Case Study Lincoln Electric

A case study of a very successful company was done by Arthur Sharplin on The Lincoln Electric Company (LEC). The company which is located in Ohio, USA is one of the best managed manufacturing companies in the world. It is also the world's largest manufacturer of welding machines and electrodes with 2,400 workers in two U.S. factories near Cleveland and approximately 600 in three factories located in other countries (excluding the more than 200 field’s sales force). Each year since the death of its active head, James Lincoln, in 1965, it has seen higher profits and bonuses. Employees have high morale and productivity thanks to the organizational culture within the company.
A leader is oftentimes the pioneer of an organization’s culture behavior.

The Lincoln bonus plan proposed by the Advisory Board and accepted as policy in 1934 and still in effect, is a particularly important motivational tool for the employees to be working their hardest. There are twice a year performance evaluations and a merit rating system. Every year in December, a portion of annual profits is distributed to employees as bonuses. Individual bonuses are exactly proportional to merit rating scores. For example, a person with a very high score of 110 on his performance evaluation receives 110 percent of the standard bonus on top of his regular salary. Additionally, many production workers are paid piece rates and this also motivates them to be more active workers. As one employee who was interviewed stated, he said he didn’t mind working harder than in other companies since “The more you put out, the more you’re going to make make (Sharplin, n.d., page 14)

A company’s culture is not so easily discernible. Though LEC has elements of a stable culture by being able to “coordinate and align individual effort for greatest levels of efficiency (Carpenter, M., Taylor B., Erdogan B., 2009)”, it is not a highly bureaucratic one. Neither is it innovative as it does not experiment with new ideas regularly and it most certainly is not an aggressive culture focused on ‘killing’ competition at all costs. Despite the company working collaboratively, neither is LEC particularly group-oriented since rewards are offered based on individual rather than group effort. We can also rule out LEC’s culture being detail-oriented since paying attention to individual customer preferences as the company’s leading competitive edge is not the case. At first glance, it might look like as though LEC is a people-oriented culture since fairness in equity is a top priority. Additionally, there are rewards and health care and a low turnover rate. However, on closer look it proves to be more of an outcome-oriented one. According to Carpenter, M., Taylor, B., Erdogan, B. (2009):
Outcome-oriented cultures hold employees as well as managers accountable for success and use systems that reward employee and group output. In these companies, it is more common to see rewards tied to performance indicators as opposed to seniority or loyalty. Research indicates that organizations that have