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Engstrom Auto Mirror Plant: Motivating in the Good Times and Bad Introduction

By:   •  October 25, 2018  •  Case Study  •  1,110 Words (5 Pages)  •  897 Views

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Introduction: Explanation

Engstrom Auto Mirror Plant has been plagued with productivity issues over the course of the last several months; productivity issues had previously been a challenge at the plant. 1948 marked the beginning of production at the Engstrom plant. It remained profitable for about 50 years and then went through a stretch of unprofitability. Challenges with the union and difficulty adapting to new technology were attributed to the plant’s problems. With a new plant manager, an employee incentive plan was put in place to help turn around the fortunes of the Engstrom plant. Sales quadrupled within seven years, but cracks started appearing.

One person’s predisposition to one motivation style shaped the future of Engstrom in 1999. Ron Bent, the plant manager, believed that individual employee incentives were a strain on management and required more maintenance. His past experience at the camshaft plant taught him that an employee would figure out a way to beat the set rate to reap rewards for only him/herself. He decided to campaign for the adoption of a group incentive plan, the Scanlon Plan. The plan has three parts: submission of suggestions from employees, committees to evaluate the submissions and monetary incentives to share the proceeds of the increased productivity (Beer & Collins, 2008). Successful implementation of Scanlon Plan’s lies within its basic framework that employees when properly engaged is a resource to increase productivity (White, 1979).

Management and the employees seemed to fixate on the monetary incentive of sharing the proceeds of increased productivity. Bent especially seemed to fixate on a results-oriented approach (Newstrom, 2015). Historically, management measured productivity by total units produced (Beer & Collins, 2008), but plant management unilaterally decided to change the measurement to be used for the plan’s base; payroll costs to sales volume. The payroll costs were factors outside of the employees’ control.

Management, union workers and the independent consultant also disagreed on the benchmark to which the plant would be measured against. The historical data showed that the payroll cost was 44% of total revenue. Management initially set the ratio at 38% but continued to decrease the ratio over the next five years to 32.6%. According to Newstrom (2015), goals need to be specific, clear and measurable so employees know when a goal is reached. While the data was accessible to employees, the calculation was convoluted and confused many of the employees due to the excessive jargon.

According to the Harvard Business School, goals should be set at both the unit and individual levels (2009). Engstrom’s managers only set goals at the company level. There was no other way to gauge individual employee’s success. The employees perceived that the managers were reaping the rewards of their hard work but were not putting in equal effort.’ “Firms that reward all staff equally also grow more slowly, make less money, and are worth less when publicly quoted. ” says Nicholas Bloom (Fottrell, n.d.). Managers are more likely to avoid addressing behaviors that need to be changed rather than withhold the monetary bonus.

Another cornerstone for Scanlon Plan success is sourcing suggestions from employees for improvement opportunities.

While the Scanlon Plan had initial success, the enthusiasm drained. One challenge that the plan faced was that of 305 suggestions, 276 were implemented; few made a difference (Beer & Collins, 2008) Employees began engaging in collective action; Strobling (2016) stated “People could collectively take an action to benefit everyone, but because the individual benefit is not apparent, nobody completes the action.” Employees were not recognized individually for contributing to the greater organization.

Upward communication in forms of suggestions slowed. Haley while only four months into his employment at the plant was able to gather more information from the staff. He also suspected that employees were stealing as a way to compensate for the lack of the monthly bonus.

Distrust began brewing on both sides: management and of the employees. Employee morale dropped and was exacerbated by a layoff in 2006. The workforce was reduced by 18% and even the most ardent supporters of the Scanlon Plan had a difficult time articulating its benefits. This distrust was exacerbated by the complex nature of the calculation. Many of the employees were unable to understand the jargon used by the company. The employees’


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