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Lincoln Electric Company

Essay by   •  July 11, 2011  •  Case Study  •  1,080 Words (5 Pages)  •  1,898 Views

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Lincoln Electric Company

Established by the company's periodic targets and the continuity of the bonus systems is an important instrument in the global economy. Positive contribution of the sales staff helps to reach of the company's probability and objectives. Ensuring the continuity of the contribution, companies have to develop their compensation policy which is appropriate to their own structure. The bonus system should be supported by employees and easy to understand. Formed a complex and inacceptable bonus systems are not permanent. Also, unpractical and constantly changing rules affect badly employees' motivation. The price of the product, consumption or endurance time, buyer profile, geographical region, and cultural elements are some important factors that affect to the bonus system's success. Lincoln Electric is a manufacturer of arc-welding products and the company was suffering huge losses in Europe, because of the company's compensation policy (Lincoln Electric). According to company's ex-chairman who was Donald F. Hastings, "Lincoln Electric obtained a controlling interest in manufacturing operations located in 16 countries" (Company History) and especially in Europe; lack of knowledge about the cultures of the acquired companies, and the cultures of the countries where they operated, was a critical factor in the company's financial nosedive. A policy that not included cultural elements created wrong compensation policies and huge losses in Europe.

There were five main factors causing the failure of this. One of the most fundamental problems was lack of international experience of the company's executives. Businesses reach the global dimension and inevitably the global company's human resources information management has to change in the light of these necessities. Today, most of the multinational enterprises operate in many region of the world and they have workforce that different culture. Exceeding the borders is very easy in this global world and mobility of the labor force has reached incredible heights. Even a firm that only operates in his own country affects by the other countries cultures easily. For this reason, creating a human resources management system which integrated a global perspective must be the first obligation for the executives. In this context, if Lincoln Electric's the Chief Executive Officer didn't even have a passport, we can easily say that the company was lucky that they might have gone bankrupt. The executives have to need to know about the cultures of the countries where they operated. They have to know that how the country's culture affect the company's sales. Otherwise, the company cannot reach their goals.

The other important problem was the vacation culture. Some companies emphasize that their employees are as exclusive as their customers in Europe. Especially, in Germany and France, workers have a month of vacation in the summer. Also, local managers have right of three months annual leave every five years in some companies. Some manufacturers send their all workers to compulsory annual leave for a month. The main reason of this rule is blocking to negative effects on the process of the production and creating efficiency. Companies that engaged in international business have to consider the vacation cultures of the countries where they operated. If they have scheduled simultaneous vacation, their working process will effective and efficient.

The other problem was un-incentive bonus system. The world has become much more competitive and volatile than in the past. The duty of the company's executives in the process of globalization play an active role in obtaining a compliance culture of the organization



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