Transcript Case Study: Lincoln Electric in China Presented By: Lilian Ho

Case Study: Lincoln Electric in
China
Presented By:
Lilian Ho
Steven Lo
Cynthia Lam
Agenda
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Lincoln’s success in Cleveland &
international expansion plans into Shanghai
Problem Statement
Situation Analysis
Recommendation
Implementation
Lincoln’s Success in Cleveland:
Lincoln Incentive System
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Piecerate payment scheme
Year-end bonus system based on
performance – paid in time for Christmas,
bonus can be as large as the size of annual
salary
Other factors that have contributed to
Lincoln’s Productivity in Cleveland
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Stock purchase plan – for employees who have
worked for more than one year
Guaranteed Employment Policy – at least 30 hours
of full-time work for employees who have worked 3
years or more
Policy of promoting from within
Employee Advisory Board – meetings run by
President
Open-door policy
Current Situation
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“To bring Lincoln to Asia…to produce within
the region for the region, products that were
appropriate to the region…lots of locally
owned stick companies that are fighting each
other to death and we saw the opportunity to
come in with a good quality automatic
technology, both for the China market and for
export”
Joint Venture (JV)
Pros
1. Gain access to local
knowledge, distribution
channels, and “guanxi” of
local partner
Cons
1. Slow down decisionmaking process
2. Dilution of control
3. Different styles of
management
4. Profits/ losses are
shared
Wholly-Owned Foreign Enterprise
(WOFE)
Pros
1. Autonomy in decisionmaking process
2. Protection of intellectual
property rights
Cons
1. Closer scrutiny from
Chinese government
2. National level approval
3. Requirement of 30%
export quota
Organizational Structure
Gillespie
President for Asia
Ray Bender
VP Manufacturing
Julius Wu
GM for SH
Jason Foo
Finance
Dr. Li
Plant Manager
Peter Grant
S&M Manager
Kundrach
Acting GM
Shan Bing
Finance & Control
Problem Statement
Should the Lincoln incentive system which has
worked so well in Cleveland be suitable for
implementation in China? If so, when and
how should it be implemented?
International Expansion
Potential Problems:
 Difference in organizational cultures –
Chinese hierarchy
 National and regional differences –
government laws, unions
 Language barriers & cultural differences
Cultural Lens
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Workforce would not speak out or make suggestions in the
hierarchical Chinese Society
 Push and encourage people to debate and argue at the
right time.
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Workers in the country won’t accept the remuneration system
if the company’s performance is unstable/ in doubt
 Introduce the system when the company is steady and
stable, which the workers could be clear about their rewards
Strategic Lens
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The upper management in United States highly
believes in the piecework system, they plan to
implement this to all branches
 People need reason and time to adopt
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Management of local employees is complicated and
varies in different regions
 Each country/region has specific cultural traits
that could inhibit traditional Lincoln management
practices
Political Lens
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New acting GM, Jeffrey Kundrach in 1998
because Julius Wu was ill. Uncertain
leadership in the future.
Dr. Li would be a main character in the
incentive system since he is the only “bridge”
between the upper management and the
workers
Recommendation
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To progressively implement the piecework
incentive system in Lincoln China
Implementation
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Hire staff, possibly in the time-study
department, with command of English and
Chinese and with foreign and China working
experience to execute the plan for effective
communications
Create channels such as employees
committee and informal gatherings for the
workforce to speak out and make
suggestions
Implementation
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Establish a long trial period to better estimate
the piecework price of each worker
Introduce the piecework system only to the
experienced workers to minimize the chance
of adjusting the piecework price
Implementation - Others
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Need to remember that other factors
contributed to Lincoln’s high productivity:
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Stock purchase plan
Guaranteed Employment Policy
Employee Advisory Board
Open-door policy
Policy of promoting from within
These should also be implemented
alongside the piecerate incentive system!
Question & Answer – thank you!