Engstrom Auto Mirror Plant

1. INTRODUCTION

1. Explanation of Organizational Issues

Engstrom Auto Mirror Plant began operation in 1948 and operates out of Richmond, Indiana. The company is privately owned and manufactures mirrors for trucks and automobiles. In the 1990’s the company became unprofitable due to changes in technology and a plant manager who was not equipped to deal with complex organization and behavior issues.  After this manager resigns, a new successful manager emerges.  He evaluates the operational characteristics and implements an employee incentive bonus plan called the “Scanlon Plan.”  Several years of success ensue from 1998 to 2006.  Unfortunately in 2007, due to a significant downtown in the automotive industry, the company was forced to lay off eighteen percent (18%) of its 255 employees and 209 remain.  This period resulted in a downward spiral of productivity, employee morale and low profit margins.  Of primary issue is the “Scanlon Plan” which had previously generated significant monthly bonus for employees but has not produced any bonuses in a seven month period.  The core concept of this plan is the concept of participative management (Beer and Collins, 2008).  Newstrom (2015) indicates that when a specific approach with widespread application are used to develop a considerable empowerment among its employees, it is practicing such management.

The case study of Engstrom Auto Mirror Plant presents several organizational issues that result in employee operational deterioration in effectiveness and efficiency and profitability of the business.  These first issue is the decline of employee satisfaction and motivation. Due to the successive months of not receiving a bonus as defined by the ‘Scanlon Plan”, management was receiving inside feedback from certain employees about how the plan was becoming useless.  The second issue is the decrease of production and quality.  The plan manager is concerned with productivity and product-quality at the plant. Management also believes that there is a direct correlation between the late delivery of the product and the dissatisfaction of the employees. Finally, the lack of trust in management.  The Scanlon Plan was very complicated and at times the employees were suspicious when management changed performance ratios.  Newstrom (2015) discusses Mutual Trust as “joint faith in the responsibility and actions of the parties involved” (p. 279).  The deterioration of trust can be devastating to an organization that relies on a supportive model.