Engstrom Auto Mirror Plant: Motivating in Good Times and Bad, Milestone Two

Case Study Analysis:

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad, Milestone Two

Doug Chapman

Northern New Hampshire University

Root Cause Analysis Introduction

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad, Milestone Two

Root cause analysis; known organizational issues and causes

Originally founded in 1948, the Engstrom Auto Mirror plant in Richmond, Indiana was a privately-owned business employing about 250 people, which at the time of the case study was managed by Ron Bent and his assistant, Joe Haley.  Morale and productivity at the plant had been mostly good before an industry downturn in 2005 brought down sales figures and with them employee morale. By 2006 the plant was forced to lay off approximately 50 employees.  By May of 2007, when the case study takes place, the layoffs and decreases in overall compensation further exacerbated the worker morale problem. Productivity was down and quality issues were endangering important customer relationships.  Increased manufacturing and shipping costs further contributed to the financial problems the plant was facing. The company-wide incentive program at Engstrom was originally developed in the 1930s and referred to as the “Scanlon Plan”, was based on workers making suggestions that lead to increases in productivity and cost savings  Although successful when originally implmemented, the Scanlon Plan was no longer functioning and paying bonuses.  Engstrom’s leadership feared that the company’s “certified supplier” status would be revoked (Beer, 2008).

Root Causes

The Engstrom productivity problems revealed two major organizational issues.  First, workers at the plant were not motivated to excel.  Second, they did not trust the plant’s management (Beer, 2008).

“Work motivation”, as defined by the text, is comprised of a combination of internal and external factors that cause workers to display behaviors and take actions that contribute towards company goals (Newstrom, 116).  Work motivation encompasses a complicated collection of factors that contribute to employee behavior differing in focus, level of effort and persistence in ways that can be positive or negative depending on the factors.  Workers who are highly motivated are creative and dependable, work hard and are persistent in their efforts to accomplish goals and productivity levels.  Unmotivated workers at Engstrom were adding to the troubles originally caused by the financial downturn.  In the past at the Engstrom plant management had been able to affect motivation with the implementation of a modified version of the Scanlon Plan but flaws in the program were not allowing it to change things in 2007 (Beer, 2008).

The Scanlon Plan was originally implemented at Engstrom because a wide majority of employees voted for it.  The involvement of employees in the decision-making process and their participation in the administration of the plan fostered a sense of ownership for employees and trust in the administration and plant governance.  Most employees seek to be involved in decisions relevant to the overall success of the organization and genuinely seek to contribute their talents and ideas to that success.  It is the responsibility of the organization to provide opportunities for meaningful involvement (Newstrom, p. 11).  Part of the Scanlon Plan was that workers would make suggestions on how to increase productivity which were then reviewed by a committee.  Bonuses were the paid out to workers based on the productivity improvements of the suggestions accepted by the committee (Beer, 2008).

However, over time employees grew suspicious that the bonuses were not being fairly distributed.  The bonus calculations, which were complicated to begin with, were changed by management several times as they attempted to fine tune the process.  When the plan was initially implemented, workers submitted 305 suggestions, 276 of which were accepted by the committee but as distrust grew the number of submissions dropped off until by 2007 there were just 50 suggestions in a year’s time.  There were two main themes in criticisms from workers. First there was a general distrust in the way bonuses were calculated.  Even though workers had access to detailed explanations of the bonus calculations some workers believed that the company was manipulating the numbers.  Secondly some employees felt that supervisors should not reap an equal share of the bonuses because the managers weren’t doing as much of the real, difficult labor as were the workers (Beer, 2008).