Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Case Study Analysis

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Southern New Hampshire University

Abstract

When organizational issues stem from human behaviors, they can have a negative and profound impact on the business suffering from them. The case study of the Engstrom Auto Mirror Plant provides a detailed overview of a business that is facing financial ruin that has root causes that can be explained by human behavior theories. By carefully identifying and analyzing the overall impact of the issues, human behavior perspectives can be used to determine strategic actions that will help to repair the damaging behaviors that caused the financial ruin. Further, the lessons that were learned from analyzation of the Engstrom Auto Mirror Plant can be directly applied to a previous military organization that I worked for. In this paper, root causes of both organizations are examined and improvement outcomes are developed to remedy the issues stemming from a human behavior perspective.

Case Study Analysis

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

I. Introduction

Explanation of Organizational Issues

The Engstrom Auto Mirror Plant is a plant located in Richmond, Indiana that employs 209 people and is managed by Ron Bent and his assistant, Joe Haley. Recently, employee motivation and morale have decreased in response to job terminations and the stopping of the “Scanlon Bonus Plan” (Michael Beer, 2008).  With the decreasing morale comes lower productivity and decreased employment confidence of employees, which in turn has decreased profits that have put the Engstrom Auto Mirror Plant on the brink of shutting down.

        For the Engstrom Auto Mirror Plant to salvage the company and retain its employees, management needs to address several organizational issues. Some of the most important issues to address are: taking employee suggestions seriously, fixing and properly re-implementing (if necessary) the Scanlon Bonus system, and make employees feel like they are an integral part of the company.

        In previous years, employees were submitting hundreds of suggestions each year. As morale decreased, so did the number of employee suggestions, which recently only added up to 50 in a year’s time because the employees did not feel like management was taking them seriously. The most common complaints being seen now involve questioning bonus calculations and questioning fairness in how bonuses are allocated (Michael Beer, 2008). Maslow’s Hierarchy of Needs clearly explains human motivation and how it is directly related to fulfillment of basic, psychological, and self-fulfillment needs (McLeod, 2007).  Employees at Scanlon do not feel secure in their employment or like they have good relationships with their leadership which prevents them from feeling accomplished or reaching their full potential.

        Also preventing employees from reaching full potential is the broken Scanlon bonus system.  Employees feel there are inaccuracies between their inputs (contributions) and outputs (rewards) in comparison to other employees in the company, such as supervisors. Adams’ Equity Theory explains that employees who feel that outputs fairly reflect the inputs in comparison to coworkers feel motivated where as if they are inconsistent and unfair, they will be demotivated and dissatisfied (Adams, 2001). The lack of compensation and perception of unfairness is directly affecting the productivity of the company.

        Lastly, the employees at the Engstrom Auto Mirror Plant do not feel as though they are an important part of the company. The four times the bonus ratios have been recalculated, the lack of attention paid to suggestions, layoffs, and perception of unfair treatment of employees have all left people feeling worthless and disposable. In order for an increase in morale and production, employees need to have their existence, relatedness, and growth needs met (YourCoach, 2009). Employees need to have good social and external esteem along with recognition in order to feel part of a work center. Additionally, having meaningful work and willingly being productive enhances work center morale and increases production. The lack of addressing these needs in employees is obviously hindering the production and profits of Engstrom Auto Mirror Plant.

II. Identifying Root Causes and Organizational Issues

In the years leading up to the case study, Engstrom Auto Mirror Plant was a thriving company. It has since suffered the effects of several organizational issues that have caused a decrease in productivity and in turn, financial loss. Identifying the root cause of the issues faced by the Engstrom Auto Mirror Plant as decreased productivity, we can further investigate to determine the cause of the decrease, address the issues, and be proactive in the future when facing similar situations. The two most predominant issues that are contributing to the decrease in productivity are: loss of trust in management mostly due to the breakdown of the Scanlon Plan, and lack of employee motivation.

        When the Scanlon Plan was implemented, it was only done so because most employees wanted it to be. The involvement of employees in the decision-making process provided them with a sense of ownership and meaningfulness in the change. Over time however, employees started growing suspicious that the bonuses were being unfairly allocated. The bonus calculations, which were already complicated, were changed several times thus raising doubts (Beer & Collins, 2008, p. 5-6). More transparency and explanation by management about bonus and how they are calculated could prevent this perception going forward.

        Along with the implementation of the Scanlon Plan came the organization of a committee which reviewed all employee workplace suggestions. Initially, the committee accepted 276 of the 305 of the suggestions submitted (Beer & Collins, 2008, p. 5). As skepticism of management grew, the number of suggestions drastically decreased showing a lack of trust in the system. The engagement of management in communication with employees, paired with action on the suggestions, would help build trust back in the future.  

        In addition to the breakdown of the Scanlon plan causing decreased productivity is the loss of employee motivation. Employees once said that they felt valued by the company and they felt what they said was listened too (Beer & Collins, 2008, p. 5). There is now a lack of “work motivation” which is, as defined by Newstrom (2015), the result of a set of internal and external forces that cause an employee to choose a course of action and engage in certain behaviors (p. 116). Employees were having to increase work production to make up for laid off employees and decrease in profits all without satisfaction in their work. Incentives were attempted, but the failure of them and lack of follow through produced a dysfunctional effect on the social system (Newstrom, 2015, p. 87) causing unfavorable effects and a decline in productivity. Previously, employees were consistently receiving bonus each month, which ended up being expected, and when the bonuses stopped getting paid for seven consecutive months because of financial difficulties, employees lost more trust in the company and lost sight of what they were working for.

Impact

The financial struggles from low productivity faced by Engstrom Auto Mirror Plant stemmed directly from the lack of trust in management and the decrease in employee motivation. The relationship between employer trust and production go hand in hand. Additionally, a lack of motivation will also negatively impact product production. According to Maslow’s Hierarchy of Needs, employees who are uncertain of the future of their employment and who don’t feel comfortable with their employers are lacking the basic needs of security and belonging that is needed for a workplace to run properly and efficiently (Mayhew, 2017).

        As discussed earlier, employees at the Engstrom Auto Mirror Plant felt as though management did not listen to them. Employees react to the attention that is paid to them and when they feel valued, they react positively (Rolstadås, 2012). This is often difficult once employees have been classified in what Leader-Member Exchange theory calls the “out-group” (Mind Tools Editorial Team, 2017). These employees typically do not receive advancement opportunities and they lack essential employer-employee trust. Once an employee is classified as part of the out-group, whether it is consciously or unconsciously, it is difficult to come out of it to the point the employee may have to change organizations or departments to get a fresh start.

In addition to trust, employees must also receive meaningful, regular feedback on performance. When an employer encourages feedback about working areas and development, and acts on suggestions, employees feel empowered and motivated to be productive. The breakdown in communication also contributed to the lack of faith employees have in the Scanlon plan and how bonuses were calculated. Because of the lack of trust in management, employees are suffering from psychological distance-a feeling of being emotionally separated between people (Newstrom, 2015, p. 60). Additionally, because management is not focusing on employee needs, the “upward communication” is also ineffective and creating additional barriers in the communication process (Newstrom, 2015, p. 67).