Abstract
The Engstrom Auto Mirrors plant is a small supplier factory based in the state of Indiana who is currently facing a crisis. They are in a drastic downturn in production and finance. The Engstrom plant has been experiencing damaging blows in their sales and morale. Ron Bent, plant manager, had to lay off more than 15% percent of the work force. The productivity was severely hit in a negative way. Employee morale suffered, and the quality of the product was sub-par. Customers of the plant was losing faith in their product. Downturns wasn’t a new occurrence at the plant. When the plant had reached a similar time they introduced the Scanlon Plan which was an incentive plan aim to increase the morale of the workers, increase the productivity and quality. But when the bonuses stopped, Ron Bent was at a cross road to figure out how to get the plant back on track for success. Should the plan be revised or should a new plan be instituted?
Introduction
The Engstrom Auto Mirror Plant experienced a decrease in productivity over a period of time coupled with the fact of proven employee dissatisfaction from the decline in success of the firm’s Scanlon Plan. Employees expressed doubt about bonus calculations and Assistant Manager Joe Haley conducted inventory reports and conversations with employees which indicated possible stealing of inventory. Irritation and suspicion where emotions the employees felt when their bonuses were taking away. Ron Bent who is the plant manager failed miserably by implementing the Scanlon Plan. The motivational processes within the incentive plan did not efficiently compensate for long term production needs. Based on the dual-factor theory, Ron’s Scanlon Plan motivated on hygiene factors. In order to remedy these failed actions, the current incentive plan has to be replaced by a more appropriate incentive scheme.
Frederick Herzberg states that hygiene factors such as salary, good pay, vacations do not give positive satisfaction or lead to higher motivation, through dissatisfaction results from their absence. The term hygiene are maintenance factors (Mind Two Team, nd). These are extrinsic to the work itself. Ron Bent implemented the Scalon Plan in order to provide incentives for the employees to increase productivity. The Engstron’s Scalon Plan was ineffective for it did not foresee the long-term issues which became evident when the employees became used to bonuses as being a part of their salaries which meant they stopped becoming incentivized. Ron didn’t enact the necessary motivational factors such as recognition for one’s achievement, involvement in decision making, or a sense of importance. Ron’s lack of knowledge in motivational techniques lead him to continue this failed plan.
It came to a point where the employees level of satisfaction became stagnant. When the factory productivity level dropped, it forced management to withhold bonuses causing a damaging effect to the employee’s morale. Herzburg research has proven that increases in wages is a short-term fix for a long term problem. In essence when employees are rewarded in this fashion, they become accustomed to receive the bonus every time and will not feel the need to increase productivity. In ratifying the incentive plan, Ron Bent did not explore all of the possible outcomes. Ron was looking for a quick motivational drive to increase productivity. He did not lay the ground work to plan ahead for long term production goals. Ron did not foresee the power in rewarding employees using intrinsic conditions such as recognition, achievement and personal growth. It was Ron’s lack of understanding the incentive plan which cause a damaging blow to the moral of the employees.
In order to rise again from the down turn of production, will be through training management in the proper techniques to increase morale of the organization. They need to learn the concepts of the dual factor theory developed by Herzburg. They must be trained and know the difference between motivational and hygiene factors and how to effectively implement a plan which is self-sustaining. They must implement a plan that fosters recognition of great work, achievements, responsibility and personal growth. There will be some resistance at first since their employees are used to monetary rewards rather than non-monetary rewards as well as trust has been breached but this will be easily diminished through time. To further the argument, the employees may not trust management after recent events. By implementing this corrective action plan could lead to major turnaround in productivity, and morale.
The efficiency problems at the Engstrom manufacturing facility stems from the lack of effective rewards system that garnered several issues with the company. There are several root causes which are driving the low productivity of the factory which are as followed: economic decline, low efficiency amongst the employees, growing distrust between labour and management, link between performance and reward, practicality of the Scanlon as an incentive plan. The industry had been hit by an economic recession in 2005, which led to lower sales profits, causing lower returns. The lack of uncertainty during this time led to several lay-offs and the non-payment of bonus to the employees. Consequently, there was a degree of discontent and the lack of motivation among the employees. Agreeing to the Incentive Theory in this case the Scanlon Plan, which a reward was given after the occurrence of an action such as an increase in productivity motivates the employees. If the employees receive the reward quickly, the effect is much greater which keeps the employees working hard. In this case, management has not been able to pay any bonus to the employees in months, and there isn’t an incentive for the employees to work at full potential. The company now has to regularly provide their employees incentives before the employees can be motivated to increase productivity. This bring me to my point where this form of an incentive plan will not be effective in the long run. Herzberg Theory held true. The low effectiveness amongst the factory employees leads to quality issues in product as well as slow production. These two problems are at the root of the company issues since it caused more harm to the company in cost. The incurred cost to meet production demands outweighed the efforts made by employees leading to low production which finally caused management not to be able to pay bonuses. And without these bonuses the employees’ morale was quite low which is one of the root causes of the low production. The level of skepticism and distrust grew amongst the employees since management wasn’t transparent with the bonus calculations. The level of complexity of the bonus calculation was quite high. When management changed the Scanlon ratio further caused more issues. Again further proving my argument that this plan isn’t effective and Herzberg Theory of motivation is holding strong. Management has nurtured the Scanlon Incentive Plan so it must now have to provide rewards and incentives to motivate their employees. According to the Expectancy Theory which deals with motivation and management. This theory which was introduced by Victor Vroom believes that there is a positive correlation between efforts and performance, favorable performance will result in a desired reward, the reward will satisfy an important need, and the desired to satisfy the need is strong enough to make the effort worthwhile (Scholl, n.d.). Employees choose to work harder to produce when they expect a reward or bonus at the end of each month. Management has to see the prominence of the reward system for the employees since they have been receiving them every month for the past few years. The expectancy theory can work in tandem with the Herzberg Theory if the correct motivators are put in place. In Herzberg words the expectancy theory will work if employees are motivated not using hygiene factors. The Scanlon Plan chosen by management led to this downturn in productivity. This plan incentivizes employees only in good times. Management fell to plan when there aren’t favorable economic conditions. The effectiveness of such a plan needs strong commitment from top management, clear communication, performance indicators, and suitable rewards. Great incentive plans should work in both good and bad times. Another root cause in the level of production of the employees is the lack of presence of human resources. There wasn’t any proper mechanism in place where employees could report any issues with employment. Human resources could not promote a sense of community especially when they hit hard times. Human resources plays a vital role in bridging management with their employees. Human Resources as well with management but work together to foster an environment where there is transparency, consistency, and structure. These root causes deals with the organizational issues from a human behavioral perspective. It identified core issues that plague the environment of the company. Feelings of distrust, uncertainty, structure, and lack of effective motivators will only feed slow production and product quality. A company is only as strong as it employees so build them up in the proper way and your company can weather any waves.
Management must several criteria before making a corrective action plan to mend the issues of the organization. Management must consider this plan’s ability to: increase the company’s working performance (which includes sales, quality, and productivity), improve the employee drive, lower cost, and effectively communicate fairness.
Bent can consider to scrap the Scanlon plan in its entirety and enact a brand new incentive plan. Implementing a new plan from the unfair Scanlon Plan may motivate employees to welcome the new program especially if they felt their concerns were heard. Proving to the employees that management has listened to their issues and took action to correct them could build trust, loyalty, and confidence. If employees’ concerns aren’t addressed in the selected new plan, negative consequences could result such as shutting down operations. And if this new plan doesn’t drastically improve from the Scanlon plan it would be a considerable lost monetarily and a significant waste in time implementing an entire new plan.
Bent could choose to revised the existing Scanlon Plan to address employees’ precise concerns. This option would be practical since it would be less time-consuming from implementing an entirely new plan. Management would not have to major time searching for another effective incentive program and the resources needed to put the program in action. Productivity, efficiency, and sales have the potential to increase at a faster rate if the company doesn’t change its incentive plan. Employees can see an instantaneous response and resolution for their issues which could possibly motivate them to rededicate themselves to the work. If this modified plan isn’t implemented or communicated properly by ensuring that all of the complaints were heard and addressed, all the effort in changing the plan would be in vain. It will be a domino effect. Employees would not be motivated and will continue to distrust management. And if this occurs, production as well as quality of product would suffer due to many employees being terminated or either quitting. Finally, customers of the company would cut their ties with the company all together and go to other vendors to meet their needs.
The success of either options would heavily depend on the supervision team, employees openly engagement, timing, and methodology of implementation. Since it is more practical and greater number of advantages, it would be wise to modify the existing Scanlon Plan.
Bent knows that their employees have a major distrust for management, it is essential that he includes them in the modification of the current incentive plan as they did previously. Management and employees should work together to build trust and reassure workers that they have a voice. Possible amendments should include: 1. The should be a set number of base ratio changes per term. Management could only change the ratio a certain amount of times within a set term. Employees would get a sense of stability since there wouldn’t be an unlimited amount of changes in their bonuses. 2. An explanation on the modified bonus calculations. Management has to be transparent in how they calculate the bonuses. They have to break down the calculation in general terms so everyone can understand. This would help mend the distrust. 3. Modification in the distribution of bonus. Management should introduce team-based performance bonuses. Instead of just management dividing the bonuses amongst all of the employees evenly. Manufacturing teams and sales teams for instant should have measurements in place to determine their performance and compare them to other departments. If the manufacturing team outperform the sales team, they should receive the higher bonus; same would hold true for the sales team if they outperform the manufacturing team. By doing this would evoke a healthy competition amongst the departments to work harder by increasing production in the manufacturing realms as well as the sales realm. 4. In keeping with the spirit of the Herzburg theory, more motivators can be added such as removing some of the control of management and increasing the answerability and responsibility the employees have in their own work. Management can provide regular feedback on productivity and job performance directly to their employees. And encourage the employees to take on new and perplexing tasks. All of these things management can enact to motivate their employees (By The Minds Editorial Team, n.d.).
There should be a committee formed by management and employees through an elected progress to keep it fair. These revisions should be heavily evaluated and ratified through a vote. If the amendments are not approved. The incentive plan should be stripped and a new incentive plan should be considered. Until this new program is approved team-building activities, and other motivational activities and workshops will be in place to help ease the transition.
The best solution is to modify the existing plan and add more “motivators” other that doesn’t involve monetary rewards as suggested by Herzburg. This modification could resolve all of the root causes of issues that permeates the company such as low efficiency amongst the employees, growing distrust between labour and management, link between performance and reward, practicality of the Scanlon as an incentive plan.
Organizational behavior involves the examination of managing individuals or groups within the workplace (Kiniki, A. & Fugate, M., 2014). There are several influences that can affect the behaviors of people with the workplace; typically, they originate from individuals, or from the business culture. Some behaviors attribute to the success of the organization while fostering desired working conditions. Others behaviors that lack accountability, and transparency create unwanted environments that make employees hate attending work and can cause a downward spiral of the organization. Luckily, I work for an organization who power lies in its structure, size, and scale. My organization is a leader in engineering and innovative technologies. Their mission is to create sustainable value for customers, shareholders, as well as sustainable careers for employees. I can honestly say its values are holding true. How employees are treated by management or how co-workers treat each other determines the behavior of the company. An establishment structure, policies and the efficiency of management can heavily dictate the behavior as a whole as well. In order to maintain its desired culture, management has to exemplify its standards so that their teams know what the company expects. My organization does this quite well. Most of its teams embodies the culture and standards of the company. Every employee takes responsibility for our company’s success. Unlike my organization, Engtrom’s Plant didn’t operate in this manner. Their employees didn’t take the company’s success to heart. Their employees only valued the bonuses. This was proven when the plant went through an economic downturn and the employees still expected their bonus. A major difference between my organization and the Engstrom’s plant is that the plant values, cultures and what it stands for isn’t aligned. Culture is what makes the difference in setting the tone for how the company operates. There is an ownership culture that exist within my organization. My company was led for generations by owners who were passionate in the firm’s long-term successful development. They understood that every individual makes a contribution to the companies lasting success. Our managers serve as great role models for the company’s planned direction and ensure that resources are used appropriately and effectively. They empower each team to put forth their best effort. My company takes on a people-oriented approach that values and exemplify diversity in experience and expertise. Diversity in experience and expertise is quintessential in this era. An industry that faces new challenges each year it is imperative to have people in place that put a plan in action and achieve desired results in any environment. Coupled with the fact that each shareholder act in a proper manner by engaging in the long-term success of the company. They keep the faith that goals will be reached and targets met. Each of them are insured great success. Luckily, my company isn’t experiencing organizational issues. Critical thinking, compliance, communication, and adaptability attributes to the functionality of the company. Having set guidelines in place helps organization to run smoothly. Having a code of ethic, and openness helps with productivity, trust, and increase loyalty. If employee have a sense that something is unethical going on two things can occur, employees will lose trust in management or they will follow suit in unethical behavior. This occurred at the Engstrom Plant. Many of their employees lost trust in management since they felt some unethical activities were transpiring. All of these types of things causes organizational issues. I am proud to say that my organization is running smoothly. My fellow co-workers act in a responsible manner, achieve stellar results, and are creative. We all contribute to the success of our organization. These are values that we are hold to the core. All of the issues that Engstrom’s Plant experienced were unfortunate but luckily my company vision, culture, and values are all aligned which assures our success. The more employees trust their company, the more personal obligation they will feel and the greater sense of family and a sense of accountability will be. Overall, I am quite happy with our organization and can proudly say that we don’t have issues and if any should arise proper measures are in place to address them while keeping the company integrity. In conclusion, it is in my opinion that they revised the current plan. Bonuses should be given but given more strategically. This would foster a healthy competition in the factory between the departments. Management should also incorporate more ways to motivate other than given monetary bonuses. They should also involve their employees in the decision making to help the morale as well. This holds true since people are more motivated when they feel their voices are heard. The Scanlon plan to be effective has to incur a modification. The Engstrom Auto Mirror will be successful but it will take the commitment of the management and the employees to ensure the success.

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