Case | HBS Case Collection | April 2008
Engstrom Auto Mirror Plant: Motivating in Good Times and Bad
by Michael Beer and Elizabeth Collins
In May 2007, the Engstrom Auto Mirrors plant, a relatively small supplier based in Indiana, faces a crisis. The business was in the second year of a downturn. Sales had started to decline in 2005; a year later, plant manager Ron Bent had been forced to lay off more than 20 percent of the work force. Plant productivity was dropping, employee morale was low, and product-quality issues had begun to surface. Relationships with key customers were at risk. Downturns were not new at Engstrom. When the plant had reached a similar crisis point years earlier, the institution of a Scanlon Plan, a company-wide employee incentive program, had proven critical in building morale, increasing productivity and product quality, and leading Engstrom into a turnaround. For several subsequent years, Engstrom workers had received regular Scanlon pay bonuses. But the bonuses had stopped in 2006, and now Ron Bent must determine how to get the plant back on track. Should he revise the Scanlon setup? Remove Scanlon and try another plan? Identify and change other organizational factors that may be sabotaging Scanlon?
Keywords: organizational behavior; leadership; change management; human resource management; incentives; motivation; manufacturing; Leadership; Change Management; Employees; Motivation and Incentives; Goals and Objectives; Manufacturing Industry; Indiana;
Case Analysis Engstrom Auto Mirror PlantCase Analysis Engstrom Auto Mirror PlantDue to the downturn in the industry, Engstrom Auto Mirror Plant is facing several organizational issues. Issues such as productivity and product quality steamed from employees unhappy with the current Scanlon Plan. Ron Bent, plant manager, adopted the Scanlon Plan to increase productivity which lead to monthly bonuses. The Scanlon Plan influenced “suggestions for improvement by employees” (Beer & Collins, 2008). These suggestions were used to improve overall production and technology. As time went on, the employees were concerned by the complex calculation of the Scanlon bonuses, questioned fairness and suggestion rates decreased. The monthly bonuses stopped and layoffs occurred. The morale was low as employees felt something was taken from them. Several factors played a role in this company’s downfall including the employees and their lack of motivation once the monthly bonuses stopped. I will review the background information on Engstrom Auto Mirror Plant, Ron Bent’s management tactics, employee involvement, and overall leadership participation. Communication also played a major role in thedecline of Engstrom Auto Mirror Plant. I will review the methods of communication used and explore other communication methods that can be used. After all the issues have been identified Iwill discuss solutions to help rebuild Engstrom Auto Mirror Plant. The plan to recovery includes implementing organizational changes such as management by objectives approach and performance appraisal. Modification of the Scanlon base ratio, implementing additional rewards program and emphasis on employee empowerment will also be included in the rebuilding process. Leadership is in charge of guaranteeing that the employees have the competence for 3