Lincoln Electric Company - Case Study - Accounting...

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Lincoln Electric Company Synopsis The Lincoln Electric Company is one of the world’s top manufacturers in arc welding products, and they pride themselves on being the best in the business. The company was founded in 1895 by John C Lincoln. John was then joined by his brother, James F Lincoln in 1905. With John’s mechanical talents and James’ managerial skills, the company started to advance quite quickly. By the start of WWII, Lincoln Electric was America’s leading manufacturer of welding equipment. Since 1974, Lincoln has had steady growth that was financed by all internally generated funds and no acquisitions. The current president of Lincoln Electric, George Willis, has followed the same managerial system and style set in place by James from the beginning. Lincoln’s strategy has remained the same over the years, “building quality products at a lower cost than their competitors.” To do this they concentrate on reducing all costs as much as possible in order to pass more savings through to the customers and their employees. By having extremely low costs the company is able to offer a better product at a lower price, as well as, put more money into the company’s incentive programs and compensation policies. James Lincoln instilled the belief that “through competition and adequate incentives every person could develop to their fullest potential.” His philosophy was supported by a motivational compensation system for the employees that consisted of three policies. First, the factory workers did not have a hourly wage, their payment was based solely on their piecework output. That way each worker is responsible for their own work, and they only get compensated for the work they complete and do correctly. The workers are motivated to do their work quickly and efficiently because the more they do the more they get paid. Second, every employee
receives a year-end bonus that could possibly equal or even exceed their annual pay. The

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