HBS case : Lincoln Electric - Venturing Abroad

The case:

Lincoln Electric: Venturing Abroad

1. How was Lincoln Electric’s successful for so many years? Does Lincoln’s experience contradict Hertzberg’sassertions (motivation-hygiene theory) or does it support them? Please pay special attention to the way Hertzberg seems to be defining “motivation”.

            Lincoln Electric’s incentive system of piecework, annual bonus and guaranteed employment provided a positive factor that led to its success over the years. What happened in Lincoln Electric is anything but contradictory to Hertzberg’s findings. Hertzberg had identified intrinsic and extrinsic factors in the workforce motivation. According to him, intrinsic factors such as personal growth, recognition, work itself, and autonomy tend to be important in individualistic country such as United States. However, extrinsic factors such as pay, working conditions, fringe benefits tend to be important in collectivistic societies such as Japan. Its subsidiaries in Canada and Australia did not face same problems as they did in Japan and Venezuela because its US centric incentive system was more attuned in these countries.

2. How did Lincoln failed to turn a profit on so many of the operations it acquired in other countries? Could its vaunted compensation system have worked in some of those operations?

            When Lincoln Electric expanded its operations internationally, it applied its US based incentive system elsewhere also. It did not take into account legal and cultural differences across the globe. For example, Europeans pay more value to vacation than to pay.  Such oversight was the root cause of its failure overseas. It is interesting to note that its compensation system in its fullest would not have worked abroad. In Germany, its vaunted piecework system is actually illegal.

3. Should Lincoln Electric proceed with its investment in Indonesia in 1996? If so, how? What should the company’s approach be to employee compensation?

            Its decision to invest in Indonesia must be made separate from its US centric corporate policies rather it must evaluate other risks and return factors. It must consider political stability, market size, legal environment, profit expectations as wells as cultural nearness. For the employee compensation, it must modify its US based employee compensation policy to match the host country’s cultural environment. It must be noted that Indonesia is falls into a collectivistic society spectrum. More attention must be paid to workplace environment than to intrinsic factors as Hertzberg’s assertions suggest.