Case Study Analysis: Engstrom Auto Mirror Plant: Motivating in Good Times and Bad
By Sydney E. Choe
Organizational Issues
In 1998 Engstrom's plant manager resigned after the plant had started to decrease in profit. He was unable to adjust and adapt to the new technology that was being implemented to stimulate production. His inability to lead in a state of duress caused
frustration. With the changing union in place -- the manager lacked the aggressive approach needed to make any change within the plant.
When Ron Bent was hired to make changes in the plant, he immediately sought after an incentive-based repayment toward his employees. He decide don an organization-wide incentive program, the Scanlon Plan, in an attempt to improve employee morale and increase profitability and productivity. Using this bonus structure he also started creating more of an open-door policy whiten his company -- allowing his employees to voice
employees to voice their opinions and how they felt left them feeling empowered: which in turn led to an increase in revenue and a decrease in the time spent (therefore, hourly payroll.)
Fast forward to May 2007 and a near decade of growth started to turn downhill on Bent and the plant. The increased productivity started plummeting and lay-offs became inevitable. Through conversations with boundary spanners, Bent finds that employees are growing disgruntled and frustrated: even though they weren't reaching their target incentive goals, they had become so used to the incentives that they now feel entitled to [bonuses.] On top of the slowed productivity and hostility of employees "suggestion rates dropped precipitously, down from hundreds to 50 a year" (Beer, M., Collins, E., 2008). The two major complaints within the organization, Beer and Collins writes were: distrust of bonus calculations and question of fairness (2008.)
From the beginning, Bent knew this plan wasn't sustainable -- he sees now that attention to detail and an occasional "shot in the arm"within the organization would have stimulated a better plan. Internally, Bent was struggling after layoffs in the mid- 2000s (which decreased 18% of the workforce) and the recognition that employees hadn't received a bonus in 8 months. He knew at this point he had three choices: modify Scanlon Plan, get rid of it completely, or come up with an alternative solution.
Analysis:
Form the outside looking in, it's clear on one thing: Money and numbers follow but they do not lead. Yes, productivity increased as did efficiency when Scanlon was implemented, but that wasn't the catalyst. The catalyst was the increase in
communication, open forums, boosting morale within the company, and allowing the employees' voices to be heard.
organization has to be on the core piece of it: the employees.
While it's true that a company wouldn't exist without product(s) and service(s), it's even more vital to understand that the product(s) and service(s) wouldn't exist without employees.
The Scanlon Plan was implemented well in the beginning but it wasn't created with the employees in mind; it was half-hazardous put in place to