Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Milestone I                

Dawn Walker

Engstrom Auto Mirror Plant is a privately owned small business employing 209 people in Richmond Virginia since 1948 that produces mirrors for both trucks and automobiles.  In the late 1990’s the company had taken a downturn in productivity and employee morale which caused the plant manager Ron Bent to look into options to improve the current conditions.  There had been success with several other plants with the implementation of a Scanlon Plan which is an employee wide incentive program that promotes teamwork and cooperation across cross functional teams within the organization.  The focus is on cost savings and motivation of employees to provide options for improved productivity.  The plan is broken down into three key functions the direct input on improvement options available to each individual employee, the evaluation of the suggestions for improvement by cross functional teams and the payout of monthly profit sharing bonuses.  The plan should be dynamic and adapt to a specific organization strategy (Beer & Collins, 2008).  Bent felt that a Scanlon Plan would benefit Engstrom as the workers would feel they were part of the solution and would have a voice in decisions made throughout the company.  The goal was to build a strong communication network that would bring the company together and increase profitability.  

To get complete employee buy in, Bent decided that the implementation of the Scanlon Plan required 75% of the current employee’s approval before being put into motion (Beer & Collins, 2008).  After three months of campaigning the benefits of the program, he received the required votes to move forward.  Once the plan was put into motion the company experienced an increase in productivity which was measured through the bonus program.  Employees received positive recognition upon submitting ideas for improvement and the monthly communication meetings were open to the entire work force.  Employees felt empowered with leadership that listened to their labor force (Beer & Collins, 2008).  Over time employees became disillusioned with the plan and the worker suggestions dropped off significantly.  To further aggravate the situation the industry experienced a down turn in 2005 affecting both employee morale and profitability.  The cadence of the communication meeting changed as layoffs and low productivity came to the surface and bonuses were no longer being paid out.  Then in 2006 the layoffs became a reality which further affected morale.  Without any positive feedback on additional incentive plans that were successful in a dynamic environment Bent did not take any steps to modify the current program retreating into his own headspace and questioning his performance and what the next steps should be for the company.

The most common problems I have experienced in my career are poor communication, lack of morale intelligence (Newstrom, 2015), and an individual’s failure to adapt and change to a dynamic atmosphere.  In evaluating the Organizational Issues with Engstrom the common theme drawn from the case study on Engstrom is that they put the Organizational needs above the employee’s needs.  “Organizations should exist to serve people, rather than people existing to serve organizations (Newstrom, 2015 p.5).  The Scanlon Plan was a bonus incentive strategy to motivate employees and provide inclusion and ownership to increase productivity.  Over time it created a sense of distrust with the employees due to a lack of effective communication, declining employee contribution and enthusiasm, and management’s failure to adapt to a changing environment.  

Many employees felt that the calculations for the bonus plan were dynamic and complex and that the bonus percentages were not evenly distributed throughout the organization.  Even though management did provide detailed information to each employee on how the bonuses were to be calculated and the data was provided for each bonus cycle, they failed to close the feedback loop by ensuring their message was understood.   By safeguarding a thorough understanding of how each individual participant would contribute to the plan, management could have promoted trust and a sense of fairness throughout the workforce.  An empowered and informed employee will often be a high contributor as their perception of the work environment includes safety and open two-way communication.  When the Scanlon Plan was first introduced the results were very favorable and the employees were satisfied with its implementation, but the plan failed to be sustainable with the downturn of the industry and management did not make changes to adapt to the shifting environment.  “When organizations stagnate, decline, or have their survival threatened, there is evidence that stress and conflict increase.” (Newstrom, 2015 p.20).  The leaders of Engstrom failed to acclimate to the new circumstances which caused conditions to deteriorate affecting both productivity and employee morale.