Engstrom - Case Review and Analysis

2-2 Final Project Milestone One: Introduction

Review and Analyzation of Engstrom Auto Mirror Plant: Motivating in Good Times and Bad Case Study

Megan DuBois

OL-500-X4237 Human Behavior in Organization

Professor Kathleen Cornett

Southern New Hampshire University

June 23, 2019

Summary

Engstrom Auto Mirror plant located in Richmond, Indiana is a privately owned business struggling to compete in the current market. They are a small business focusing on the production and distribution of mirrors for automobiles and trucks since 1948. On May 14, 2017, the Plant Manager, Ron Bent, and Joe Haley, assistant to the Plant Manager, identified many obstacles affecting business operations, employee morale, and profitability. Business sales were declining for the second consecutive year, causing Mr. Bent to lay off 46 employees of the plant’s 255 manned workforce. This created a downward ripple effect amongst the remaining employees, causing employee morale to decline. “A single significant change or a series of smaller but rapid changes may throw an organization out of balance, seriously reducing its forward progress until it can reach a new equilibrium. (Newstrom, 2015, p. 87). Productivity was decreasing, causing quality assurance checks and shipping deadlines to not be met. Long-standing trusted customer relationships began to suffer. However, this was not the first decline in operations that Engstrom and Mr. Bent faced.

In 1998, a similar situation occurred and Mr. Bent implemented and organization-wide employee incentive plan named the Scanlon Plan. “This type of a gain-sharing program seeks to involve employees more directly in an organization’s decision-making process. Since the employees are set to benefit from the plan, both should acknowledge the importance of each other’s suggestions and contributions” (Scanlon Plan, n.d., para. 2). For seven successful years, employees received a monthly bonus in addition to their paycheck based on performance and output. This motivated employees, and increased productivity and the quality of products. However, overtime, employees began feeling entitled to this bonus and the effect began to wear off. Engstrom was transparent in the calculations of the formulas to employees; however, employees began believing the company was padding numbers to ensure the company would receive additional profits and employees would receive lower bonuses. Sales began to decline and employees did not receive their bonus for 7 months, per the Scanlon Plan.  Now, Mr. Bent is forced to reevaluate the Scanlon incentive plan in order to increase productivity and sales, or another layoff could be pending, or Engstrom could close their doors indefinitely.

Organizational issues from a human behavior perspective

Engstrom Auto Mirror plant competed well in the developing market for 50 years until the late 1990s. New technology began to emerge in factories, and Engstrom incorporated these advancements into their business, causing new production lines that came with a learning curve. The Plant Manager that Mr. Bent replaced lacked the education and understanding of the new technology and resigned from his positon. Losing the plant manager amongst a disgruntled workforce due to the new lines, allowed the Union to take a stance and become more firm with their demands. Their Union brotherhood became more assertive and more difficult in relations, allowing employees to have the false security of protection while their entitlements raised. Engstrom failed to use a combination of intrinsic and extrinsic rewards, causing the bonus money to become expected, and every occurrence of a deficit month meaning no bonus payout, allowed dissatisfaction amongst the workforce to set in.

Mr. Bent and Mr. Haley focused their attention on improving morale amongst the workforce; however the industry took a hit in 2005 and sales were negatively impacted. Company culture and the social equilibrium was off-balanced, causing a dysfunctional effect. “Managers also need to predict both short-term and long-term effects” (Newstrom, 2015, p. 87). Layoffs occurred in mid-2006 and decreased 18% of the workforce. By 2007, employees hadn’t received a bonus in 7 months, causing increasing employee dissatisfaction. “When employees join an organization, they make an unwritten psychological contract with it (Newstrom, 2015, p. 87). An internal conflict shook Mr. Bent as he assessed how his plan failed if it consistently worked for so many continuous years. He evaluated the situation and began to identify modifications and alternative solutions for the Scanlon plan.

Analyzing root causes

        Mr. Bent emphasized the Scanlon Plan over any other incentive. This was not a long-term solution, however, in a unionized environment, every plan implementation requires concurrence from the Company and the Union. Employees are influenced by monetary benefits and tend to react accordingly when it is performance based. On the other hand, the Union will fight for one thing: Non-performance based money/rewards to ensure its fair and equitable distribution. Other intrinsic rewards should have been slowly introduced to the workforce in an attempt to phase out or allow modifications to the Scanlon Plan.