Duong Ly Short Memo: Lincoln Electric

Lincoln Electric has an extensive incentive system and entrepreneurial

environment for its employees since the company was founded. The company

believes that with the right incentive system, it can motivate and fulfill employees’

potentials based on their performance. In fact, Lincoln Electric is the first company

introduces the “no-layoff policy” and shares the majority of the company’s profits

with workers and employees through annual bonuses (almost 32% of the

company’s income). These bonuses are calculated using merit rating, which based

on one’s adaptability, productivity, dependability, teamwork, health, and safety. The

company also created Employee Advisory Board, where employee can give

suggestion to their senior management. The incentive system and entrepreneurial

environment helped the company maintain the lowest turnover rate in welding

industry as well as reduce the training expenses.

The company’s biggest problem is to maintain the healthy financial goal over

the next three year due to the saturated market in the U.S. Lincoln Electric has

approximately 60% of its sales in North America while other markets, such as Japan

and China, potentially outweigh the U.S market in the next few years. The company

also faces the spending challenge in international market, with two-third of free

cash flow for international expansion in 2005. Besides Japan and China, Lincoln

Electric should also target other Asian markets, such as India and South Korea, in

order to meet its double rate of growth goal and increase revenue.
Attachment 4
Guidelines for Short Memo
Items for Short-Memo
 Factors that explain performance of this firm at this time (at the end of the
case)
 Going forward, the issues facing the management of the firm
 GOAL IS TO WRITE A MEMO THAT COVERS BOTH ITEMS BASED ON YOUR
ASSESSMENT OF THE CASE. THE ITEMS YOU SELECT FOR CONSIDERATION
SHOW YOUR EVALUATION OF THE CASE!
 THE WAY YOU WRITE MAKES A DIFFERENCE
 PAGE LIMIT IS 1 PAGE (DOUBLE SPACED, 12-FONT, INCLUDING ALL
TABLES, FIGURES)