Lincoln Electric Case Study
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Solution
Lincoln Electric Case Study
Executive summary
Lincoln Electric is an American company that has embraced a globalization strategy that has seen it enter into new markets across the globe with increased success. The company has been able to establish a plant in China. One of the most challenging environments for most multinationals. The company has seen success in terms of its operations. Major challenges being cultural fit. This report investigates the impact of the cultural factors that have influenced the reduced success of Lincoln. Among them are, establishing an effective relationship with its employees in china and facilitating increased productivity.
Lincoln Shanghai faces various issues including uncertainties about the future of its quality, lack of leadership training, ineffective motivation of employees, and cultural impediments. This interferes with the communication between the employees and the management. The cultural difference between China and the Us is the origin country of Lincoln. This has influenced its cultural background, is the major underlying factor for the issues that are faced by the country. The differences in culture between the two is using three of the cultural dimensions discussed by Hofstede in his cultural dimension model, including power distance, individualism versus collectivism, and masculinity versus femininity, shows discrepancies that have made it impossible for the Lincoln management system to apply in China.
This paper recommends training of the employees and managers in cross-cultural interaction, and the recruitment of local Chinese mangers to run the subsidiary in shanghai as they have a better understanding of their culture. Leadership training is also recommended in view of promoting it within the organization.
Introduction
International Human Resource Management is an area that has received increased deliberation over the recent past with different stakeholders acknowledging the significance of transboundary factors in managing people and motivating them towards organizational success. Cultural differences between nations and regions are important in determining the factors that motivate individuals towards increased performance. In the wake of globalization, organizations are forced to develop a deeper understanding of the regions in which they are entering.This in order to be able to effectively integrate the various factors that would increase receptiveness of the organization’s goal and mission among the local labor force.This paper aims at reviewing Lincoln Electric’s entry into China so as to understand the various cultural factors that ought to be observed by the management in order to facilitate increased performance and the general success of the organization in the Chinese market. To achieve this, the report will start by reviewing the company’s background, the various issues that it has faced in its expansion into a foreign market, and the causes of such issues. This will in turn provide recommendations that would allow the management to outplay such problems and succeed in China.
Background
Lincoln Electric Welding Company is a US based manufacturing company that deals in manual, semiautomatic, and automatic welding products. The company is a global giant having witnessed years of success in terms of profitability. The company is well renowned for its labor management strategy. This has allowed it to effectively motivate its employees through incentives and remuneration programs. With such a strategy, the company has effectively established itself as a major player in foreign markets. Quality of its products is key. The company has never experienced strikes. The management focuses on motivating the employees through enumeration. This is to facilitate increased performance and commitment towards the goals of the company. The company has successfully penetrated and established itself within various foreign markets. The management has faced an increasing challenge entering into the Chinese market. Culture stands out as a major issue of concern and a barrier against the company’s success in China. The human resource forms a major part of any organization. The success of any organization is intertwined with the level of satisfaction that is achieved among the employees and the established attitude towards the organization. Inadequate motivation of employees from the local Chinese market has been a major factor that has contributed towards the low success rate if the organizations in China. With most of the management comprising of expatriates while the low level employees being populated by Chinese workers, the differences in culture between the two parties could be termed to be a major issue of concern when reviewing its success within the Chinese business environment.
Issues & Problems
As much as Lincoln has seen days of success since its establishment in Shanghai. The company’s management is overly concerned over various issues that ought to be addressed in order to guarantee the sustainability of the company. One such factor involves ensuring that the high quality of the company’s products is well maintained. The company engineers were associated with high quality products. With quality being the company’s point of difference in the highly competitive market. Ensuring sustainability of such quality is an issue of great importance in ensuring that the company expands across the country and the region at large.
Another issue of concern according to Lincoln’s case involves leadership training. During 1998, Julius Wu became ill, forcing him to take time out for convalescence. Jeffrey Kundrach was able to step in and to handle the immediate leadership functions. Nevertheless, it was clear that the company has not establish a proper mechanism for leadership training, to allow for effective succession in leadership in the wake of a situation that would require such a succession. Kundrach may have been able to handle the immediate needs of the organization from the leadership position. But was unaware of the long-term leadership goals that had been put in place by Wu. The organisation is developing a program that would allow them to facilitate leadership training across the organization. This will facilitate increased success in the leadership functions, especially considering the fact that the company highly favors hiring internally.
The introduction of the Lincoln Incentive Program is also another issue of great concern. The management always differing on whether the program should be introduced to the Chinese based organization or not. This system has been seen to be a source of increased employee motivation in other foreign markets that the company has expanded to including France and Canada, among others. As such, part of the management believes that introduction of the incentives program in China would lead to the same level of success as experienced in the other foreign Lincoln subsidiaries. Nevertheless, this form of employee motivation appears to be less effective in the Chinese environment. Cultural impediments have also been cited as an issue of concern for Lincoln in China. There is language difference between the expatriate managers and the local Chinese workers. This is a significant issues that affect proper communication across the organization and hence interfere with effective performance. The remuneration system adopted by Lincoln also seems not to fit in the Chinese environment. With the company likely to experience resistance from the employees on issues such as prolonged depression of the earning of employees, and the spread of poor performance risk to the employees.
Analysis of Causes
Cultural Issues
One of the issues highlighted in the case study involves cultural impediments. This is a major contributor to the poor interaction between the expatriate managers and the Chinese employees. According to psychologist Geert Hofstede, different nationalities have their national cultures, which are distinctive from other nations. This determines the level of interaction that would exist between such nations. It is through this that Geert developed the cultural dimension’s model. This was meant to inform managers in making managerial decisions when entering into new markets. This section applies the power distance, individualism versus collectivism, and masculinity versus femininity dimensions of the cultural dimension model to show the disparities between the Chinese culture and that of the US, the origin country of Lincoln. This would allow for development of an understanding of the factors that contribute to the failure of the Lincoln managerial approach in China.
Power Distance
One of the cultural dimensions discussed by Hofstede is that of Power Distance. This refers to the level of inequality within a given society. It happens between those who have power and those who do not have it. The extent to which such inequality is accepted. In societies with a high power distance score, it is indicative that individuals accept distribution of power that is hierarchical and unequal with each individual understanding where they are placed in the society. On the other hand, societies with low power distance scores are those in which power is widely dispersed and shared. With societal members highly sensitive to situations in which power is unequally distributed. China has a high score of 80 in terms of the power distance as compared to the low score of 40 in the US. This means that the employees in China expect the management to take charge of all the decisions. Hence are less likely to make most of the decisions on their own. This contradicts the Lincoln model of management where the management has to take part of leadership approach. Whereby individuals within the organization are directly involved in management. They are expected to be innovative and contribute in terms of ideas towards the general performance of the organization. In fact, one of the four criteria based on which employees receive year-end bonuses is ideas and cooperation. Which involves the participation of the employees in the organization’s suggestion program.
Individualism versus Collectivism
The Second cultural dimension involves individualism versus collectivism. This refers to the level of connection that exists within a society. In a society with a high score of individualism, there is a weak connection among members of the society. As such, individuals do not assume responsibility for the actions and outcomes of others. In a society that scores low in terms of individualism, which is also referred to as a collectivist society, individuals are loyal to societal groups in which they belong. They have to take responsibility for other members of the groups, with the groups also defending their interests. Each member of the larger group is responsible for the well-being of the other members of the group. China has a low score of 20 while the US has a high score of 91 in terms of individualism. Lincoln’s approach to promoting performance is highly individualistic. Whereby they are more concerned with offering individual rewards for work well done, with the view of motivating individual employees to work even harder and meet their performance targets. The performance monitoring systems established in the organization are also more interested in monitoring individual input, based on which rewards are offered. As opposed to this, being collectivists, the Chinese employees are more interested in intrinsic rewards. Which is why the Lincoln incentive program is less likely to succeed in the Chinese firm. Chinese employees would be more motivated by programs that build on their skills and make them masters in their areas of work.
Masculinity versus Femininity
Hofstede also emphasized on the importance of the Masculinity versus Femininity dimension. In masculine societies, individuals are expected to demonstrate their success, be fast, strong, and show assertiveness. On the other hand, in feminine societies, individuals are expected to uphold good relationships with those above them and show cooperation at work. With scores of 62 and 65 respectively, the US and China are both less feminine and more masculine societies. Nevertheless, coupled with the high score in individualism, the Lincoln management pushes for assertiveness among team members. On the other hand, being from a collective society, the Chinese employees expect management by negotiation, compromise, and consensus.
Recommendations
Cultural differences between a large part of management at Lincoln Shanghai and the Chinese employees seems to be a major issue of concern. Embracement of approaches that would fill the cultural gap between the two parties is highly important bin ensuring that an inclusive approach towards the success of the organization is upheld. This report suggests that Lincoln hires more Chinese managers to manage the subsidiary in China as they have a better understanding of the national culture. Hence would promote practices that would allow for the success of the organization. The company could facilitate training of its expatriate employees, including managers sent to Shanghai, in cross cultural practice, especially with reference to the Chinese culture. This would allow the managers to develop a better understanding of the needs of the Chinese employees and hence to adopt managerial practices that would ensure success.
According to Maslow’s hierarchy of needs, individuals have different needs that ought to be met for them to be satisfied. It is important for the company management to understand that not all people within the organizational context are motivated by monetary incentives. As such, it is important for the management to develop a proper understanding of the employees. This will establish motivational approach that would allow them to meet the needs of the employees and encourage increased productivity. Through proper motivation of the employees, the organization’s uncertainty concerning the future of its quality would be solved as the organization will be able to attract and retain competent and skillful employees. It is also important for the organization to establish a leadership training program. This would allow it to shape its employees and managers into leaders, who will be capable of taking charge of the company and making important trans-formative decisions that would motivate the employees towards increased performance.
Implementation Plan
To effectively promote a proper understanding of the cultural differences between Lincoln’s root culture and the culture of the Chinese, it is important for the management to be trained in issues of cross-cultural management. This would be achieved through establishing a cultural learning program in the organization as part of the initial training that all employees go through during the initial entry into the company. Training all employees in cross-cultural issue not only prepares them for expatriate duty in foreign countries, but also promotes positive interactions within the local company in the US as Lincoln has a highly diversified workforce. On the other hand, the management may higher some of the management to cover the top management positions within the Shanghai plant. Recruiting Chinese managers would allow them to effectively represent the interests of the management among the employees and hence promote increased performance.
It is also important to establish an employee feedback program that would allow employees to effectively communicate their interests to the management. This would allow the management to have a better understanding of the needs of the employees and hence to establish measures through which such needs can be met as opposed to employment of an incentive program that is less likely to be effective. Promotion of transformational leadership among the top managers is also important. This allows the leaders to mentor and prepare others for leadership. Establishment of a four-weeks leadership workshop would also be highly effective in sneering that leadership skills are well imparted into the managers to allow them to effectively contribute towards the success of the organization in leadership roles.
References
Ahlstrom, D., & Bruton, G. D. (2010). International Management: Strategy and Culture in the Emerging World. Mason, OH: South-Western Cengage Learning.
Briscoe, D., Schuler, R., & Tarique, I. (2012). International Human Resource Management: Policies and Practices for Multinational Enterprises. New York: Routledge.
Elg, U., Hadjikhani, A., & Ghauri, P. N. (2012). Business, Society and Politics: Multinationals in Emerging Markets. Bingley, UK: Emerald.
Grant, L., Stronge, J., Xu, X., Popp, P., Sun, Y., & Little, C. (2014). West Meets East: Best Practices from Expert Teachers in the U.S. and China. Alexandria, VA: ASCD.
Robbins, S. P., Bergman, R., Stagg, I., & Coulter, M. (2015). Management. Melbourne: Pearson Australia.
Salmon, D., Brockmann, C., Salmon, D., & Dietrich, C. (2009). Expatriation in China. Norderstedt: GRIN Verlag.