Engstrom Auto Mirror plant, as a privately owned business, it manufactured mirrors for trucks and automobiles. The managers aimed to increase productivity for sustainable development of the company. Back in 1998, to pursue highly productivity, the plant was redesigning its production lines to incorporate new technology, however, the transition was not smooth, some problems had emerged, such as the staffs’ moral and efficiency declining and the internal contradictions being intensified between the managers and employees. As the result of it, the previous manger resigned in 1998.
After that, the new manager, Ron Bent believed in the power of worker incentive programs and wanted to establish one at Engstrom. Eventually, the plant adopted the Scanlon Plan as incentive program because a substantial majority of workers wanted it. Due to institute the plan, the plant was achieving growth, higher profits and consistent quality standards, the employees were also receiving good financial rewards. Over a seven-year period, business had been good in the company, However, a downturn hit the industry in 2005 because of the declining of the workforce’s morale along with the sales figures.
In 2006, Bent had been forced to lay off 46 of his 255 employees. The trust between the managers and employees was shaken and the main problems by the complaints of workers was distrust of bonus calculations and question of fairness between the supervisors and employees. In this situation, Bent thought to make changes urgently before conditions deteriorated further. There are several factors that cause the issues in the Engstrom. Firstly, according to the equity theory, employees focus on the fairness of their work outcomes in proportion to their work inputs.
In the Engstrom, some employees thought that supervisors did not working as hard as them, however, the supervisors got the bonus probably higher or equal to them. Therefore, employees complained about unfairness and the unreasonableness of the situation that could be a decline in morale. More seriously, the trust between the managers and employees were likely to declined dramatically because they felt the award or punishment system was not fairness to them that will be a negative effect for the normal operation of the plant. Secondly, the plant was lack of setting up of flexible incentive mechanism.
Although the plant instituted the Scanlon Plan to motivate their employees, the managers did not consider to further improve the incentive program before the issues was appearing. Additionally, they did not properly feedback and value views of employees, why the enthusiasm waned and suggestion rates dropped. The employees gradually were a lack of a sense of belongingness and low recognition from the company. For me, I will give two possible options for Bent to ease the crisis for their plant. 1. The plant should improve the Scanlon Plan by the managers.
It means that the managers should focus on the recognition and appreciation for their employees which as integral components of a winning strategic reward system. It could be posted a top twenty list of employees who perform their jobs excellently in every month. At the same time, it sends personal letters in the name of the company to convey appreciation to them. 2. The second option is to change the Scanlon Plan with another plan that is collect different ideas from the staffs (sometimes are workers’ representative) in every week by face-to-face meeting.
If some ideas could be accepted by managers, the employees who give the recommendation will be praised at the meeting. Further, the company will give rewards to employees if their suggestions through practice bring economic gain for the Engstrom. According to my analysis, the problems are distrust between the managers and employees and unfairness of rewards between the employees and supervisors. In order to keep productivity and profitability of the plant, it should resolve the issues urgently before the situation deteriorated further. I recommend the option two is better for Bent to deal with these problems for the plant.
Firstly, communication is the most important factor that affects the relationship between managers and employees. If the managers could listen advices of the work in time from their employees, it not only will be more easier to handle the existing problem in the company, but also will improve the relationship between managers and employees because the staff feel the company takes, to respect and to trust them, feel oneself is in enterprise’s one, and they can have the confidence and the sense of responsibility for the development of their company.
Secondly, it is to give the appreciation by managers to employees frequently that will improve the employee morale because they will feel more attached to their company. As the result of this, employees will devote to their work without any complaint. Consequently, because of the improvement of relationship and employee morale, the efficiency and productivity of company will improve with the efforts of all staff and give them corresponding reward.
Although the first option is probably to resolve the crisis for the Engstrom, it is not a long-term incentive program because the communication between the managers and employees is not so much compared with the second option and some problems in the plant may be not addressed immediately by managers. Therefore, the Engstrom should change their incentive plan to built the good relationship, seek advices from subordinates and give employees corresponding reward. In conclusion, I suggest that Rent could choose the second option to handle this crisis in their plant before conditions deteriorated further.