Engstrom Case Paper
Issue The main issue with the Engstrom Auto Mirror Plant was how to improve quality and performance of its assembly line workers. The plant manager determined the best way to do this was to implement the Scanlon plan, which focuses on employee participation to identify ways to increase productivity. When the plan was proposed, it was widely accepted by employees (81% voted for it. ) In the beginning, employees had many suggestions to improve productivity (305) and management accepted almost all of them (276) despite the fact that only a few had a meaningful impact on productivity.
Employeesloved that communication between themselves and managers was so strong, as evidenced from the statements from Jim Lutz and Dori Andrews. Eventually, the employees became less satisfied with the way the Scanlon plan was working. At the same time, an industry downturn was leading to decreased sales, which began to really affect the bonuses paid out to employees. Things deteriorated so much that the plant manager was forced to lay off 46 employees and no bonuses had been paid in seven months.
Management now needs to adjust the variables in the Scanlon plan in order to get employees motivation and performance to a similar level from when it was first implemented. Analysis There are a variety of reasons the Engstrom Auto Mirror Plant finds itself in this current predicament. 1. Failure to continuously adjust the Scanlon plan over time to maintain employee motivation 2. Failure to respond to employee complaints in a timely fashion 3. An industrial recession which has resulted in decreased motivation and lower sales 4. Inability to pay out monthly bonuses 5.
Layoffs made employees question job security and lead to further dissatisfaction. I think the current problem started because management was content to let the Scanlon plan go along with making any adjustments other than changing the payroll-to-sales ratio (which marked the line where bonuses start. ) Management should have recognized that the number of employee suggestions were steadily decreasing, from 305 in the first year the plan was implemented all the way down to 50 in he current year. This is a sign that the employees felt their suggestions were not being taken seriously, so they stopped making them.
One thing that did catch the manager’s attention was the worker’s complaints. The two most common complaints had to do with the employees not trusting how their bonuses were calculated and employees questioning the fairness of the bonus structure. Management did a poor job explaining to the employees how their bonuses were calculated and which factors contributed most significantly with higher bonuses. Also, making bonuses based on the payroll to sales ratio limits the employees control over the possible bonuses.
If employees are perfect, but due to management, sales (and therefore bonuses) decrease, employees begin to question how much their increased productivity is having on their bonuses. Management should also explain why certain jobs receive certain bonuses to quell the fairness dispute between assembly line workers and supervisors. The failure to recognize and alleviate these internal factors was compounded by the downturn in the industry that deeply affected the company. This downtown lead to decreased sales, which in turn lead to a lower payroll-to-sales ratio, effectively eliminated bonuses paid out to employees.
Now the employees have no way to recognize the relationship between their productivity and sales, because they can be as productive as possible, but they have no way to personally increase sales. So as their motivation decreases and their dissatisfaction increases, it is inevitable that a decrease in productivity will follow. These feeling were only expounded when the company laid-off 46 employees. Not only did employees fail to see how their productivity had any affect on the business, they now had to worry about job security.
Conclusion The Engstrom Auto Mirror Plant has to remedy their current situation by adjusting the Scanlon plan to fit their current economic situation. Management needs to reopen the lines of communication between themselves and their employees. This will allow the employees to thoroughly express their concerns and will allow management and the employees to be on the same page once again. Nothing can be done over the downturn in the industry, but by adjusting the Scanlon plan, they can maximize their potential in the current environment.
The company may not be able to afford to pay out large bonuses at the moment, but it should lay out a long-term plan to show employees how the company will get back on track and resume paying bonuses. This plan should be much more flexible than the current plan, so when an unfavorable variable affects the company In the future, the employees will not be as affected as much as they were this time around. These new plans should be a stepping stone towards increased quality and productivity of the employees.