Lincoln Electric Company - Case Study Example

Lincoln Electric Company Lincoln Electric Company is one of the world’s leading manufacturers of welding products and industrial electric motors. It has more than four thousand employees who work in the three factories situated in the United States of America (Buller, & Schuller, n.d). A similar number of employees are employed in other branches of the company located in other countries. Lincoln Electric Company came into existence in 1895 when John C. Lincoln its founder opened the business in a single room. The company grew despite the harsh economic times that preceded it. In 1906, the company moved from the one-roomed, fourth floor factory to a three-story building John had built in Cleveland. This made him expand his employees to thirty as his sales also increased (Buller, & Schuller, n.d). Lincoln’s brother, James Lincoln joined the fast growing company after dropping out of Ohio State University because of typhoid. He became an active head of the business enterprise in 1914. This was after he assumed the titles of Vice President and General Manager. John remained the head of the company operating as president for a long time before venturing into other business as an investor. James Lincoln initiated several changes into the company (Buller, & Schuller, n.d). These changes led to fast growth and development of the company. The first change that James Lincoln initiated was allowing employees to elect representatives to represent them in the Advisory Board. The Advisory Board members were to meet the company executives every two weeks. They were to discuss some of the issues and problems the workers were facing in their line of duty. These meetings were extremely beneficial since workers grievances were made presented to the company executives. The Advisory Board also advised the executives on how to conduct the operations of the company. It is through their deliberations with that the executives that innovative policies that distinguish Lincoln Electric Company from its competitors. For instance, rewards and incentives aimed at motivating the workers were introduced. Working hours were reduced from fifty five to fifty per week. This meant that the workers were not being overworked, and were being enough time to rest (Buller, & Schuller, n.d). This resulted to high work turn over since the workers diligently did their jobs well and rested when exhausted. The employees were also issued with a life insurance policy. The insurance policy ensured that they were always in excellent health. This implied that they never missed work because of sickness, and in the long run the company’s operations always run smoothly. The company should continue providing workers with comprehensive health covers. This may look expensive, but a keen analysis of the same makes one realize that it is a cheap venture. This is because once the workers are in good health; they will always attend to their duties diligently. Additionally, the production process would not be broken since cases of workers missing work would be minimal. Lincoln Electric Company also introduced a reward system that gave employees a fully paid two-week vacation every year. This vacation is meant for workers to spend time with their families as they rest. This incentive is a motivator to the workers since they would have lots of time to spend with their families and friends during the two-week vacation. Since they are paid allowances, workers do not chip into their pockets to fund their holidays. They use the two week’s duration to recuperate and rest. Therefore, when they return to work, they are energized to continue with the production process (Buller, & Schuller, n.d). Additionally, when the workers resume work from their vacation, they come when their minds are at peace since they have had enough rest. This automatically motivates them to perform their roles better. Therefore, Lincoln Electric Company should ensure that this reward is maintained, and maybe the vacation allowances should be raised to keep up with the changes in the Consumer Price Index. Lincoln Electric Company should also maintain the bonus plan that was initiated in 1934. The bonus plan should be aimed at rewarding employees who excel in their roles. The end-of year bonus should be used to motivate employees to continue working hard in their areas of work. Even lazy employees would do away with their bad habits and conform to the culture of working hard. Seeing their colleagues being awarded hefty sums of money would make them work hard too. Making employees believe that their hard work is noticed is also a motivation to make them perform better. Rewarding employees who have spent more than two years working in the company with the opportunity to own company’s stock was also beneficial. This is because the workers felt that they were part and parcel of the company. Owning the company’s stock promotes teamwork among the employees since they are mutually anxious to see the success of the company. Moreover, owning the company’s stocks motivates them to work extra hard since they are confident that they will enjoy the profits made by the company. This is one of the reasons that Lincoln Electric Company thrived at the expense of its competitors. The employees had invested in the business, and so they viewed the company’s business as theirs (Buller, & Schuller, n.d). Whatever they did, they did with enthusiasm since they knew that their hard work would make them reap lots of dividends and profits. Giving employees incentives and rewarding them is one of the surest ways of motivating them to work harder. In the same way Lincoln Electric Company treated its workers, employees should be given a conducive working environment to motivate them to work and produce improved results. Giving them medical cover will always ensure that they are healthy, and they attend to their duties. They should also be trained on new technologies that may arise to enable them handle the production process. Management change is also a critical component in initiating vital tasks, process or/and cultural changes within the work place. Therefore, change management is defined as a set of processes employed for ensuring that significant changes are instigated, in a controlled, systematic and orderly fashion, to effect organizational change (Lewis, Schmisseur, Stephens, & Weir, 2006). Additionally, change management incorporates both individual change management and change management models, which put together plays a significant role in managing the people’s side of the change (Higgs & Rowland, 2005). For instance, when James Lincoln took charge of the Lincoln Electric Company, he came up with new changes that were aimed at propelling the company to success. One of the notable changes was the introduction of the Advisory Board. The board was made up of employees who were elected to represent the interest of the employees. The board worked together with the company executives to come up with strategies to facilitate the flourishing of Lincoln Electric Company at the watch of its competitors. Emerson (2000) assert that most business often try to improve their performance by implementing improvement programs. These programs should be focused on specific, observable and measurable results for the business entity to last long and achieve long term goals and have efficient service delivery. He further explains that human clashing nature with the dynamic world of business is the reason behind the extra focus needed in the change management. This is the exact thing that happened in Lincoln Electric Company; the changing times and the environment that the company was in compelled it to adjust and change accordingly. The company made use of the World War II to thrive. It saw an opportunity and seized it. Theoretical orientation Change management process must be handled carefully for the success of any business or organization employing it. Maslow’s Theory Warrilow (2010) asserts that Maslow’s Theory of motivation brought a novel face to the human beings study. The earlier psychologists had paid much attention to the abnormal and mentally ill, and when Maslow came into the picture, he investigated and attempted to define positive mental. His investigations predicated the belief that human beings do not react blindly to situations, but try to accomplish greater things. This simply meant that human beings possess the inner resources for growth and healing necessary to help them remove all obstacles that hinder them from achieving their dreams, as well as realizing their full potentialities. Dwayne (2012) explicates the need for leaders to set up an environment that enables employees to motivate themselves. He says that leaders need to understand the motivational needs of the groups and individuals they lead. This will enable them set up an environment that promotes motivation of employees. They should understand Maslow and Herzberg’s hierarchy of needs to ensure that their employees’ needs are fulfilled. A keener analysis of this theory demonstrates that rewards and incentives and motivates employees to work hard. The fact that Lincoln Electric Company employees were given a two-week vacation annually explicates Maslow’s Theory. This is because the company’s executives provided an environment that catered for the needs of the employees. By going on vacation paid for by the company, the employees would be motivated to work extra hard when they resume duty. This is because they would have time to rest and relax themselves. Douglas McGregor and Theory X-Theory Y Theory X as proposed by McGregor assumes that employees dislike working and are naturally unmotivated. As a result, an authoritarian style of management is encouraged. Bennis, Heil & Stephen (2000), claim this view emphasizes on the fact that the management must actively get involved for things to be done. Additionally, Theory X assumes that workers avoid responsibility and need to be; directed, enticed or controlled to produce results; otherwise, they have no incentive to work or ambition. In X-Type organizations, managers and supervisors are needed every time to give directions (Bennis et al, 2000). Theory X management has its place in large scale production organizations and the unskilled production-line of work. On the other hand, Theory Y explicates a decentralized and participative style of management. It is based on the assumption that employees are happy to work, are creative and self-motivated, and above all, enjoy working with prodigious responsibility (Theory X and Theory Y). Additionally, theory Y assumes that employees; take responsibility and are inspired to fulfill the objectives they are given, consider work as an obvious part of life, and lastly, they accept responsibility and do not require much direction. This theory also proposes that people at lower levels of the organization have extra responsibility and are involved in the decision making process (Theory X and Theory Y). Employees of Lincoln Electric Company were not only motivated to work because of the rewards they obtained; but also considered work as an obvious part of life. They did their work diligently without being supervised. Since some of them were shareholders in the company, they took responsibility of their duties and fulfilled their objectives with minimal supervision. It is more than evident that the employees had adopted theory Y style of management. Chester Barnard and co-operative systems Theory Barnard argued that an organization is a cooperative system; thus without the willingness of its members to make contributions and pursue its goals, it cannot operate effectively. He believes that cooperation can not only be accomplished by monetary incentives. Instead, he supported a combination of monetary and non-monetary inducements. Burnes (2009) asserts that cooperation itself cannot be effective unless an organization also possesses a common purpose; realistic and clear goals and objectives that its members understand, relate and pursue. Individuals at the top of organizations’ are charged with the responsibility of establishing the common purpose, but achieving it required the cooperation of those at the bottom, and at all levels. This belief prompted his assertion that the flow of authority comes from the bottom up, and from the top down. Barnard also advocated for a purposeful and systematic communication to avoid negative response from workers (Burnes, 2009). He viewed formal and informal structures of communication as the key functions of the executive. He also argued that successful leadership arose from the interplay within the individual leader, the followers and the context. However, his main argument was the rejection of the idea that material incentives are the only incentives that propel people to work purposely. He viewed them as the weak incentives that needed support from other sociological and psychological motivators for organizations to achieve their common purpose successfully (Burnes, 2009). Conceptual Framework Independent variable Dependent variable The terms ‘independent’ and ‘dependent’ refer to the relationship between these two types of variables. These two terms have meaning only with respect to each other. In cases of dependent variables, its behavior or value is considered reliant, to an extent, upon the value of the independent variable, but not the other way round (Emerson, 2000). That is why it is considered ‘dependent.’ On the other hand, independent variable is truly independent of the dependent variable. This simply means that its value does not change according to the value of the dependent variable. The downsizing of the senior management employees during change management may result to a salary increment to employees who remain. In this scenario, the increment in salary is a dependent variable while the downsizing of employees is the independent variable. This is because the increase in salary depends on the downsizing of some employees while the downsizing of employees does not depend on the salary increment. The remaining employees’ may have a salary increase since roles will be added to the ones they have (Loup & Koller, 2005). Change management may also result to a change in the working conditions in an organization. Since modification of working conditions relies on the change management, the change in the employee working conditions and company programs is the dependent variable; while the change of senior management team is the independent variable. The new managers in the company may come up with new working conditions with the aim of improving service delivery to customers. The employees will have no choice other than to adapt to the changes put across by the new management (Loup etal. 2005). For instance, when James Lincoln took over the leadership of Lincoln Electric Company, he initiated some changes which affected the working conditions of employees. For example, the employees were issued with life insurance and cover, their working hours were reduced from fifty five hours a week to fifty, just to mention but a few. Change management may result to either an improved or decreased employee performance. In this case, change management is the independent variable whereas the performance of employees is the dependent variable. Jobber (2007) asserts that change in the management may bring insecurity and tensions among employees since their working schedules and conditions may be altered. In this case, if the management does not step in quickly to enable the employees take the change positively, the workers may give poor service to the customers (Kotter, 2002). On the other hand, when the senior management steps in early, they may motivate employees to view the change as beneficial, who will in turn adapt to change as fast as possible to ensure high quality service delivery. Conceptual Review Effect of change management in the working conditions of employees’ e.g working hours Emerson (2000) points out that each and every person has a role to play in productivity and quality image; therefore, it is the responsibility of management to ensure that the employees are focused to the vision and mission of the company. Maintaining a positive company image will influence and assist in the growth of the company, in years to come. This is normally demonstrated by the deeds of the company, the quality of products offered by the company and also the way a company markets its products. Therefore, change management should not necessarily confine itself with increasing the working hours of employees, with the intention of compelling them to achieve better results. This would demotivate their spirit of hard work since they will not be able to achieve better results when working long hours. Reason being, they would not concentrate, and the result they would produce would not be appealing to customers. The effect of change management on employees’ motivation According to Kotter (2002), a properly designed image reflects an organization’s commitment to quality, excellence and proper relations with its potential customers, employees and the public at large. Therefore, a fully functional change management that aims at improving its service delivery would target to motivate the employees by improving their remuneration, instead of lowering their salaries. These salary increments would ensure that their security, social and psychological needs are met; thus, they would be motivated to work with zeal to produce better results for the customers. In as much as Barnard considers material incentives to be weak incentives in motivating employees to produce better results, they need the material incentives so that they may be comfortable and have stable minds (Burnes, 2009). According to Maslow’s hierarchy of needs, some needs must be met first for an individual to be fully operational. Therefore, an increase in the employees’ salary would enable them provide for their basic wants, making them comfortable to work passionately and diligently for better service delivery (Rune, 2005). The effect of change management on performance of employees’ Change management affects the performance of employees during and after the change. During the process, the employee behavior is significantly impacted on through emotional responses. In most cases, when the issue is introduced to employees, they tend to fear. They always assume a resistant and defensive role. This is because it interferes with their routine activities and they are subjected to deviations from what they are used to doing. They feel insecure and threatened; thus, bringing emotional and mental instability (O’Connor, 2006). During implementation of the change, the employees are renowned to possess negative feelings, and they 'scrabble' about in finding ways of coping with the effects of change. The resistance displayed is extremely rooted in routine and preconditioned subjection that the employees are previously exposed to within their work environment. Managing change affects the employees in that, during the implementation, the employees' concentration is reduced as they conform to the change. Much of their time, creative thinking, intellectual capacity and efforts, are interfered with. They register a decreased performance due to lack of an initiative and stress free environment. However, this is expected by the management and it should be a temporary feature as the workers are soon able to cope with the change and assume their normal performance (O’Connor, 2006). Nonetheless, it depends on how quickly the management can win their support and acceptance to change. As the process moves forward, the workers become accustomed and begin to endure the change (Jobber, 2007). During this time, they realize that the change is a positive venture. They begin to accept and live with it wholly. They presume their efficiency and effectiveness in production and the business gets back to profitability and productivity track. Conclusion In conclusion, Lincoln’s Human Resource Management strategy is centered on a best fit approach that is designed to achieve product quality and employee productivity. By matching the human resources approaches to competitive and functional levels of strategy, Lincoln has succeeded in creating a sustainable competitive advantage. This is the reason behind the company’s success. References Bennis,W., Stephens, D. & Heil, G. (2000). Douglas Mc Gregor, Revisted: Managing the Human Side of the Enterprise. San Francisco, CA: Wiley Publishers Burnes, B. (2009). Managing Change. New Jersey: Prentice Hall Buller, P. & Schuller, R. (n.d). Managing Organizations: Cases in Management, Organizational Behavior and Human Resources Management. Ohio: South-Western College Publishing Emerson, P. (2000). "The Economics of Tenancy Rent Control," Economic Journal, Royal Economic Society, vol. 110 (466). Dwayne, K. (2012). ‘Managing change, motivating people’. Change factory. Retrived 04 July, 2012 from http://www.changefactory.com.au/articles/change-management/managing- change-motivating-people/ Hiatt, J. & Creasey, T. (1996). Change Management. Loveland: Prosci Research Higgs, M., & Rowland, D. (2005). All changes great and small: Exploring approaches to change and its leadership. Journal of Change Management, 5(2), 121-151. Jobber, D. (2007). Principles of Practice and Marketing. New York: McGraw Hill Kotter, P. (2002). The Heart of Change: Real-Life stories of How People Change Their Organizations. Boston: Harvard Business Review Press Lewis, L.K., Schmisseur, A.M., Stephens, K.K., & Weir, K.E. (2006). Advice on communicating during organizational change. Journal of Business Communication, 43(2), 113-137. Loup, R., & Koller, R. (2005). The road to commitment: Capturing the head, hearts and hands of people to effect change. Organizational Development Journal, 23(3), 73-81. O’Connor, E.J. (2006). Creating organizational support for change. Physician Executive, 32(3), 76-78. Rune, T. (2005). Organizational change management: A critical review. Journal of Change Management, 5(4), 369-380. Warrilow, S. (2009). 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