The Engstrom Auto Mirror Plant

The Engstrom Auto Mirror Plant, located in Richmond, Indiana had been in operation since 1948. The privately owned manufacturing business produced mirrors for trucks and cars, with an employee roster of 255.  In June of 2006 the company was facing a decline in business and sales, and had laid off 46 of its 255 employees.  Employee productivity was rapidly declining, as well as the employee’s faith and morale in the Engstrom Auto Mirror Plant (Beer et. al., 2008).

In the late 1990’s the plant was began implementing new machinery in the production lines.  This transition caused production to slow down, and in turn created some angry customers.  The Plant Manager at the time lacked the knowledge to find a way to solve the issues the plant was facing. The Plant Manager was also facing criticism from the Union, the Union claimed that he was unwilling to work with them.  Engstrom Auto Mirror Plant hired Ron Bent to fix the company and save it from closing their doors (Beer et. al., 2008).  

In 1998, the Engstrom Auto Mirror Plant had faced a similar crisis, employee morale was low and productivity was at “40% of expectation” (Beer et. al., 2008).  The Plant Manager at that time, began examining ways to increase productivity and raise employee morale.  Thus, implementing the Scanlon plan into the plant.  Business began to increase, over the next seven years the sales quadrupled.  In 2006 the industry began to decline, and Engstrom Auto Mirror Plant felt the effects of that recession (Beer et. al., 2008).

Up until 2006, the employees had received regular bonuses from Scanlon plan for their increased efforts and productivity.  After the layoff in June of 2006, the 209 employees who remained went seven months without receiving any bonus from the Scanlon plan.  Ron Bent was forced to reevaluate the Scanlon plan, and the troubling issues the Engstrom Auto Mirror Plant were facing (Beer et. al., 2008).  Engstrom Auto Mirror Plant, was facing low productivity tied to low employee morale.  Possibly due to the failure of the Scanlon plan, and the extend periods of time without their bonuses.

In May 2007, the same issues crept up and Ron Bent was forced to once again reevaluate the issues at hand.  Sales were dropping, along with productivity, and product quality issues also began to arise.  Ron Bent was worried that their top client Sam Martinez, the manager for the Toyota Plant, was going to leave the Engstrom Auto Mirror Plant.  Toyota was angry with the slow productivity and the poor quality of the products coming from the plant (Beer et. al., 2008).  

Organizational issues within the Engstrom Plant, were evident and began to affect the employees and the business.  If management fails to address these issues as they appear, this can lead to even larger issues in their organization.  Many organizations will face these issues, it is how they are handled that makes the difference.

Looking at the case study, it is clear that the motivational strategy that the Engstrom Plant was using caused several conflicts within the organization.  The management implemented the Scanlon plan as an incentive for the employees, a way to award them for their hard work.  Once their bonuses had stopped coming, the employees no longer saw the Scanlon plan as a positive incentive.  The poor motivational issues that the plant was facing, created a decline in production, and low performance from the employees.  The Scanlon plan was no longer an effective incentive, and its failure affected employees at every level.  The lack of payouts and the mistrust for the management created a dissatisfaction among the employees.  The employees of the Engstrom Plant did not understand the new ratios that management was putting out.  People within an organization will not support a program they don’t understand. “They need to know why that are getting a new system (Ehrenfeld, Coil, Berwick, Nyberg & Beer, 1992)”.

The leadership of the Engstrom plant were also facing issues outside of the failing Scanlon plan.  The case study refers to numerous issues the management was having, and the issues that they were facing.  The management team was inexperienced with dealing with the issues that the Engstrom Plant was facing. They were unable to come up with a way to fix the Scanlon plan, and motivate their employees.  The management was also unable to work with the union, the manager described it as a “militant union”, and they were just waiting for him to fail (Beer et. al., 2008).

With the fallout of the Scanlon plan, the employees no longer felt as if their voices were being heard.  During the Scanlon meetings the employees were able to voice their opinions to the leadership.   The employees felt as if they were being listened to, they felt as if they were part of a “cooperative workforce” (Beer et. al., 2008).  But that communication dissipated over time, the employees felt as if the management was “playing the numbers”, and lost the trust of the management (Beer et. al., 2008).  A result of this, is seen when the employees stopped suggesting new ideas, the suggestions went from hundreds a year down to about 50 (Beer et al., 2008).