Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Katy Acree

Southern New Hampshire University

Introduction

Located in Richmond, Indiana, Engstrom Auto Mirror plant is a small production and distribution company. Since 1948 they have produced mirrors for cars and trucks which are then supplied to major auto manufacturers.  Overall, they have been a highly successful company, however changes to technology coupled with economic trouble left the company in crisis off and on beginning in the late 1990s.  The Scanlon Plan, an employee incentive program based on company performance rather than individual performance, was successfully implemented in 1998, but by 2007 with business declining and employee morale at an all-time low, Engstrom once again found itself in a state of crisis.

Plant manager Ron Bent had studied, presented, and implemented the Scanlon Plan at Engstrom in 1998 after finding employee production hovering around 40% of what was expected (Beer et. al., 2008). With employee support the plan was approved and adopted and in turn, production soared, sales quadrupled, and the employees received regular bonuses. By 2005, the economic downturn had hit the auto industry hard and the bonuses the employees were accustomed to decreased and along with that so did productivity and employee satisfaction.  The following year Bent was forced to lay off 46 of his 225 employees, and he was facing a crisis which could shut down the plant permanently.

Organizational Issues

If the Scanlon Plan was so successful, then why did Bent find himself in the position he was in?  While it has been suggested that the Scanlon Plan works best at companies on the verge of collapse, it almost seems to prove the opposite here. (Miller, 1987).  The employees initially supported and were motivated by Scanlon, however over time that support waned among the employee as questions of fairness and exactly how the bonuses were calculated arose.  Distrust of management surely played a role in the overall loss of productivity. This distrust may have resulted in cognitive dissonance when information was provided by management, resulting in employees discarding or even changing the meaning of what was conveyed (Newsome, 2015).  Contrary to popular belief, money does not always motivate every employee, therefore additional motivators are often needed for a successful organization (Chamorro-Premuzic, 2013). Management may have early on presented their mission, vision, and goals, however if they are not reinforced or kept in the forefront of every employee’s mind, some of the motivation was lost and as motivation decreased so did the money.