Hastings, Donald Lincoln Electric’s Harsh Lessons from International Expansion

Overview

The article reveals how Lincoln Electric Company was rescued by Donald Hastings from a financial mess caused by George Willis, his predecessor. On July 1992, Hastings dream of working as the CEO of the company he had worked for, for 38 years came true. His happiness was short lived though because 24 minutes later, Ellis Smolik, the financial officer informed him the European Subsidiaries that were part of the company posted poor results in the prior year (7.5 million losses).

The news was devastating and his tenure started on a very sour note with little hope of reversing the situation quickly. He was certain that changes had to be made to business strategies applied by Lincoln to avoid a calamity. Under George Willis, his predecessor, the company had opened branches in Latin America, Japan and Europe quickly and this without analyzing cost benefits.

During his first 5 years if reign, over $ 325 million was invested by the company in foreign expansions. He made acquisition decisions on hi wow and despite the fact he had limited international experience, he made instructions for all managers of foreign subsidiaries to directly report to him. It was assumed by those on the board the expansions would lead to increased sales and profits but that was never the case.

Hastings knew after taking over the office that the Company’s US workers must be paid their bonuses and since they had made a loss, he relied on borrowing. In order to acquire the loan, he compelled Europe subsidiary managers to come up with business plans that were workable and which would convince banks to issue a loan that could be paid in the form of a bonus. He also directed them to come up with sale strategies that get t he company back on its profitability trend within one year.

Despite putting into place solid plans, the company’s losses increased during the first quarter of 1993. Hastings did not give up though but rather, he came up with a plan for action for United States employees that would offset the losses.

As part of the plan, he made the suggestion for the US plants efficiency to be increased to one hundred percent and the sales targets to increase to $2.1 million from $1.8 million per day. All employees were also given the assurance their jobs were safe. The strategies bore fruit because in the span of 2 months the target was reached and though Lincoln made losses employee bonuses were still paid. All the Japan, Brazil and European plants were closed in 1994 and the focus shifted to the US market which was more profitable.

Likeable aspects

Suspense: Suspense is built right from the beginning with the author saying how he his dream has just come true and how short-lived the joy is. The suspense increases after the first 2 paragraphs and the reader wants to know what happens and whether the workers will get their benefits.

Sensitivity: Hastings was a long term employee at Lincoln and knew the importance of bonuses. In the text, it is clearly depicted how sensitive he is to how his employees feel.

Determination: The determination of a manager to uphold the tradition of the company is clearly depicted in the text. It is inevitable that one will appreciate the efforts put in by Hastings to end the nightmarish state Lincoln is going through that lasted for one year to maintain company tradition. The determination in the text is a great inspiration for future leaders.