Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Case Study Analysis: Milestone 1

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Renee E. Vincent

Southern New Hampshire University

INTRODUCTION

Engstrom Auto Mirror Plant was a privately owned company established in 1948, it manufactured mirrors for trucks and automobiles, and was located in Richmond, Indiana (Beer, 2008). In 1998 the plant manager resigned due to lack of knowledge with new technology from years prior that overtime, created a productivity crisis. At this time, Ron Bent was hired to turn-around Engtrom’s crisis. A year later he implemented a bonus incentive program called the Scanlon Plan, a participate management plan, with a company wide approval rate of 81% (Beer, 2008). The plan’s success increased productivity by motivating employees with a new organizational culture of open communication among all levels of the company and gave benefits to employees through monthly bonuses.

In 2005 the industry took a turn that slowed production and dropped sales. The company was forced to layoff 46 of their 255 employees causing hostility and wide spread mistrust among employees. Bonus incentives weren’t paid for months and rumors of distrust in bonus calculations and questioning fairness were spread among employees (Beer, 2008) which created Engstrom’s second company crisis in its 59 years of business.

In the analysis of the organizational behavior (OB), which is the systematic study and careful application of knowledge about how people – as individuals and as groups – act within organizations (Newstrom, 2014). While there are several organizational issues, I am focused on three that primarily contributed to Engstrom’s downfall which all relate to various forms of communication. The first organizational issue I observed was the mistrust between management and employees. It’s identified in 2005 when the industry took a turn forcing Ron Bent to layoff 46 employees a year later. The layoffs created a job security scare, and without full knowledge of what was disclosed to employees, it further embedded cognitive dissonance, which is the internal conflict and anxiety that occurs when people receive information incompatible with their value systems, prior decisions, or other information they may have (Newstrom, 2014).

The second organizational issue is The Scanlon Plan. It was believed that individuals will work hard to help achieve their organization’s goals so long as they have an opportunity to take responsibility for their actions and apply their skills (Beer, 2008,). The Scanlon Plan rewarded all employees through monetary monthly bonuses when increased productivity is reached. The issue with this is that employees became dependent on their monthly bonus. It was a regular occurrence over a seven year period and when they hadn’t received a bonus for several months in 2007, this caused them to become hostile and spread rumors. The Scanlon Plan isn’t a contingency approach, which is when different situations require different behavioral practices for greatest effectiveness (Newstrom, 2014), as it’s wasn’t created to be a long term plan.

The third organizational issue I saw was the downward communication,