Re: Case Memo #1: Engstrom Auto Mirror Plant
Issues: Though the Scanlon plan was effective when it was implemented, there are now several potential issues existing in Engstrom. The employees are no longer seeing the benefits of the incentive plan that originally showed them bounty. They do not trust the system of bonuses, or the methods by which they are calculated, and by extension are beginning to distrust management entirely. They are starting to observe a lack of fairness in payment, valuing relative over concrete compensation. Ultimately, employees as a whole are beginning to be more individually minded as opposed to having a group mentality. This is the main cause of Engstrom’s problems. The Scanlon plan is designed to combat many of the issues that are now facing Engstrom – that is, providing meaningful motivation for employees by allowing them to be a part of the company as a community and see more value in group success than their ...view middle of the document...
• Without fundamentally changing its use of the Scanlon plan, Engstrom encourages teamwork by creating complimentary team-building retreats or meetings, so that employees and management have a chance to work together in a non-work setting.
• Engstrom completely gets rid of the Scanlon plan, adopting a more traditional incentive system where individual work is emphasized over group success. This would separate employees’ benefits from the success of the company, which, in the current economic situation, is hard to control, and could get rid of employee disgruntlement over losing bonuses.
• Engstrom merely changes the bonus calculation of the Scanlon plan, allowing employees’ incentives to be more individually-inclined than what is current. While still having interest in the overall success of the company, the bonuses would not be entirely dependent on the currently unhappy global market, and would still encourage individual hard work.
Recommendation: The best course of action for Engstrom to take would be to temporarily change the system by which employees’ bonuses are calculated, to put more emphasis back on individual work and take some off of the company’s overarching success. This would allow employees to see that their individual work is still being valued when the company hits hard times due to the uncontrollable economy. Because the issues that Engstrom faces are of distrust with the teamwork mindset of the Scanlon plan, it would be refreshing and rewarding for employees to feel as if they have more personal control over their compensation. The changes in bonus policy must be made blatantly clear to the employees, both so that they are personally encouraged and so that they do not feel any sense of distrust for management. The changes must be carried out quickly, so as to minimize the amount of bonuses that are altogether missed. When Engstrom revenue begins to rise again with the eventual natural lift in the economy, the bonus system can be brought back to where it currently is, which inspires teamwork and motivation in times of prosperity. In the meantime, enacting come group bonding retreats and meetings is encouraged, in order to lessen the negative effect of losing a company-wide group mentality which the Scanlon plan has encouraged.