PRESENTATION ON

CASE STUDY

“LINCOLN ELECTRIC COMPANY”

PRESENTED BY:

SONAM KHOSLA(43)
DIPIKA TIWARI(46)

VINAY SINGH(47)

KANHUCHARAN SAHU(48)
FLOW OF THE PRESENTATION
 Synopsis
 About the company
 A historical sketch
 Company philosophy
 Lincoln’s business
 Products
 Manufacturing Process
 Organization structure
 Personnel policies
 Financial policies
 Conclusion
SYNOPSIS……
 The case is about the company Lincoln Electric
Company which is known for its best Incentive
management plan.

 The firm was a successful one and mainly due to

leadership of James.F.Lincoln.

 It was after death of James Lincoln that various

questions were aroused that how it will be able to sustain
its progress.

 The case mainly highlights the management control

system of the organization which was responsible for it
to sustain even after 24 yrs of Lincoln’s death.
ABOUT LINCOLN ELECTRIC COMPANY…

 Largest manufacturer of arc welding products & leading

producer of industrial electric motors

 Employed 2400 workers in 2 US factories and equal no in

11 factories in other countries.

 Famous for its Incentive Management Plan

 Sustained its success story for 24 yrs even after death of

James.F.Lincoln
THE LINCOLN ELECTRIC VISION

 We are a global manufacturer and the market leader of

the highest quality welding, cutting and joining products.

 Our enduring passion for the development and

application of our technologies allows us to create
complete solutions that make our customers more
productive and successful.

 We will distinguish ourselves through an unwavering

commitment to our employees and a relentless drive to
maximize shareholder value.
HISTORICAL SKETCH….
 The company started during economic depression in 1895
under leadership of John C. Lincoln

 In 1906 incorporated business

 In 1907 James brother of John joined the company

 1914 he became active head of firm

 Earliest action o f his was to form advisory board

 In 1915 there was introduction of employee paid up

insurance policy
CONTD….
 1917 established Welding school

 In 1918 attempted employee bonus plan not continued

 In 1923 piece work pay system in effect

 In 1925 there was a stock purchase plan for employees

 In 1929, started suggestion system

 In 1934 bonus plan was proposed

 In 1944 pension plan was implemented

COMPANY PHILOSOPHY

 Attitude towards customer

 Attitude towards Stockholders

 Attitude towards unionism

 Belief & Assumption about employees

LINCOLN’S BUSINESS (CASE)

 Construction Industry.

 Manufacturers of Tractors and all kinds of heavy Equipment.

 Patio Furniture and Barbecue Pits.

Fleetweld 5P (pipe & general welding 1930 to 1989)

Lincoln’s sold directly by its engineering-oriented sales force and

indirectly through its distributor organization.
Advertising expenditures less than 0.75% of sales &
R&D exp $ 10 to 12 million.
 Machines and techniques used in arc welding would be
evolutionary rather than revolutionary .
PRODUCTS (CASE)
 Manufacture and sale of arc-welding products
 Several million dollars been invested in automated
equipment that lead to double Lincoln’s manufacturing
capacity.
 Coated “stick” electrodes & Coiled Wire

NEWSROOM
MANUFACTURING PROCESSES
• Materials used on each workstation were stored as close as possible to
the workstation.
• Administrative offices, near the center of the factory.
• Fortune magazine declared one of America’s 10 best managed factories.
• Series of assembly lines.
• Outsiders were not given access to the details of processes.

Worker Performance and Attitudes

• Exceptional worker performance.
• Earned twice as other factory workers.
• Turnover nonexistent except for retirement & departure.
• No wasted motions, no wasted materials.
• No Supervised necessary busy in planning & record keeping.
ORGANIZATIONAL STRUCTURE
 Maximum Flexibility
 Open-door Policy

 Less Formalization

 Span of control

 Two or at-most 3 levels of

supervision
 PERSONNEL POLICIES
1. Recruitment and Selection
 Every job opening was advertised internally

 External hiring was permitted only for entry-level

positions
 Engineering & sales positions were filled by graduate
engineers
 A committee consisting of vice-presidents &
supervisors interviewed candidates
 Out of 3500 applicants

fewer than 300 were hired

PERSONNEL POLICIES
2. Performance Evaluation
 Each supervisor formally evaluated subordinates
twice a year
 Performance Criteria
a. Quality
b. Dependability
c. Ideas & Co-operation
d. Output
 Suggestions for improvements
resulted in high scores
PERSONNEL POLICIES

3. Compensation
 Basic wage levels were determined by a wage
survey in the Cleveland area
 Wage rates were translated into piece rates

 Annual bonuses
PERSONNEL POLICIES
4. Vacations
 The company was shutdown for 2 weeks in
August and 2 weeks during Christmas season
PERSONNEL POLICIES

5. Work Assignment
 Management had authority to transfer workers
and to switch between over-time and short-time
as required
PERSONNEL POLICIES
6. Employee Participation in Decision Making
 The Advisory Board, elected by the workers, met
with the Chairman and President every 2weeks
 The Advisory Board only recommended actions
 PERSONNEL POLICIES
7. Training & Education
 On-the job training were given for a short period
to both production workers and sales executives
PERSONNEL POLICIES
8. Fringe Benefits & Executives Perquisites
 A medical plan and a company paid retirement
program
 A plant cafeteria served meals at about 60% of usual
costs
 The employee stock ownership plan resulted in
employee ownership of about 50% of the common
stock
 Crowded offices, no executive lunch rooms and no
reserved parking spaces
FINANCIAL POLICIES
 Financing should be arranged from internal
sources - cash investment by founders, retention
of earnings & through stock purchase(Sales).
 Ownership of stock by employees(ESOP) will
help to
a) Strengthened team spirit.

b) Individual Incentive(Benefit from Profitability).

c) Ownership is educational “will know how profits

are made & Loss”.
d) Help to reduce gap between employees & Boss.
CONT…
 LiabilityConsist of account Payable & short term
accruals only.
 Until 1980 Lincoln borrowed no money from outside.

 Lincoln’s Prices has increased only1/5th as fast as the

consumer Price Index From 1934-1970.
 Substantial cash balances were accumulated to pay
each year bonus(paid $54 million in 1988).
 The money was invested in short term us government
Securities & Certificates of deposits(CDs) until
needed.
 LINCOLN‘S FINANCIAL HISTORY
1979 1980 1981 1982 1983 1987 1988 1989
Sales(in $385 $401 $469 $329 $277 $377 $478 $582
Millions of $)
Return on equity 19% 16% 19% 9% 9% 15% 16% 12%
ratio
Debt to equity 0% 0% 0% 0% 0% 2% 7% 11%
ratio
Segment Data

Arc-Welding 91% 91% 91% 91%

Products (% of
total sales)
Other Products 9% 9% 9% 9%
(% of total
sales)
SERVING IT’S STAKEHOLDER….
 CUSTOMERS- Lowest Price with highest Quality,
Cost of Field Failure just 0.04% of its Revenue.
 Sold 1000 AC-225 welders which were warranted
for 1 year with 0 warranty claim.
 EMPLOYEES- Employee Stock option, Year ended
Bonuses, Personnel Programs & Comments for the
employees.
 STAKEHOLDERS- in 1989 E.P.S was $30 & the
Repurchase value of Stock was $201.
 By end of 1989 the stated value of stock was $270
called for sale but non being offered for sale.
 Risk associated with Lincoln Stock was Minimal.
 CONCLUDING COMMENTS
 Reason for Lincoln’s Success was the excellent attitude
of their employees & their willingness to work harder,
Faster & more Intelligently.
 New Products reviewed and cost verified by
manufacturing department before it is approved by
management.
 Manufacturing Supervision and all Personnel were
responsible for reduction of scrap, energy conservation
& maintenance of product quality.
 Production Control, Material handling and method
engineering were closely Supervised by top
management.
CONTINUE….
 Purchasing dept was responsible to procure
material at lowest cost, to work with engineering
& Mfg to ensure latest innovation implemented.
 Management established sales department that
was technically trained to reduce customer
welding cost.
 Management encouraged education, technical
publishing, and long- range Programs that
resulted in Industry growth .