Engstrom Auto Mirror is facing one of its most difficult periods of its history, driven by a variety of factors. After enjoying several years of prosperity, particularly due to an effective implementation of a Scanlon Plan, the company is facing problems associated with productivity and product quality. These issues have transcended to other areas of the company including its employees, who have been complaining for some time about the company’s policies and its current situation, and have been underperforming, which in turn leads to low productivity. The situation puts plant manager Ron Bent in a difficult position because he has to figure out a way to address these problems, and come up with solutions so that the company can continue operating and supplying its clients. One of the most fundamental factors that has contributed to these problems is related to the work force, in general. A hostile environment, numerous complains by the employees, low morale and lack of communication are just a few of the elements that are present in this organization. Essentially, the employees’ complaints revolve around the Scanlon Plan and how recently it has been less effective.
In 1999, the company was facing similar problems and they implemented a Scanlon Plan. A Scanlon Plan is an organization-wide plan that reinforces teamwork and cooperation across the organization, focusing on cost savings and employee motivation. Its main components include: a system where employees from all levels submit suggestions for improvement, a committee that evaluates and enables communication between employees and management, and finally, a sharing of monthly bonuses of which both the company and the workers can benefit. These components contribute to participative management, where employees are motivated to increase productivity and take responsibility of their actions, and improved communication and cooperation throughout all the levels of the company. Shortly after the plan was implemented, the plant began experiencing increased productivity, higher profits, consistent quality standards and improved employee morale, due in great part to the monthly bonuses they received for their good work.
The plan proved to be successful mainly because employees in Engstrom had never been in a position where they were part of the decision making process of the company, and were responsible for their actions, similar to empowerment. In this case, employees felt valued by the company and were motivated to be more productive and to contribute to the company’s improvement. Workers expressed satisfaction and they felt that the company was a better place to work.
While all Scanlon plans, when implemented properly, improve teamwork, collaboration, creativity, productivity and innovation, the plans can be adjusted to support the strategy of a specific organization. In this case, Engstrom was aiming for higher productivity and cost savings and thus the bonus given was based on the ratio production per labor hour. However, organizations with different strategies base their compensations on different factors. For example, Parker Pen Company implemented the Scanlon plan not focusing on cost saving, but on improving the incentive plan the company had. In this particular company Joe Scanlon was the main player in improving the company’s incentive plan to a more productive and balanced one.
Generally, a Scanlon Plan will result in any organization if the employees receive what they have agreed, and in this plant they were supposed to receive bonuses for their productivity. This means that employees will give their best and work collectively for the benefit of the company as long as they are being compensated for their performance. When an employee is not receiving what they were promised, then his or her performance will decrease significantly and it will affect the company’s productivity as a whole. A pay-for-performance system is one in which employees receive compensations for their performance if they reach a certain target. Essentially, this system will be conducted by the specific goals of different companies. Communication between management and employees is key for this system to be successful, in order to enforce teamwork in an organization. The system works effectively if performance is the main focus of the employees, rather than money, because it can lead to exceeding goals. Money is definitely a motivator in any kind of organization, and especially in this economy. Many people are having a hard time finding jobs and generating money has become a difficult task. However, as proven in Engstrom, money is not the only motivator. Certainly there are other factors that contribute to the performance of an employee in a company. Things like feeling valuable, being heard, trusted, and having more responsibilities of actions, can make an employee perform better. Someone can receive monthly compensations but if that person is not feeling valued by the company, then some of the interest and effort is lost, and will perform poorly. Meanwhile, feeling valued and part of the organization motivates and inspires that person to work, and to constantly improve that work, increasing productivity. It is important to mention that not every person is the same. Some people are more motivated by money, while being valued motivates others. The reality is that money will always motivate someone, while being valued may or may not motivate someone. Everyone wants to be compensated for his or her work, and the more effort you put in your work, the more you want to be compensated. If you feel that someone is getting paid more than you, when you have worked more than that person, then your performance will drop. This happens in every company, and it is also presented in Engstrom. Brent’s position is not an easy one. In my opinion I would modify the current agreements of the Scanlon system, and I would try to look for other types of motivational elements. Some of the modifications could include a reduction in the amount of bonuses, and lowering the ratio. To compensate these changes, I would monitor each employee’s performance and give positive and negative feedback regarding their work. This way, the employee knows what he or she is doing wrong and correct it, and if its right, continue or maybe even improving it. Also, I would organize small social gatherings every month so that employees from all levels can have the opportunity to socialize in a non-business environment. That way, they can strengthen relationships with each other, which in turn will help them work together with more confidence.