Managing Global Workforce: IHRM Challenges and Recommendations for Lincoln Electric

This paper discusses the IHRM challenges faced by Lincoln Electric while expanding into the Chinese market and provides strategic recommendations. The challenges include organizational context, sourcing HR for global markets, and international performance management.

Running head: MANAGING GLOBAL WORKFORCE
Managing Global Workforce
Name of the Student:
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Table of Contents
1. Executive Summary...............................................................................................................3
2. Introduction............................................................................................................................4
3. Discussion..............................................................................................................................5
3.1. Three Pertinent IHRM Challenges..................................................................................5
3.1.1. Review and Analysis of the IHRM Issue 1- The organization Context.......................5
3.1.2. Discussion and Analysis of the IHRM Issue 2- Sourcing HR for Global Markets-
Staffing, Recruitment and Selection......................................................................................7
3.1.3. Review and Analysis of the IHRM Issue 3- International Performance Management9
4. Conclusion............................................................................................................................11
References:...............................................................................................................................12

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1. Executive Summary
Lincoln Electric Company has been effectively conducting the business since its
foundation in the year 1895 by John Lincoln and James F. Lincoln. The company has
expanded its business into China, Shanghai and is facing some issues in terms of HRM. This
paper has been elaborated on discussing the issues that have been suffering by Lincoln
Electric Company while expanding the business into the Chinese market to provide some
strategic recommendations for the same. The very first issue that it has faced is that in terms
of its management and organizational structures and control systems. Secondly, the company
faced the issue with sourcing its human resources for the global market. It has faced staffing,
recruiting and selection problem. The third issue is related to international performance
management. It is associated with the various factors that are associated with the expatriate
performance, comprising of the package of compensation, role, the host environment and
cultural adjustment.
To improve the situation, it is recommended that the company should formalize the
arrangement of the organizational components and must re-design its regulatory process as
per the new market. With the same, although the structure of the company is flat, they are
also valuable and have some unique technological software and hardware resources that are
likely to mitigate the threats that take place. This recommendation is directly in line with the
strategy of process innovation as it opens up the international opportunities that would allow
the firm to grow and mitigate the threat of the buyers and danger of entry through economies
of scale. Although expansion limits the opportunities that are available for weaning away
from the monetary incentives, at the same time, can increase the sales of the company, giving
it a cushion at the times of economic hardships. Also, Lincoln Electric Company can make
use of an employee compensation package which will include a guaranteed job for the
employees working for the organisation after two years of their tenure. It would decrease the

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level of employee turn-over and would increase the know-how, both of which are the
qualities of cost advantage. With the same, it is recommended for Lincoln Electric Company
to implement part-time job opportunity within the company as well.

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2. Introduction
The largest manufacturer of welding equipment in the world, Lincoln Electric, has
been effectively conducting the business since 1895 (Hearn & Peters, 2017). John Lincoln
and James F. Lincoln founded it. It is an American multinational company and a global
manufacturer of the welding components. It is headquartered in Euclid, Ohio and earns total
revenue of about 3.03 billion dollars as per the data of 2018 (Price, Kuttolamadom &
Obeidat, 2019).
It is to note that the company motivates its employees by means of some distinctive
compensation systems along with providing a culture of cooperation in between the
organizational management and labour on the basis of some fervent beliefs of one of the
founders of the company, James F. Lincoln in self-reliance, the requirement of competition
for the progress of human beings and the egalitarian treatment for the employees and the
managers. The company has introduced many human resource management systems to
ensure employee job satisfaction, increase in retention level and customer satisfaction. Some
of the effective HRM systems that James F. Lincoln have put in place are the year-end bonus
and the wages on a piecework basis. With the same, the company also has a stock purchase
plan for its employees who have been working for the organization for one or more year.
However, it has faced challenges in terms of its HRM while entering the China
market. This paper is going to elaborate on discussing the three challenges analyzing the case
study and would provide recommendations for the company that could be used for addressing
the issues.

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3. Discussion
3.1. Three Pertinent IHRM Challenges
3.1.1. Review and Analysis of the IHRM Issue 1- The organization Context
The very first issue that Lincoln Electric should take into consideration is related to
the organizational context. As per the case study, the organisational culture of Lincoln
Electric is hierarchical. For example, Michael Gillespie was the president pioneer in Asia. He
was in the topmost in the hierarchy of organizational structure of the company. Gillespie was
aided by Ray Bender who was then the vice-president for manufacturing in the Asia region.
In the year 1997, Julius Wu was appointed as the country manager for China and also as the
general manager of the Shanghai operation. He has actually belonged to Taiwan, and he has
experience in the electric motor industry of mainland China and Taiwan. He was first sent to
the Cleveland for about eight weeks of the training program and then was returned to
Shanghai for staring the operations of the company out the representative office in the
Shanghai. The final members of the management team were Peter Grant, Jason Foo, Shan
Bing and Dr Li. Peter Grant was hired as a sales and marketing manager. He was an
Australian had four years of experience in Chinese industry and at the same time, have also
worked for one the competitors of Lincoln in the past.
It is also to note that all the sales people of Peter Grant were university qualified
welding engineers. The next is Jason Foo, who was appointed as the finance and accounting
manager, and he used to look for the finance and accounting function from his base in
Singapore. In the year 1999, Shan Bing was hired as the finance and control manager. He was
a Chinese accounting expert and had more than five years of experience from the foreign
investment firms in the Shanghai area. Dr Li was the plant manager of the company. He was
a professor at the Institute of Metal Research at Harbin University. At the same time, Dr. Li
was also a widely recognised expert in the Chinese welding industry. He spent a total of six

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weeks in Cleveland before working on the Shanghai plant. The organizational structure of the
company is as followed:
Figure 1: Organizational Structure of Lincoln Electric (Created by the author)
It is recommended that Lincoln Electric should opt for offering home delivery and
long distance delivery services for the customers living in the key cities of China for free-
based distance and make sure the first assembly of the service takes place. It is to mention
that it was likely that the workforce in China would not speak out or make any further
suggestion in the hierarchical society of China. Push from the part of the company and the
encouragement towards the people for debating and arguing at the right time would have
been useful. Also, the workers in China do not accept the remuneration system as well if the
performance of the company is in doubt or is unstable. This is why Lincoln Electric should
have been worked towards introducing an order when the company becomes steady and
Michael Gillespie
President for Asia Zone
Ray Bender
Vice-president for manufacturing in Asia
Julius Wu
Country Manager (China) & G.M. (Shanghai)
Shan Bing
Finance and control
manager
Peter Grant
Sales and marketing
manager
Dr Li
Plant Manager
Jason Foo
Finance and
accounting
manager

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stable in the Chinese market. In this way, Chinese workers could be made clear regarding
their rewards and recognition.
With the same, the company should work towards building and emphasizing control
through their network, corporate culture and relationships. It needs to have an appropriate
structure for effectively conducting the business in the interconnected and chaotic economy
of China (Murray, Skena & Haynes, 2017). It should have a formalized arrangement of all the
organizational components like the subsidiaries, business divisions, headquarters and the
functional units within the subsidiaries and offices, job positions, and product lines,
3.1.2. Review and Analysis of the IHRM Issue 2- Sourcing HR for Global Markets-
Staffing, Recruitment and Selection
From the case study, it is clear that Lincoln Electric has come remarkable HR policies
and practices that have resulted in its success all these years. The company has introduced
many human resource management systems to ensure employee job satisfaction, increase in
retention level and customer satisfaction. For example, James F. Lincoln have put in place are
the year-end bonus and the wages on a piecework basis. Also, the company also has a stock
purchase plan for its employees who have been working for the organization for one or more
year. However, still, the company has faced challenges in sourcing its HR practice in China.
It has recoded of difficulties for expanding the company into international borders. It is to
note that the rapid evolution of the global financial powerhouse in China is creating a
significant demand and Human Resource challenges for the talented executive candidates as
well as the white-collared administrative staffs in China (Wei, Xie & Zhang, 2017). Today,
the international H.R. executives, along with the Chinese firms, are searching for talents and
are all in a competition in the very same pool. In China, a large number of welding was stick
electrodes. However, there was a move towards the higher technology type of processes,
mainly, for capitalizing on the high productivity and efficiency of the systems. Also, there

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was a tremendous amount of stick electrode manufacturers, and the Chinese government was
very interested in moving forward for their lower end technology into a higher one (Hart,
Bonvillian & Austin, 2018). The company employed mostly the local welding Chinese
engineers who were sent to Cleveland for their training program and had returned to Chine
for helping Lincoln Electronic to push the products. However, there were absolutely no direct
sales efforts as the sales were through the local distributors of the company.
However, it is to note that the first three hires- the technicians and the managers in the
company were all made through the contacts of Lincoln in the welding industry as the brand
name was quite strong so it was easy for Lincoln to attract employees. However, it was
complicated for the company to attract skilled operators who did not recognize the brand
name of Lincoln and were also very scarce in China. To get the skilled workers to apply for
the positions of the operators, the mangers of the company had to make many visits to the
homes of the people there to inform them regarding the company. However, soon, the word
of mouth promotion helped the company in spreading the news of the job openings and
gradually, the position was fulfilled. Any candidate was allowed to apply for a job at Lincoln
Electric seeing the advertisement. They just had to go through an interview process in which
they might be selected for the job to possess the necessary skills and talents. The company
gave many opportunities for the employees to ensure employee satisfaction in place. The job
security that it provides to each of its employees. The company has a guaranteed continuous
employment policy in place, and this policy takes into consideration every worker who works
for the company for two or more years. With the same, the company also has a stock
purchase plan for its employees who have been working for the organization for one or more
year. Hence, the company motivates its employees by means of some distinctive
compensation systems along with providing a culture of cooperation in between the
organizational management and labour on the basis of some fervent beliefs of one of the

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founders of the company, James F. Lincoln in self-reliance, the requirement of competition
for the progress of human beings and the egalitarian treatment for the employees and the
managers. Still, in many cases, it has appeared that the new hires were lacking in gaining a
clear understanding of what the company was expecting from them. Also, there were only 40
employees at Lincoln in the year 1999.
It is recommended that Lincoln Electric could have been used the geocentric approach
of internationalization in China for its staffing, recruiting and selection process in the country
(Kim, Mahonery & Tan, 2015). It is to note that this approach gives more importance to the
ability of the people than on their nationality and seeks for the best suitable person for the job
position. The strategic decisions should be made in between the subsidiaries and the
headquarters through the global approach, and the subsidiaries and offices make some unique
contribution to the process. This is the best suitable approach for Lincoln Electronic as this
approach is adopted by the firms that genuinely global and follow the integrated
comprehensive business strategy. While using this approach, the company could have been
developed a pool of all the senior executives who have international experiences and have
contacts across the nations. Also, in this way, the company could have also allowed its
employees to learn and develop through the experiences of each other. Skills of each manager
in the firm could be used for accomplishing the objective of Lincoln Electric.
3.1.3. Discussion and Analysis of the IHRM Issue 3- International Performance
Management
It is to note that performance management is crucial in every organization. Diversity
in the production, cultures, geographical locations and operations all combine for making the
process of performance management and performance appraisal a significant challenge for
the HRM practitioners. Lincoln Electric is highly renowned for its visible and successful
remuneration system. At the heart of the "Lincoln Way" was the piece-rate payment scheme

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that used to pay the employees for what they produced and a bonus system that was provided
to the employees along with the year-end bonuses based on their performance. It is also to
mention that the company motivates its employees through some unique compensation
systems along with providing a culture of cooperation between the organizational
management and labour. However, it is questionable that does this scheme worked in China?
The answer is No. In China, there was a general suspicion of the highly incentivized
remuneration scheme of Lincoln Electric. When the Cleveland was performing well given the
situations that were lifted by an inspiring local effort for generating the sales of the company
and for boosting the productivity, the discontent among the Chinese employees was also
brewing among different ranks. Although the best efforts of were made by the company to
upload their incentive commitment to their employees in China, Lincoln Electric found it
very difficult to uphold the same level of remuneration system that the employees at the USA
were used to in China. This is why the bonus percentage of the total compensation was
dropped to 40 to 50%. Some employees were disgruntled and dissatisfied and also there were
many murmurs of unionization. Several meetings were conducted to understand the
sentiments of the employees.
Having the employees bear more of the disadvantages or downside risks for the
reduced company performance might not be acceptable in a nation like China where people
were not exposed to such kind of remuneration schemes and systems. The prolonged
depression among the earning of the people in China have raised accusations of the
exploitative practices of the company, and this also was thought of introducing government
intervention in place. The traditional system of Lincoln Electric was required to showcase the
potential of the workforce for speaking out and making suggestions for further improvements
in the processes. It was something that would not come so quickly in the hierarchical society

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of China where the superiors were expected to take the initiatives and to make the necessary
decisions on most of the company related matters.
It is recommended that the company should do some modifications. Firstly, the
bonuses to the workers and employees should be paid more frequently as of the fact that
recurring payments would demonstrate that the Chinese workers can trust the management
and the delayed reward program of the company (Lo et al., 2017). Also, the workers who are
familiar with the company reward system and the corporate policy should also be brought by
the company to the new Chinese plants for demonstrating and teaching the organizational
culture and the new hires. This will ensure high productivity practices within the firm. With
the same, the meetings between employees and management should have been conducted
initially and more frequently. It could help in resolving the issue more quickly as they could
have been identified early. Suggested from the parts of the employees should have been
implemented for creating openness and increasing the level of trust. Often, the workers who
do not perform good only to get the company bonuses. This is why, the company should also
opt for giving them material rewards like vacations, gifting cars and goods to the employees
for their excellent performance.
4. Conclusion
Hence, from the above analysis, it is clear that entering in China was not easy for
Lincoln Electric. The company faced issues in terms of its management and organizational
structures and control systems and with sourcing its human resources for the global market. It
has also faced staffing, recruiting and selection problem. The Chinese workers were not
accepting the remuneration system. Also, it was tough for the company to attract skilled
operators who did not recognize the brand name of Lincoln and were also very scarce in
China. It is to note that the initial plan for entering in China was to come through an existing
state owned firm operating in the manufacturing industry. However, the entry more was

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ignored by the company. The company settled on a collaboration with the Chinese
distributors as well. By the year 1998, it established itself as being the first manufacturing
factory present in China under the leadership of Kundra. The company also started to
implement the labour practises so that they can be in-line with the ones in Cleveland.
However, it is to mention that the success of this company in China was never easy and it
was based on the competent management as well as the willingness of the company in
sharing its profits and ownership with the earnings of its employees. It was their self-
confidence that boosted their morale and helped them in overcoming the challenges that they
faced in their way of conducting successful business in China.

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