Engstrom Auto Mirror Plant experienced productivity issues with its employees that led
to a decrease in sales over an extended period of time. In an attempt to reverse this downturn, a
plan was introduced that would help motivate its employees to work as a whole organization and
focus on one common goal in production and productivity which in turn would provide them
significant pay bonuses. The Scanlon Plan was a way to incentivize the employees of the plant to
work as one entire team for one common goal: the success of the company
The Scanlon Plan is a "systematic approach to enhancing organizational effectiveness
through a formal participation program and a financial bonus" (White, 2017). By implementing
the Scanlon Plan, it was the plant manager's hope that the plant workers would be interested in
new methods and new machinery when they are given the opportunity to be a part of the a
company-wide program that allowed them to submit their own suggestions for improvements
within the company. The logic behind this process was to empower employees. Empowerment is
any process that provides greater autonomy to employees through the sharing of relevant
information and the provision of control over factors affecting job performance (Newstrom,
2015). This would lead to both personal satisfaction for the employee that would lead to results
that benefited the factory. The Scanlon Plan helped ease tension between employees as well as
helped the company achieve higher production numbers, profit and quality standards. The plan
also gave a significant financial reward to the employees. These financial rewards were included
monthly with their standard paycheck. Though this plan seemed to be the best plan for the
company and its employees at the moment, issues would soon arise that would cause this plan to
be useful for only a temporary moment of time.
One issue that arose after the plan was instituted was the employees trust in calculations
of the bonuses. With the development of the base ratio, that many considered a very complex
calculation, employees felt the numbers were being "played with." Production prior to the
implementation of the Scanlon Plan was measured by the total number of units produced. With
the Scanlon plan, production was measured by a number of different factors, which made the
employees feel like even their best numbers produced was not giving them the bonus they felt
they deserved. The wage incentive that was once a motivational factor for the employees to be
more productive was now causing uncertainty in the employees and the work they were
performing. Newstrom notes that when utilizing wage incentives, disruptions in the social system
may lead to feelings of inequity and dissatisfaction. This explains why many of the employees at
Engstrom felt their bonus pay was not sufficient to the amount of work they put into the
company.
Another issue that arose was the employees thoughts on how supervisors did not deserve
the same bonus that they received as employees as they felt the supervisors weren't putting i