Organizational Culture and Incentives at Lincoln Electric free essay sample

1. Introduction: An overview of the case study Lincoln Electric is a leading manufacturer of welding products, welding equipment, and electric motors, with more than US$1 billion in sales and 6,000 workers worldwide. Although now publicly traded, members of the Lincoln family still own more than 60 percent of the stock. Lincoln Electric’s tradition of innovative solutions, technological leadership and commitment to customers, employees, and shareholders stems from the vision of its founder, John C. Lincoln and his brother, James F. Lincoln. Lincoln Electric has a very successful management system that other businesses benchmark their own systems by it. For years, other companies have tried to figure out how management coaxes maximum productivity and quality from its workers, even during difficult financial times. The Lincoln system succeeds largely because of an organizational culture based on openness and trust, shared control, and an egalitarian spirit. Although the line between managers and workers is firmly drawn, managers respect the expertise of production workers and value their contributions to many aspects of the business. We will write a custom essay sample on Organizational Culture and Incentives at Lincoln Electric or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The company has an open-door policy for all top executives, middle managers, and production workers, and regular face-to-face communication is encouraged. Lincolns system worked so well in the US that management decided to extend it overseas. Lincoln built or purchased 11 plants in Japan, South America, and Europe with plans to run the plants from the US using Lincolns expertise with management control systems. Managers saw the opportunity to beat local competition by applying manufacturing control incentive systems to reduce costs and raise production. The results were abysmal and nearly sunk the company. Production and financial goals were not met. The huge losses in the international plants meant that the company would have to borrow money to pay US workers bonuses, or forego bonuses, for the first time, in Lincoln history. Management wondered whether the Lincoln Management System could be transferred to other countries. 2. S. W. O. T Analysis Strength Organizational Culture Everybody in company treated Equally whereby there is no special car parking area for managers and top management executives ,everybody will use the same cafeteria for breakfast or lunch and lastly they practicing open-door policy in the organization Any GAINS in Productivity will be shared with Consumers low Price Employee Higher Pay Shareholders- High Dividend Incentive Scheme Pay according to number pieces produced and enable the workers to gain more wages than the other welding company workers throughout the United states. In addition, these incentives system indirectly heightened the sense of ownership among the plant workers and it’s encouraging them to produce more quality product within the timeframe. Lincoln main strength is Lowest cost structure and High level of productivity strategy Weakness Long working Hours According to the labor law in US or any other countries ,the acceptable working hours for manufacturing company workers is (35 hours per week ) whereas Lincoln electric practicing (43-58 hours per week ). No Base salary when there is no base salary, most of the workers will feel uncomfortable to work in that kind of organization. For instance, if the worker couldn’t work for 43 to 58 hours per week, he or she might low wage than others and how that person would manage the cost of living in United States with that low wage. Opportunity It was told by foreign distributor that American equipment will not sell good in Europe So instead company decides to set up the Wholly owned subsidiaries and acquisition to make the Equipment locally to capture the international market. E. g. Lincoln acquired 7 manufacturer in Europe and Mexico It takes 2 years to implement or change the entire company workers to follow and adopt the Lincoln organization culture and incentives system in Mexico. Threats Political In many Europe and Asian countries the government considered piecework as Exploitative compensation system which force employers to work harder, therefore in Germany the strategy doesn’t work well. Society As stated in weakness part, the long working hours became threat when Lincoln implement the strategy in Other countries because it is not acceptable since labor law limit the working hours 35 hours per week Technical Managers have no experience of work outside US and the local managers also felt reluctant to implement the culture of Lincoln in the Unit. Legal Due to many lawsuit against the organizational culture and incentive systems of Lincoln ‘s foreign acquired companies 3. Case Discussion Questions 1. What is the source of Lincoln’s long-standing competitive advantage in the United States market for arc welding equipment? Lincoln’s Electric long-standing competitive advantage in the United State market achieved by a high productivity rate per worker and this company success had been on extremely high level of employee productivity. Lincoln’s Electric apply incentive scheme based on piecework. The workers receive no based salary but depend on the number of pieces they produce. The piecework rates at the company enable an employee working at a normal pace to earn an income equivalent to the average rage for manufacturing worker in the area where the factory is based. A company faces a quality aspect when it comes to incentive scheme based on piecework. But at Lincoln Electric’s the worker must repair or paid back any piecework that have defect. It means the workers must be responsible for their outputs. The work culture in Lincoln Electric’s is one of the attributor. The company had a strong respect for the ability of the individual. Moreover, in this company, they practicing open-door policy whereby the communication barriers between ‘workers’ and ‘managers’ were eliminated. All workers are treated equally despite of their position. Since 1934, production workers have been awarded a semiannual bonus based on merit ratings. These rating are based on; Objective criteria; example: employee’s level and quality of output. Subjective criteria; example: employee’s attitude toward cooperation and his or her dependability. This semiannual bonus motivates workers to perform better and work harder, resulting boost in productivity. Despite high employee compensation, the worker so productive than Lincoln has a lower cost than its competitors. 2. Why did Lincoln enter foreign markets through acquisitions and Greenfield ventures, rather than through exporting? The Lincoln Electric’s did consider expanding into international market by exporting, but was told by foreign distributor that American equipment would not sell well in Europe. So instead the company decides to set up wholly owned subsidiaries and acquisitions to make the equipment locally. Through acquisition, it was a quick way to execute. The company can rapidly build its presence in this targeted foreign market. Lincoln acquired seven arc welding manufacturers in Europe and one in Mexico. This move is the quickest way to make the equipment locally and introduce their product to the local market. Acquisition may be less risky because acquisition provides a set of assets that are producing a known revenue and profit stream. It also acquires valuable information such as manager’s knowledge about the local market environment. Greenfield ventures gives the company a much greater ability to built the kind of subsidiary company that it wants. The backbone of Lincoln Electric’s success lies in its strong organization culture and a unique set of incentives. Thus, by applying Greenfield ventures can be much easier for Lincoln to build that organization. It is to change the culture of an acquired unit 3. Why did Lincoln’s foreign ventures fail to deliver the gains forecast? The Lincoln may have overlooked the organizations cultural differences when the company decided to acquire the seven arc welding manufacturers in Europe and one in Mexico. When the company acquires these arc welding manufacturers, Lincoln left local managers in place, believing that they knew local conditions better. But there have been told to imply Lincoln’s strong organizational culture and introduce its incentive system in acquired companies. Local managers had little working knowledge about Lincoln’s organizational culture and were unable or unwilling to impose that culture on their unit, which had their own long-established organizational culture. The incentive system or work pieces were a problem to imply to it’s newly acquiring companies. The piecework was viewed as an exploitive compensation system that forces employees to work harder in other countries. The strong organizational culture and the incentive system were the main reason why Lincoln Electric’s stand up upon other competitors. If these two elements cannot be imply or used in their newly acquire companies, this must be the reason why Lincoln’s foreign ventures fail to deliver the gain forecasted. 4. In retrospect, what might Lincoln have done differently to avoid the financial crisis it found itself in? Before investing to a foreign country, Lincoln must first in vestige the foreign countries law relating to worker and working conditions. Also the company must know the foreign culture; it might be organizational culture or life culture itself. Then decide what entry made is the most suitable for the company. When it comes to Lincoln Electrical, where strong organizational culture and incentive system were the backbone of it success, the most possible entry mode is through Greenfield. Greenfield ventures give a much greater ability to build the kind of subsidiary company that it wants. Lincoln can introduce it organizational culture and incentive systems without a clash with another culture or system. While this strategy takes more time to execute, it yields greater long-run returns than the acquisition strategy. 5. What lessons can be gleaned from the Mexican venture? International managers should understand better about the foreign culture that the company wants to invest in. Before foreign instruments are made, the company must understand fully about its culture and laws. The local managers should be train or paid a visit to the successful factories in the America. They should be taught about the culture and the incentive system. Then the managers can imply these to the factories in their own country. The culture can change slowly if truly it is a good culture. Worker can accept it if it more beneficial to them. The incentives systems are proven to make the worker more productive and make the worker earn more. 4. Recommendation There are three ways to solve the company’s current on whether to expand Lincoln business into international market or not such as Human Resources Management, Culture and Policy and Communication . Based on the case study, through Human resources management, could bring an end to this issue whereby recruit foreign talents into US headquarters to adopt the culture and once they feel confident, they will be transfer to their home country to oversee the Lincoln’s acquired companies. Moreover, HRM should recruit more degree holder so that could balance between experienced based managers and knowledge based managers in the organization in order to avoid the agency problem. Apart from that, training is also plays vital role to overcome the lack of international business knowledge of fresh graduates who hired as managers. Nevertheless, Lincoln’s management should create new department called ‘culture and policy ‘ in headquarters and also in acquired companies around Europe and Asia countries. This department main objective should be on understanding the culture, behavior, law, politics intervention, economy, labor law policies and also the market research about a country where Lincoln prefer or desire to expand the business. Last but not least, communication also an important factor for international business whereby create new channel among the branches and offices in order to update the current situation in the acquired companies, if they found anything goes wrong ,the US headquarters would take immediate action it. Higher the foreign talents and local talents hired, more will be the solution, ideas, suggestion and strategies will be introduce, therefore, it will be easier for Lincoln to expand the business into international market and will sustain for longer term.

The Effect of Divided Government on the Rally-Round-the-Flag Phenomenon Essay Example

The Effect of Divided Government on the Rally The Effect of Divided Government on the Rally-Round-the-Flag Phenomenon Paper The Effect of Divided Government on the Rally-Round-the-Flag Phenomenon Paper Nicole Dambra PSC412 Professor Johnson April 29, 2010 Abstract: The concept that public approval of the President increases during times of international crisis is known as the Rally around the Flag phenomenon. Divided government lessens the Presidents accountability, by allowing the president to pass blame to the majority party in the legislative branch. The President attains higher levels of approval from rallies during divided government due to three factors. First, there are higher levels of opposition party criticisms prior to a crisis. Secondly, media outlets disproportionably cover opposition party elites statements supporting he President. Lastly, opposition party statements in support of the President are a very powerful influence on the public. Public approval is important because it increases the power of the President in many aspects of the political arena. Presidential public approval plays a role in members of the presidents party being elected into opening congressional seats (Marra and Ostrom 1989). Presidential popularity has also been linked to the successful policy initiation from the president (Rivers and Rose 1985), and less reversed presidential vetoes (Rohde and Simon 1985). Popular presidents have more persuasive power mongst members of Congress, and are more likely to present bold and ambitious legislative packages to Congress (Baker and Oneal). Popular Presidents have more options and freedom to enact their political agendas with less resistance from Congress (Baker and Oneal). Since public approval is so valuable to the President, the rally-around-the-flag phenomenon is worthy of further research. The notion that a president can elicit a surge of patriotism and public approval for his administration and its policies during an international crisis is known as the rally around the flag effect (Mueller 1970). This phenomenon was supported by empirical research (Kernell 1978; Mueller 1970). More recent studies have cast doubt on some aspects of the rally effect (Brody 1991). The political aspects that explain the origin of the rally-around-the-flag phenomenon lead me to question if periods of divided government effect the size of a rally. Previous Literature There are three prevailing schools of thought that explain Presidential Approval Ratings. The first is that Presidential Approval will inevitably decrease throughout the term. Presidential approval is not a constant decrease, so this theory does not ompletely explain approval trends. The second school of thought claims that presidents are constantly evaluated on their abilities to fulfill the expectations of the electorate. Public approval fluctuates in response to inflation and rates of unemployment, battle deaths during periods of war, levels of international tension, and the success of the presidents legislative agenda. This theory expects the electorate to be sophisticated and informed, which is not the case. The third is the President will do anything to prevent the decay of public approval. This theory is here the rally around the flag phenomenon plays an important role. There are two approaches to explaining the cause of a rally, patriotism and opinion leadership. The Patriotism Model claims that in times of foreign crisis, the public will unconditionally support the president. The fact is that there are many examples of public reaction such as individual rally events, threats, demonstrations, or use of force which do not routinely result in a boost of the presidents popularity. If the cause of a rally is intensified sense of patriotism, events that most gravely threaten he nations political, economic and strategic interests will be the most likely to induce a rally. However, higher levels of hostility have only limited effects on the size of the rally in presidential popularity (Baker and Oneal). When the United States is engaged in a militarized disputes for a prolonged period of time, the presidential approval decreases. This could be evidence of public fear of a successful exit or that the US is overstretching itself. This decrease in public approval does indicate that support is not blind, and the fact that militarized disputes with cold war rivals did not roduce significant rallies sheds further doubt on the patriotism hypothesis (Baker and Oneal). The Opinion Leadership Model states that the political environment in which international crises develop often prohibits the public from access to traditional sources of information which are available during normal periods. This inability to access pertinent information is generally the cause of the rally; it creates a barrier in making political Judgment by leaving out a piece of the puzzle per say. The opinion leadership model of the rally effect (Brody 1991) seems to more accurately account for the rally phenomenon. The factors that seem to effect the size of the rally pertain to how efficiently the dispute is publicized, not the type of the event. The White House increases the size of a rally through eloquent presidential statements, acquiring bipartisan support, and media coverage. The public does not rally in response to a crisis in and of itself, but rather to how the president manages and portrays the events. This suggests that public relations skills of an American president are an progressively more essential instrument for the successful management of public opinion of international conflicts which involve the United States. The political nature of the factors that cause a rally lead me to hypothesize that rallies will be larger in periods of divided government. Divided government occurs when the President and the majority party in Congress have different partisanships. Divided government makes bipartisan cooperation more likely by giving moderates the advantage of greater influence. Divided government creates a credibility dilemma, because the electorate does not know whom to blame or accredit for governmental actions (Mellow and Trubowitz). Presidents are easy targets or capegoats; a divided government makes them less likely to be held accountable for the governments failures because the public has a conceivable alternative for assigning liability to Congress. The majority party in congress has the same incentives as the President to pass the blame. During a divided government there are high levels of opposition party criticism towards the president prior to a crisis (Nicholson). After a major emergency the partisan relationship goes through three stages. The first stage is genuine solidarity; during this stage the legislative branch votes a lot of power to the xecutive. The second stage is ersatz solidarity, when the parties continue the fapde of solidarity (Vermeule). Resulting in open conflict, the initial cooperation and support for the executive causes the public to rally for the president. The reason for this initial support is opposition leaders may avoid criticizing the president because the administration has a virtual monopoly of information about the foreign events and they do not want to appear ill informed or unpatriotic. The Party elites also have a better chance of getting media coverage if they make a statement to support the President. This creates an incentive to agree with the president in order to get publicity, and be able to give opinions on other topics (Howell). Media outlets disproportionably cover opposition party identifiers statements in support of the president because they are less common opinions (Baum, 2002). Non- party presidential praise is extremely persuasive and influential to the public, especially non-party identifiers (Baum and Groeling). The media is a gatekeeper for the information the public receives. When the media covers statements supporting the president the public is influenced. Unlike the President who is always able to get media coverage and publicity about the issues that are interesting to him, members of congress and other party elites have to act strategically to get media coverage. The lack of political opposition and criticism of the presidents policies combined with the media lacking the resources to present opposing interpretations of the crisis creates an environment where the public is largely cut off from the cues it traditionally employs to develop an opinion and form Judgments on political phenomena. Without easily accessible cues presented through the media from those ith whom they identify politically or ideologically, the public is led to assume that there is a consensus among political leaders on the issue and to support the president, even if they would otherwise be inclined to oppose him. Since most Americans know little about foreign affairs they rely on heuristic cues from credible sources. One credible source many Americans rely on is the co- partisan party elites. Support from opposition party members is very influential because the American public trusts their party elites (Baker). Times of divided government are estimated to increase the immediate rally for the president 4. percent (Colaresi). The public also has more trust during divided government because they believe the branches will check each other. Divided government acts to increase the potential political cost of a foreign policy action and thus increases the persuasiveness ofa leaders signal. The public can be more confident that a legislature under opposition control will use its subpoena and oversight power to uncover abuses of power. While it may not be in the presidents partys interest to attack a foreign policy action that was undertaken for private rather than public gain, an opposition party will have no such qualms (Schultz). During divided government the legislature is more likely to hold hearings and investigate presidential decisions under divided government. Between 1954 and 1989 the average number of hearings on defense and international affairs was 25 percent higher under divided government (Martin). The public feels like they are being informed which increases their support. Methods and Data I have combined the rally events used in the articles, Rallying Around the Flag: Foreign Policy events and presidential popularity, Pretty Prudent? Public Responses to U. S. Uses of Force, 1950-1988, and the major uses of force according to American Military History (www. historyguy. com/american_military_history. html) ending with the 2003 invasion of Iraq. I gathered 68 rally events which are composed of 28 wars and military crisis events, 9 peace and reconciliation, 11 summit conferences, 6 policy initiatives, 11 International Setbacks, and four personal events. Then I used News, Norms, Indexing and a Unified Government (http://arts. bev. net/ roper David/politics/congress. htm) to determine if the even occurred during divided or unified government. Lastly, I used public approval ratings from the Gerhard Peters: The American Presidency Project (www. residency. ucsb. edu/data/ popularity. php) to measure the change in presidential approval after the rally event. The data was statistically analyzed. Data Analysis Table 1: Change in Approval Variable Obs. Mean std. Dev. Min Max All Rally Events 4. 91176 6. 986677 -8 Divided Government 5. 026316 7. 937209 Unified Government 4. 266667 5. 662541 14 Table 2: Statistical Significance 1 . oooo Divided Discussion Change †l divided Change in Approval 0. 0544 1. 0000 0. 6596 I found that in general a president can expect to increase public approval ratings by 4. 5 percent following a rally event. This is consistent with previous literature. I did not find evidence to support my hypothesis. There i s little, or no effect that divided government has on the rally phenomenon. The average change in table one for divided government makes it appear that divided government increases that rally by . 75 percent, but the fgures show that these numbers are not actually different, and they are also not statistically significant. When the data was plotted in a box plot it exemplified that there is a slightly greater rally effect during unified government (Figures 1 and 2). These findings were inconsistent with a lot of the previous iterature. This could be due to the fact that I did not only consider military engagements, or other biases formed in the case selection process. One of the reasons attention was focused towards divided governments effect on the rally-around- the-flag phenomenon is because the two largest rallies occurred during divided government. The first was the Gulf War in 1991 under Bush Seniors Administration. Bush experienced an increase of 28 percent. Then the largest rally occurred following September 1 1, 2001, under George W. Bushs administration, he experienced a 34 percent increase in public approval. The rally that followed September 1 lth was fueled by patriotism. Many Americans actually gathered and prayed around the American Flag. This surge in public approval enabled Bush to enact his political agenda, and have ample public support of invading Iraq and waging the War on Terror. Both Bush administrations were immensely aided by the rally. An example ofa military dispute that did not result in a rally was in 1971, under the Nixon Administration, the expansion of military involvement in Laos. This event caused a decrease of seven percent public approval. Another reason that the effect of divided government is hindered is if the egislative branch is divided the accountably dilemma is attributed to partisan affiliation rather than congress blaming the executive. Also divided government inhabits higher levels of presidential public approval (Nicholson et. al. ), and rallies are larger when public approval is low, because the president has more room to improve(Baum 2002). One of the Presidents most influential powers is persuasion. The President has to take advantage of any political tools that will enable him to implement his agenda. The ability to create or inflate the size of a rally can be extremely advantageous to the President.