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 STUDY ANALYSIS Case Study Analysis Engstrom Auto Mirror Plant: Motivating in Good Times and Bad I. Introduction Explanation of the Organization Issues Engstrom Auto Mirror [henceforth refereed as “Engstrom”] is a plant that employs over 200 employees. Due to recent employee terminations, managerial attitude, and the halting of a monthly bonus plan called the “Scanlon Bonus Plan” (Beer, 2008), employee morale and overall motivation has severely decreased. With such, Engstrom faces low employee productivity, low profit margins, and a risk to a company shutdown. There are several organizational issues within Engstrom that needs to be immediately addressed so as to salvage the company. The top three organizational issues that need to be addressed first and foremost are as follows: employers need to once again take employee suggestions seriously, assuring employees feel integral to the system, and fix the Scanlon Bonus Plan; the last task is the most important. In regards to employee suggestions, the Engstrom employee suggestion rate dropped to dismal 50 per year, an all-time low number for the company; the true meaning for this is that employees no longer feel as though providing feedback to their company is important, especially if it is just going to be ignored by management. If employees feel as though they are not being received, then they will not contribute to the success of the company; which is very harmful in the long run. Engstrom ignoring employee suggestions is an example of “psychological distance” (Newsome, 2015) put up between management; regardless of how unintentional, this unproductive barrier between employee and employers contributes greatly to the issue on hand. 2