Lincoln Electrics Case Study

Does Lincoln follow a hierarchical or decentralized approach to management? Explain your answer and give examples.

According to Zannetos (1965), with centralized or hierarchical management, decisions are made at relatively high authority levels in the organization, whereas a decentralized management delegate important decisions by top management to lower levels of authority. Lincoln has a decentralized management approach. Firstly, the management approach is democratic. For example, the company has earned employee trust with its no-layoff policy, and managers respect the expertise of all workers and value their contributions. Secondly, decision-making is participative. The open-door policy encourages communication and feedback sharing by all employees towards the management objectives.

Based on what you’ve just read, what do you think makes the Lincoln System so successful in the United States?

First, the company’s corporate culture encourages independence and a hard-working mindset. It encourages the employees to work and earn rewards for their performance, which is a fair and just system, that supports American’s capitalist mindset. Specifically, the company has shared capitalism, a form of traditional capitalism seen mainly in the United States (Freeman, 2001). The sharing occurs through financial participation in one’s firm, through pension fund ownership of shares in one’s firm, and shared decision-making at the workplace. The employees at Lincoln participate in stock purchase plans, are awarded bonuses depending on their performance, and are expected to challenge the management if they believe practices are unfair. Second, The Company has strong work ethics values that involve taking care of customers first, then employees, and lastly stockholders. These make employees feel like part of the company and want to stay with the company for their entire lifetime. The Hofstede Insights indicates that the US has a high score in individualism, masculinity, and indulgence. Americans’ premise of “liberty and justice for all” emphasizes equal rights and fairness. Lincoln’s management corresponds to this belief because employees can participate in decisions, are treated fairly, and have the opportunity to be the best, as per high masculinity score indicates.

What is the problem with transporting Lincoln’s control system to other national cultures? What suggestions would you make to Lincoln’s managers to make future international manufacturing plants more successful?

Problem

Cultural differences – The European labor culture was hostile to the piece-work and bonus control system, central to the Lincoln management. Because some plants were purchased, using the management control systems to manage such distant plants meant minimal to no culture change from what they were previously.

Suggestions

Lincoln’s management must assess the culture of other countries in which they wish to open plants to reconfigure the management system in a way that increases the possibility of success. The physical presence of some managers who had already worked at the Ohio plant and seen its progress was needed in the new plants to facilitate change and offer motivation and training where necessary. The company needs a widely distributed crisis awareness and knowledge about action and strategy, managerial and operational-level vigilance, and dissemination of lessons learned from the Ohio plant to the new locations.

Should Lincoln borrow money and pay bonuses to avoid breaking trust with its U. S workers? Why or why not?

No. The company is already operating on an “open-book” policy, which means the workers understand their bonuses fluctuate according to company profits. The company has been honest with them on compensation and other practices. Being open about the financial problem to cover bonuses could even increase their trust in the company. If Lincoln borrows money to pay bonuses, there is a likelihood that this can cause the company to enter a financial crisis short afterward, risking their jobs and possibly breaking the no-layoff policy.

References

Freeman, R. (2001). The shared capitalist model of work and compensation. Reflets et perspectives de la vie économiqueXL(1), 169. https://doi.org/10.3917/rpve.401.0169

Zannetos, Z. S. (1965). On the theory of divisional structures: Some aspects of centralization and decentralization of control and decision making. Management Science12(4), B-49-B-68. https://doi.org/10.1287/mnsc.12.4.b49