Dr. Iris BerdrowDr. Iris BerdrowBentley College, Harvard Summer SchoolBentley College, Harvard Summer School

Monday July 30Monday July 30thth Agenda Agenda

Hand In Briefs Check In Lincoln Electric Review last week Facilitators & Barriers to Innovation

Leadership Organizational Culture

Wrap Up Group reps see Mike Harrison

Lincoln ElectricLincoln Electric

Group discussion of questions1. Why has Lincoln electric been so

consistently successful?2. Why has Lincoln's system worked so well

in some locations, but not others?3. What is the difference between incentives

and motivation?4. What should Lincoln do in Indonesia?

Why?

What is the main issue?What is the main issue?

Should Mike Gillespie, President of Lincoln Electric’s Asia Region, invest in a new factory in Indonesia.

Should he consider transferring Lincoln’s unique incentive system of management to such an operation.

What are the elements of Lincoln What are the elements of Lincoln Electric’s unique incentive system?Electric’s unique incentive system?

Piecework Bonuses Guaranteed employment

What is Lincoln’s international What is Lincoln’s international expansion history and experience?expansion history and experience?

Up to 1986: United States, Canada, Australia & France; successful ventures.

1986 to 1992: Japan, Germany, Ireland, Italy, Netherlands, Norway, Spain, UK, Brazil, Mexico, Venezuela.

1993 – 1994: Close Japan, Germany, Brazil & Venezuela due to poor performance.

1996: New CEO, new expansion strategy – Latin America and Asia.

DiscussionDiscussion

Why has Lincoln electric been so consistently successful?

Why has system worked well in some locations but not others?

What is the difference between incentives and motivation?

What should Lincoln do in Indonesia? Why?

Key PointsKey Points

Direct labor represents a small percentage of manufacturing cost. Approximately 70% of manufacturing cost is materials (commodity steel products) over which Lincoln has little control.

Incentive system drives front-line workers to look for entrepreneurial innovations that can leverage equipment and operating processes. They operate standard machines at 2-3 times manufacturer’s rated capacity and develop own proprietary equipment. Therefore, knowledge and skill is a key competitive advantage.

KSF is people and culture which attracts self-motivated entrepreneur willing to work long and hard for exceptional pay.

Strong values – belief in individuals, principle of rewards based on performance, egalitarian environment.

Management by walking around (MBWA)

Overseas companies lack strong link between Lincoln’s strategy and organization model, and the self-selected employees motivated by incentive-system.

Hands-off operation style failed to acculture companies to Lincoln’s strategy.

Success depends not so much Success depends not so much on the external, cultural and on the external, cultural and political environment as on the political environment as on the ability to recruit ability to recruit individualsindividuals who fit who fit the company’s values and the company’s values and system.system.

RegulatoryEconomicPoliticalSocialCultural

Last Week in summaryLast Week in summary

Innovating InnovationCompetitive advantage

Return via the market

ORGANIZATION

MARKET

CONTEXT

COMPETITION

Today’s Readings:Today’s Readings:

Freeing Managers to Innovate. Bellmann & Schaffer

The failure tolerant leader. Farson & Keyes. How to Kill Creativity. Amabile. Inspiring Innovation. Wynette. Coaching innovation: an interview with Intuit's Bill

Campbell. Mendonca & Sneader. Infusing innovation into corporate culture. Price.

Facilitators of InnovationFacilitators of Innovation

1. Leadership1. Vision2. Champion3. Tolerance for failure

2. People 1. Values 2. Norms3. Skills &

Competencies

3. Management Practices

4. Knowledge 1. Capture2. Creation3. Disemination

5. Slack Resources1. Financial2. Time3. Space

Barriers to innovationBarriers to innovation

1. Mindset1. Not-invented-here vs. Nothing-is-invented-

here

2. Shortage of resources

3. High internal barriers 1. Organizational bureaucracy

4. Lack of motivation

What did we learn?What did we learn?

Model of Week 1 Lincoln Electric Lessons Facilitators & Barriers to innovation

Group Reps meet with Mike Harrison