Engstrom Case Study

In the early 2000s, Engstrom Auto Mirror plant, a privately-owned manufacturer of automobile mirrors, had begun to face arduous times in a global economic downturn. In 2006, Engstrom was forced to lay off 18% of its employees. The next year would be worse. Classified as the Great Recession, the years 2007 to 2009 were grueling for everybody. This was a global financial crisis that effected everyone and it is essential that everyone remembers its effects. Prior to 2007, these difficulties that plagued Engstrom and to equal extent the plant manager Ron Bent, were not only caused by a declining economy, but a decline in employee morale and performance. The inefficiency of the employees was even affecting the delivery schedule. Bent saw this as …show more content…
Efficiency wasn’t the only problem, however. There were several root causes driving the low productivity at Engstrom including: economic decline, a growing distrust between the labor force and management, practicality of the Scanlon plan chosen, and the low efficiency amongst the employees.
Economic decline peaked in 2007, but it was in 2005 that Engstrom started feelings its effects. Sales profits were lower, which led to lower returns. A lack of uncertainty and growing concerns of the future led to lay-offs and cutbacks in the form of management unable to provide employees with incentives. A staggering 46 out of Engstrom’s 255 employees were let go: 18% of their labor force. Consequently, the lack of motivation filled the plant as well as the degree of discontent for management. Motivation of the employees prior to the economic downturn was likely due to the incentives that came from the Scanlon Plan. Moreover, if the employees were to receive the incentive quicker, the employees should in theory increase productivity further. Low efficiency amongst the plant employees led to quality issues as well. Quality control was lacking. This, along with the slow production were the two issues that were costing Engstrom money. Morale was low due to a lack of incentives and fear of job security, …show more content…
There is a way for Scanlon to thrive in a company. That is to start off using it without any incentives or bonuses. Afterwards, incorporate some form of monetary bonus as in indicator, whether it be quarterly or annually, of how the employees are doing against their goals and the standard they (or the employer) have set. Money only motivates to a certain extent. People’s need to feel recognized, the need to contribute and the added self-esteem are also motivators. It really depends on the person and what their needs are. The true bonus of a dedicated employee should be all the ideas and team-building synergy that’s derived from the team meetings. The actual incentives should feel like an added bonus. In a sense, you own part of the company and share in the profitability of the company in both the good times and the