Control Systems CHAPTER 9 CLOSING CASE Lincoln Electric is one of the leading companies in the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Control Systems CHAPTER 9 CLOSING CASE Lincoln Electric is one of the leading companies in the global market for arc welding equipment. This is a cost-competitive business in which consumers are price sensitive. Lincoln's success has been based on extremely high levels of employee productivity. The company attributes its productivity to a strong organizational culture and an incentive scheme based on piecework. Lincoln's organizational culture dates back to James Lincoln, who in 1907 joined the company his brother had established a few years earlier. Lincoln had a strong respect for the ability of the individual and believed that, cor- rectly motivated, ordinary people could achieve extraordinary performance. He emphasized that the company should be a meritocracy where people were rewarded for their individual effort. Strongly egalitarian, Lincoln removed barriers to communication between workers and managers, practicing an open-door policy. He made sure that all who worked for the company were treated equally, for example, everyone ate in the same cafeteria, there were no reserved parking places for managers, and so on. Lincoln also believed that any productivity gains should be shared with consumers in the form of lower prices, with employees in the form of higher pay, and with shareholders in the form of higher dividends. The organizational culture that grew out of James Lincoln's beliefs was reinforced by the company's incen- tive system. Production workers receive no base salary but are paid according to 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 wage for manufacturing workers in the area where a factory is based. Workers are responsible for the quality of their output and must repair any defects spotted by quality inspectors before the pieces are included in the piecework calculation. Since 1934 production workers have been awarded semiannual bonuses based on merit ratings. These ratings are based on objective criteria (such as an employee's level and quality of output) and subjective cri- teria (such as an employee's attitudes toward cooperation and his or her dependability). These systems give Lincoln's employees an incentive to work hard and to generate innovations that boost productivity-doing so influences LINCOLN ELECTRIC Productivity Beaters! The pay of employees at Lincoln Electric is tied closely to productivity targets. So successful have these incentive systems been that the company has the highest productivity in its industry, along with the lowest cost structure Courtesy of the Lincoln Electric Company 227 their level of pay. Lincoln's factory workers have been able to earn a base pay that often exceeds the average manufac- turing wage in the area by more than 50 percent, and they also receive bonuses that in good years can double their base pay. Despite high employee compensation, the workers are so productive that Lincoln has a lower cost structure than its competitors.31 CASE DISCUSSION QUESTIONS 1. What kind of control systems does Lincoln Electric rely on to generate high employee productivity? 2. Can you think of any possible unintended consequences of an incentive pay system based on piecework? How does Lincoln guard against these unintended conse- quences? 3. Do Lincoln's control systems match the strategy of the enterprise'? How? Control Systems CHAPTER 9 CLOSING CASE Lincoln Electric is one of the leading companies in the global market for arc welding equipment. This is a cost-competitive business in which consumers are price sensitive. Lincoln's success has been based on extremely high levels of employee productivity. The company attributes its productivity to a strong organizational culture and an incentive scheme based on piecework. Lincoln's organizational culture dates back to James Lincoln, who in 1907 joined the company his brother had established a few years earlier. Lincoln had a strong respect for the ability of the individual and believed that, cor- rectly motivated, ordinary people could achieve extraordinary performance. He emphasized that the company should be a meritocracy where people were rewarded for their individual effort. Strongly egalitarian, Lincoln removed barriers to communication between workers and managers, practicing an open-door policy. He made sure that all who worked for the company were treated equally, for example, everyone ate in the same cafeteria, there were no reserved parking places for managers, and so on. Lincoln also believed that any productivity gains should be shared with consumers in the form of lower prices, with employees in the form of higher pay, and with shareholders in the form of higher dividends. The organizational culture that grew out of James Lincoln's beliefs was reinforced by the company's incen- tive system. Production workers receive no base salary but are paid according to 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 wage for manufacturing workers in the area where a factory is based. Workers are responsible for the quality of their output and must repair any defects spotted by quality inspectors before the pieces are included in the piecework calculation. Since 1934 production workers have been awarded semiannual bonuses based on merit ratings. These ratings are based on objective criteria (such as an employee's level and quality of output) and subjective cri- teria (such as an employee's attitudes toward cooperation and his or her dependability). These systems give Lincoln's employees an incentive to work hard and to generate innovations that boost productivity-doing so influences LINCOLN ELECTRIC Productivity Beaters! The pay of employees at Lincoln Electric is tied closely to productivity targets. So successful have these incentive systems been that the company has the highest productivity in its industry, along with the lowest cost structure Courtesy of the Lincoln Electric Company 227 their level of pay. Lincoln's factory workers have been able to earn a base pay that often exceeds the average manufac- turing wage in the area by more than 50 percent, and they also receive bonuses that in good years can double their base pay. Despite high employee compensation, the workers are so productive that Lincoln has a lower cost structure than its competitors.31 CASE DISCUSSION QUESTIONS 1. What kind of control systems does Lincoln Electric rely on to generate high employee productivity? 2. Can you think of any possible unintended consequences of an incentive pay system based on piecework? How does Lincoln guard against these unintended conse- quences? 3. Do Lincoln's control systems match the strategy of the enterprise'? How?
Expert Answer:
Answer rating: 100% (QA)
ANSWER Question 1 Lincoln Electric relies on several control systems to generate high employee productivity a Organizational Culture Lincoln Electric has fostered a strong organizational culture that ... View the full answer
Related Book For
Managing Business Ethics Making Ethical Decisions
ISBN: 9781506388595
1st Edition
Authors: Alfred A. Marcus, Timothy J. Hargrave
Posted Date:
Students also viewed these general management questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
2. For every $1.00 spent on Advertising, the Industry generates $10.00 in Net Sales. You calculate Living Earth's Advertising relationship to Net Sales (show work) and report your comparison of...
-
Fabiana's Designs has three lines of women's wear: Teenage, Young Woman, and Mature. On May 18, 2017, Fabiana's Designs had a fire that destroyed the Teenage line of inventory. Sales for the period...
-
What does the legalize and tax method of dealing with currently illegal drugs imply about how proponents of this approach view the ability to put a dollar value on human life?
-
For a good refrigerant (a) Ozone Depletion Potential should be high and Global Warming Potential should be less (b) Ozone Depletion Potential should be less and Global Warming Potential should be...
-
You are considering an audit engagement with a new, privately-held entrepreneurial company (Moxy, Inc.) headed by Ryan Morris, a charming CEO. The company specializes in chemical lawn treatments....
-
A parking lot is made with scarce resources such as labor, machinery raw materials. 1) What is the opportunity cost of using the resources used to build a parking lot? 2) After the parking lot has...
-
As part of an estate plan for Marsha, would you recommend a will, a will with a testamentary trust, or a revocable living trust? Why. Are the children old enough to voice their preference for a...
-
The following information is available for British Columbia Limited (BCL) a company whose shares are widely traded: Comprehensive net income for 2020. $230,000 Net Other Comprehensive Income for...
-
A centrifuge slows down from 691 rpm to 281 rpm in 14 seconds. Assuming constant angular acceleration, determine the number of revolutions it goes through in this time. Express your answer using zero...
-
Consider a production process where flowers are grown (the output) using gardeners (labor) and greenhouses (capital). The quantity of flowers grown per day with various combinations of labor and...
-
Fill in the Table below (note: this is just for practice - you can copy this and try fill the values just for practice): # of Workers Total Product P of Output Wage Rate VMP 0 $5 $400 1 $5 $400 2 $5...
-
Red blood cells can often be charged. Consider two red blood cells with the following charges: 1 6 . 6 pCand + 4 8 . 6 pC . The red blood cells are 3 . 7 0 cm apart. What is the magnitude of the...
-
In scenario A, the formula to calculate the future value after 20 years is indeed Ct = PV (1 + r)20. This formula considers 20 compounding periods because the interest is applied annually. Each year,...
-
Question 3. (9 points) We defined the set N CR of natural numbers. The set Z of integers is defined as Z=-NU {0} UN where -N := {n ER| -n E N). In the following you may assume that N is closed under...
-
[a] Two foam blocks, each with a charge of 19 micro coulombs (1 C = 10-6 C), are both held in place 19 cm apart in the east-west direction. A foam ball with a charge 49 C is placed 55 cm north of the...
-
You are on the management team of a rapidly growing apparel company that had $780 million in sales last year and is projecting an additional $150 million in sales this year. You have been invited to...
-
USMNC has just purchased Latin America Metallurgy Company (LAMC) from a competitor. LAMC is located near Managua, Nicaragua. There has been rapid growth in worldwide demand for the sheet metal and...
-
Pithos Internet Company is known for its innovative software products. The secret to Pithoss success is in large part its ability to create a climate in which its smart and ambitious employees are...
-
Refer to the nanopillar height data on page 25. Using the \(95 \%\) confidence interval, based on the \(t\) distribution, for the mean nanopillar height (a) decide whether or not to reject \(H_{0}:...
-
Refer to the green gas data on page 241 . Using the \(95 \%\) confidence interval, based on the \(t\) distribution for the mean yield (a) decide whether or not to reject \(H_{0}: \mu=5.5...
-
Repeat Exercise 7.69 but replace the \(t\) test with the large sample \(Z\) test. Data From Exercise 7.69 7.69 Refer to the labor time data in Exercise 7.3. Using the 90% confidence interval, based...
Study smarter with the SolutionInn App