where employees could bring issues of concern to top management s attention question policies and make suggestions o Board served best interests of employees o Minutes were posted on bulletins o Management still made final decisions In addition to board there was 12 member board of middle managers that met with Irrgang and Willis once a month broader than board issues o This allowed top management to get better acquainted with these individuals and to encourage cooperation bw departments His top two execs Irrgang and Willis cont open door policy to employees middle managers thought this was open and direct o Most saw this as good but one said they were the 2 that ran the companydecisions flow top down Management also seen in physical facilities o No nonsense atmosphere was firmly established o And reward for turning in people who steal from parking lot o THE ACTUAL IS LIMITED THE POSSIBLE IS IMMENSE sign o Long staircase for traffic and tunnel leading to offices was clean and well litwindowless o In the center was reception room where they were greeted and visitors were greeted o Seven doors led to offices and depts large rooms with close desks o Offices were the same but prez was slightly bigger Personnel Strict policy on filling all but entry level positions by promoting from within the company o Whenever opening it was posted in bulletin boards anyone could apply o Outsider could join by taking factory job or entering training programs o Lincoln recruited also o Policy from promoting within was rarely violated except for specializations required No formal org chart and managemnt feel it wasn t necessary Hierarchy was flat with few levels bw bottom and top Prez and chairmen kept tight rein over personnel matters all changes in status of employees had to be approved by Willis an employee could be fired but still had to be approved by top 2 Marketing Welding was good for 30 yrs like razors Management believed no company could match the line overall maybe meet their costs and quality Al Patnik they go to customer and see what they are doing and we teach how to do better most do distributors but they have top sales forces Manufacturing Unusual seemed crowded with material and equipment with few workers workers obviously worked fast and few breaks Plant layout was responsible for crowded appearance no central stockroom for materials raw materials entered one side and finished came out on the pother Everything that entered plant would be taken directly to work station Many operations were automated Over the years had to make rather than buy increasing proportion of its components even though units of gas was fraction of suppliers Lincoln purchased and assembled them rather than buying man was cont evaluating opps for backward integration and had not ruled out manufacturing any of lincoln s components or raw materials Future Lincoln offers too many monetary incentives if he ever cant do that danger But Willis said company hasn t changed much since he has been there its been run the same way employees are more outspoken and interested into why things are being done Willis saw no need to change Lincoln s strategy or policies 2 21 Blue Ocean Strategy ch 1 online Management Strategy lecture Technology and Globalization Info