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Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad
Milestone One: Introduction (Section 1)
On May 14, 2007, Ron Bent and Joe Haley ascertained that Engstrom Auto Mirror plant was facing a crisis. Lately, employees at the plant were complaining of bonus that had not been paid over a considerable time. The key problem that initiated complaints from employees at Engstrom was that they were formerly used to high bonuses and nearly perceived them as part of their basic compensation. Workers, therefore, had angrily reacted to the lateness of the bonus that was critical to their pay. Bent expressed worry over the reducing quality. Engstrom had adopted the Scanlon plans that aim to improve productivity among employees (Beer & Elizabeth, 2008).
Scanlon plan helps build collective teamwork and enhance sharing knowledge among employees to increase productivity (Snell & Bohlander, 2012, p. 453; Dar-El, 2013, p. 197). Besides initiating competitiveness among employees, the plan helps them through rewards such as bonuses (Whitney & Ochsman, 2013, p. 83). The plan has three components. First, employees at all levels propose possible suggestions justifying improvements. Second, set committees at the company conduct an evaluation of the suggestions. Finally, monthly bonuses are offered to employees who coordinate to provide improved quality (Beer & Elizabeth, 2008). Engstrom Auto Mirror adopted the plan solely to ensure cost sharing.

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Bent trusted that employees could be motivated to promote productivity in their service delivery. In the late 1990s, the management of Engstrom Auto Mirror introduced initiatives to motivate workers and achieve high productivity. Instead of choosing a system that would reward groups, Bent selected a program that recognized individuals’ efforts.
Bent chose Scanlon Plan as most suitable for the company because of the unique challenges experienced. He perceived that workers at the company would express new method with enthusiasm prompted by the feeling of being part of the program undertaken by the entire company. It demanded efficient communication channels to implement the plan successfully. Implementing the plan also helps in enhancing great communication among workers that the company. In an attempt to ensure workers are acquainted with the plan, Bent promoted learning from other organizations that have applied it earlier. The company’s bargaining committee learned ideas from similar committees in organizations that have applied it. Workers at Engstrom attended Scanlon meetings in organizations implementing it to gain insight into the plan’s implementation.
The company formally adopted the plan on December 10, 1999, and every employee consented to a Scanlon Bonus Plan Agreement. Based on the agreement, the employees would have 75 percent and company 25 percent of savings on labor. There was a provision to compensate months when there were experiences of reduced productivity that was lower than the base ratio. The provisions articulated a 25 percent of the bonus to be set to offset other months when productivity may be low. That was before deductions on the total bonus. The 25 percent initial deductions served as a reserve for deficit months. The plan outlined a detailed structure of the screening committee including appointments of its members. There were set conditions on circumstances that would prompt the management to adjust the base ratio. It further outlined possible changes in the volume of sales, pricing levels, subcontracting and wages that would be applicable.
Calculating the base ratio presented a notable challenge during the plan’s adoption phrase. It demanded a benchmark that would be applicable. The selected base ratio was that or payroll cost to the volume of sales attained from the production. There were arguments among members of the management team when calculating the ratio. During its institution stage, the plan delivered high levels of productivity. It served to ease tension and reduce conflicts. The firm attained high profitability.
Beer, M & Elizabeth, C. (April 2008). “Engstrom Auto Mirror Plant: Motivating in Good Times and Bad.” Harvard Business School, Brief Case 082-175.
Dar-El, E. (2013). HUMAN LEARNING: From Learning Curves to Learning Organizations. Springer Science & Business Media.
Snell, S. & Bohlander, G. (2012). Managing Human Resources. Cengage Learning.
Whitney, P. & Ochsman, R. (2013). Psychology and Productivity. Springer Science & Business Media.

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