Lincoln Electric Company Q Florian AUTRIQUE Camil e BAC TON Lauriane BER CRONIER Aurélien E Hélène REBR

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1 ille m a C n QUE Floria I R AUT BACQ auriane L n ON urélie T R A BE ER H é l è n e I N C R O E BR E R Lincoln Elec tric Company

2 1. Describe the practices that Lincoln Electric uses to motivate employees. What are some of the consequences of these practices for employees and the company? The?irm does not propose any advantage to its employee, but is well known for its low turnover. How can they make it? By being one of the?irm that delivers the most. The retribution system is based on the production done by the employees, and the bonuses are based on a merit- based pro?it- sharing. The bonus is based on the productivity of the?irm : the more pro?itable the company is, the most important the bonuses are. Those bonuses can represent 60 to 150% of the average salary of a employee per year. The company guarantees 30 hours a week per employee. The management system is also peculiar : the rate of manager per employees is very law. It can not work in all the companies : here, it is possible because of the few need of control that the tasks need. In the same way, the managers evaluate each employees to determin the level of bonus they will earn, and that assures them a high level of remuneration.

3 What are some of the consequences of these practices for employees and the company? This system has worked very well : the company had to forbide them to work before 9 AM. When Lincoln Electric decided to hire new employees, it received applications, which can be interpreted as a mark of success. It proves that the company is well known for the motivation policy. However, some of the new employees have dif?iculties to adapt themselves to the high rythm of work, and quit their jobs after a few weeks. This shows that the system that Lincoln Electric has settled does not work for everyone.

4 2. Discuss the motivational system at Lincoln Electric, using each of the need theories of motivation. What does each theory say about the motivational practices at Lincoln Electric and which theory works best for explaining employees motivation? The?irm stands for the idea that the main motivation of employees is money. This extrinsic motivation is claimed to be suf?icient to keep employees, and that seems to work indeed. Money belongs to the?irst category of Maslow pyramid (physiological satisfaction), as well as for Alderfer theory (existence needs), and could be compared with McClelland s (achievement). Nevertheless, Maslow theory seems the best one to describe this kind of social contract. But as a satis?ied need is no longer motivating, the company keeps money related to the amount of involvement at work. Besides, the soft management and strong individual communication system (through the evaluation process) is related to the 4th step of Maslow pyramid: esteem.

5 Going further : psychological contract theory As for going further, we also could develop the concept of psychological contract which describes the kind of relationship that develops between employer and employees: the idea is that employees develop a vision of their employment relationship based on mutual promises and obligations. This one is clearly de?ined and merit- based, which avoids any breach in contract. That means that this relation maintains motivation and involvement. But it only works with people for whom this kind of contract ( transactional ) is what they need, which is why half of the hired people leave the company within the?irst 90 days. That is why this couldn t work in every countries. If Canadians tend to develop transactional contracts, Europeans for example are more likely to develop relational or balanced contracts. (Sources : McNeil (1985), Rousseau (1989, 1990, 1995), Guerrero (2001, 2003, 2003),

6 3. Consider the motivational system at Lincoln Electric in terms of the process theories of motivation. What does each theory say about the company s motivational practices? In other words, can we understand the system and its effectiveness in terms of expectancy theory, equity theory, and goal setting theory? - In terms of expectancy theory: (Vroom, Porter and Lawler) The expectancy theory explains that the motivation of people depends on the level of expectation. Indeed, if they are convinced that their job will be good evaluated (and therefore, have a good reward), they will be more motivated as other. Lincoln Electric case seems to be in adequacy with the theory. Compensation is based on merit and an employee can earn a good bonus. The turnover is really low and the employee follow the rules even if they don t have a lot of perks. - In term of equity theory: (Adams) This theory is based on the idea of equality between people: equal work, equal wage and people will be motivated and satis?ied. Lincoln Electric pays his employees according to their performance and we saw that employees seem to be motivated.

7 The company has a good image and remember that the turnover is low. Employees accept to work hard even if they don t have the same wage. This case doesn t validate the theory. - In term of goal setting theory (Locke and Latham) This theory is based on the different kinds of goals the company can put in place in order to motivate his employees. In the case of Lincolm Electric, the goal for the employees is to make as much money as possible. This can explain the motivation to accomplish the different tasks. This goal is possible to achieve because the system is made for achieving this goal, and the remuneration system is adapted to this way to motivate people.

8 4. Some have said that the methods of motivation used at Lincoln Electric should be used by all organizations to motivate their employees. Do you believe this to be true? Explain your reasoning. We believe that this methods of motivation can t be used in every countries because not all the culture have the same beliefs and the same needs. This can work in countries led by money or which like meritocratic issues but this will not work for everybody. Each cultural group have different beliefs and will not be motivated by the same method. Like they said in the text only few people stay after trying to work in this place. We could refer to Hofstede s analysis of the different sight of work in every countries, for example, to understand the national differences.

9 5. Comment on the cross- cultural limitations of Lincoln Electric s motivational system? How do the theories of workmotivation help us to understand why the company s incentive program did not work in Germany but does work in North America and Australia? What does this tell us about the cross- cultural limitations of the theories of motivation? We can explain the cross- cultural limitations by using d Iribarne theory. He explains that different countries have different logics at work. For example, in USA, the logic used is the logic of contract. It means that the hierarchical relationship is freely accepted by all the parts, and that you can expect of the others parts exactly what you have asked them and what they have accepted to do. In France, it s the honnor logic : to each role of each individual in the organisation, a behavior is expected and each invidual must ful?ill the expectations. The differences between the perception of the work proves that the system of motivation of Lincoln Electric would not work in all the countries, because each culture has its own relation to work. The theories of motivation insists on the individual aspects of each relation to work : even in a country with a homogeneous culture, each individual will have a different relation to work. This relation comes from his own experience at work, and a company should take those particularities.

10 6. What can other organizations learn about motivation from Lincoln Electric? What do you recommend that organizations do to motivate employees based on your knowledge of the Lincoln Electric motivational system and on your understanding of motivation? This case and the test we have done before allows to learn that each person have different sources of motivation. So, it s important for companies to be able to know, de?ine and specify from the outset what kind of needs they can satisfy, to be sure that people and organization?it to each other. We recommend to organisations to satisfy more than only one need to be able to attract and keep the maximum of pro?iles. It s important to satisfy the primary need like physiological and safety needs in order to maintain a comfortable work atmosphere to prevent new employees from leaving company in the?irst work days. Once the company has complied with the primary needs basis, it can develop other kinds of rewards. Moreover, this kind of management can be really dif?icult to apply in France for example given that the law provides some mandatory rights (holidays, working time, social welfare )