Premium Essay

Engstrom Auto Mirror Plant

In: Business and Management

Submitted By Sam786
Words 1537
Pages 7

1) Other than the Scanlon, what are some common types of employee incentive plans? Provide a brief overview of what they are and how they work.

My research found that basically there are four types of programs classified as gainsharing. These include: the Scanlon Plan, the Rucker Plan, Improshare and Custom plans. These gainsharing plans are all similar. The differences appear in the way they calculate bonus and the level of employee involvement required to support the plan.

The Scanlon Plan appears to be the oldest and most widely used type of gainsharing plan. As was shown in the case study: Engstrom Auto Mirror Plant: Motivating in Good Times and Bad, the Scanlon Plan is based on the historical ratio of labor cost to sales value of production (Beer & Collins, 2008). Because it rewards labor savings, it is most appropriate for assembly line companies.

The Rucker Plan is based on the idea that the ratio of labor costs to production value (actual net sales plus or minus inventory changes, minus outside purchased materials and services) is historically stable in the manufacturing industry (Recardo & Pricone, 1996). This principle became the fundamental guideline of the Rucker Plan, which tracks the value added to a product as a measure of productivity. Because this plan utilizes a multi-cost formula, it is most appropriate for organizations that want to improve other variables, such as scrap reduction or energy consumption, in addition to labor.

Improshare measures changes in the relationship between outputs and the time (input) required to produce them (USLegal, 2011). This plan is minimally affected by changes in sales volume, technology and capital equipment, product mix, or price and wage increases. It's the easiest of the gainsharing plans to...

Similar Documents

Free Essay

Engstrom Auto Mirror Plant 2

...Engstrom Auto Mirror Plant Problem Statement: Engstrom Auto Mirror Plant was considerable successful for approximately 50 years then after redesigning production lines with new technology they had long production delays that hurt their business. Ron Bent was hired as plant manager to attempt a turnaround in production and bring profitability back up. Bent needs to ensure workers are receptive to new technology. Hypothesis 1: Plant manager before Bent could not adapt to use of new technology. Ron Bent believed in incentive programs; he implemented the Scanlon Plan. The Scanlon Plan worked over a seven year period with sales quadrupling due to the increase in productivity and employee morale. Then a downturn in the industry made it necessary to lay off 46 employees and Scanlon bonus was placed on hold for seven months while Bent decided to change or replace it. Hypothesis 2: It may be that Bent did not consider the reactions of the workers if Scanlon Plan fails and he did not prepare an alternative plan. Bent should work closer with other managers to re-design Scanlon Plan or alternate plan. Including changing the ratio target to 44% as suggested by the Scanlon consultant back in December 1999. Similar to Beverly Stevens of Quick-Cook Ovens, Bent did not consider workers performance or lack of performance and corrective actions until productivity regressed. (Stewart, 1985, pg. 2). Now he is concerned with losing his best client Martinez whom designated......

Words: 580 - Pages: 3

Premium Essay

Engstrom Auto Mirror Plant

...Indian professor named Harvard B-school Dean WASHINGTON: An India-born professor and IIT alumnus who has long championed a pledge for organizational leaders and managers on the lines of the Hippocratic Oath for doctors to enhance accountability in the corporate world has been named Dean of the prestigious Harvard Business School. Nitin Nohria, who is currently the Richard P. Chapman Professor of Business Administration at Harvard Business School (HBS), will become the School's 10th dean, Harvard President Drew Faust announced on Tuesday. Nohria is the first Indian, and indeed the first non-white, to become the dean of the 102-year old institution that typically ranks among the top three business-schools in the world. Nohria, who will take up his new role on July 1, succeeds Jay Light, who in December announced his plans to retire at the end of the 2009-10 academic year after five years as dean. "At a pivotal moment for Harvard Business School and for business education more generally, I'm delighted that Nitin Nohria has agreed to lead HBS forward," Faust said in his announcement. "He's an outstanding scholar, teacher, and mentor, with a global outlook and an instinct for collaboration across traditional boundaries... he's a person who not only studies leadership but embodies the qualities of a leader." While Nohria's current academic interests include the theory and practice of leadership, the analysis of management practices critical to corporate success...

Words: 788 - Pages: 4

Premium Essay

Engstrom Auto Mirror Plant and Work Analysis Case Study

...University Final Project Submission Engstrom Auto Mirror Plant and Work Analysis Case Study Abstract During May 2007, the Engstrom Auto Mirror Plant faces a low employee morale issue. The newly appointed manager, Ron Bent, sees a decline in work place productivity and culture throughout his recent years of working at the plant. When Bent joined the company, it was facing a similar issue of low morale. He then decided to introduce the Scalon Plan, an incentive program for the employees, to raise morale. The program was successful when it was first introduced but ran into problems time after. Bent was faced with many challenges with the Scalon Plan that caused him to ask many questions. 1. Should he remove the Scalon Plan and try another? 2. What is the root cause of employee morale declining? 3. Should there be revisions to the Scalon Plan and who oversees it? In order to answer these questions, it is suggested that Ron Bent and the other management team work together with employees to identify the root cause to their issue of low morale and work productivity and come with a possible solution to fix the issue. Introduction Engstrom Auto Mirror Plant is a privately owned business that manufactures mirrors for trucks and automobiles in Richmond, Indiana. The mirror manufacturing plant employed over 209 people. Engstrom Auto Mirror has operated since 1948 and has seen many years of success. In the late 1990’s, the plant started to see a drop in......

Words: 3084 - Pages: 13

Premium Essay


...COLLINS Engstrom Auto Mirror Plant: Motivating in Good Times and Bad There had been several rough quarters at the Engstrom Auto Mirror plant in Richmond, Indiana, a privately owned business that manufactured mirrors for trucks and automobiles and employed 209 people. For more than a year, plant manager Ron Bent and his assistant, Joe Haley, had focused their Friday meetings on the troubling numbers, but the tenor of their May 14, 2007, meeting was different. Both men sensed that they now faced a crisis at the plant. Bent was talking animatedly to Haley: “This is the third productivity problem in, what, two weeks? We can’t climb out of this downturn with performance like that.” He scowled as he signed the authorization to air-freight a large order to the Toyota plant where Sam Martinez managed the assembly line. The difference in cost was astronomical, and it had been necessitated by the slow pace of productivity at Engstrom, which meant in this case that a job due for completion on Monday wasn’t completed until Thursday. But Bent couldn’t afford to make a late delivery to Martinez; he was a prized but demanding customer who had designated Engstrom as a certified supplier one year earlier. Only one other supplier for Martinez’s plant had achieved certified supplier status—a recognition of both extraordinary reliability and quality. The worry lines on Bent’s face deepened. Certified status meant that Martinez had personally authorized Engstrom products to be used on the......

Words: 4479 - Pages: 18

Free Essay

Engstrom Auto Plant

...Engstrom Auto Plant Engstrom Auto Mirror plant has had faced crisis in 2007 which was downturn with performance. In addition, Bent signed authorization with another company a large order. But the problem in cost was a massive, that led to delayed of productivity at the plant. So Bent suggested Although, a Scanlon plan had been good over a seven-year period and sales had fourfold, downturn hit the industry. Because, the plan had outlived it’s usefulness. The employees had become accustomed to the plant’s substantial bonuses stopped, so the workers responded with anger. Engstrom Auto Mirror plant had faced difficulties by the late 1990s. the management at that time was training to used technology to improved it’s production line. But the plant manager lacked the knowledge with technology necessary to find solution quickly and was unsuitable at working. On anther hand, Scanlon plan had outlived it’s usefulness because the employees had become accustomed the plan’s substantial bonuses. Therefore, Engstrom Auto Mirror plant was too small which makes it easier to accommodate the complexity of multiple plans. Money is important motivation to help workers to improve plant’s p products. But if plan don’t development the the workers might be don’t care about the quality and deliver products on time. According to Bent 2006 if the plan outlived its usefulness, the workers had become feel Engstrom Auto Mirror had redesigned it’s......

Words: 290 - Pages: 2

Free Essay

Engstrom Plant

...Problem Statement The Engstrom Auto Mirror plant is a small privately owned business that supplies mirrors for trucks and cars. The plant had suffered several years of downturn before Robert Benton introduced the Scalon plan. The Scalon plan, an employee incentive program, was created to boost employee morale, increase productivity, produce quality inventory and lead the plant to a turn around. Now, the plant manager, Robert Benton, must figure out how to get the plant back on track in order to stop the plant from experiencing another year of downturn. Hypothesis 1: It may be that the organization has not met the employee’s expectations When an employee enters an organization they have certain expectations. According to the article, ‘Note on managing a psychological contract,’ it states, “A psychological contract is made, which may defined as the mutual expectations of the individual and the organization as articulated by its managers.” Employees and organizations expect to receive certain things in exchange for participation. Employees at the Engstrom plant expected to get their bonuses while Robert Benton, the plant manager, expected an increase in productivity and the quality of the plants inventory. When one side of the contract is being met, this can effect the relationship and the fulfillment of their needs. However, the Engstrom Auto Mirror plant was not meeting their end of the contract. The employees of the plant were no longer seeing the benefits of the bonus...

Words: 634 - Pages: 3

Premium Essay

Human Behavior

...Final Project Milestone 1: Introduction Organizational Issues at the Engstrom Auto Mirror Plant October 11, 2015 Final Project Milestone 1: Introduction, Organizational Issues at the Engstrom Auto Mirror Plant My review of the Engstrom Auto Mirror Plant: Motivating in Good Times and Bad case study allows me to identify certain organizational issues within the company. There is an older incentive (Scanlon) plan put in place which worked very well for this company and its employees, helping them to rise up from an unproductive state in the 1990’s. Now that it has been in place for quite some time, it is getting stale. No bonuses have been given in months. The employees are not satisfied with the management of the company and overall efficiencies have decreased. There is a lack of leadership including social and emotional intelligence and this is now leading to very low employee morale. The management doesn’t seem to be motivating their staff. Also the employee suggestions which worked well in the past have now been declining. The suggestion rates from employees have dropped to just 50 a year, showing that employees no longer feel like they are contributing successfully to the plant (Collins and Beer, 2008, p. 5). It seems that there has been no management feedback, which is crucial for employees to realize their potential and become more motivated. Thus, the employees are no longer taking an active interest in the company. My suggestions for......

Words: 629 - Pages: 3

Premium Essay

Case Study

...Case Study Engstrom Auto Mirror Plant: Motivating in Good Times and Bad Engstrom Auto Mirror Plant, in Richmond, Indiana, a privately owned company that has been in existence since 1948. Engstrom was largely successful until the late 1990’s at which time the plant struggled to make a profit. During this period the plant was updating its production lines by adding new technology. This change did not go smoothly which caused delays in production resulting in a loss of customers. The plant manager did not have the knowledge of the new technology to find solutions to the decreased production and could not communicated effectively with the worker’s union. This lead to his eventual resignation in 1998. At this time Ron Bent was hired. Bent determined that the average productivity at 40% of expectation. Bent believed in the power of worker incentive programs and felt that the best option would be a company-wide program. Bent felt that a Scanlon Plan would be the best option. The Scanlon Plan was developed by Joseph Scanlon with the concept that employees, the employer and the union have much in common and that every employee can contribute to making improvements. These improvements would help the company’s position in the marketplace and provide increased job security and provide bonus earnings to employees for any improvements. (Hess 1976, pg.141). Bent communicated the Scanlon concept in multiple ways to the employees and engaged them in the process to develop the Scanlon Plan......

Words: 597 - Pages: 3

Premium Essay

Solutions Development

...Engstrom Auto Mirror Plant: Motivating in Good Times and Bad Milestone 3: Solutions Development Solution The Scanlon Plan can be used as a major catalyst to turnaround the plant by emphasizing more on productivity. The more they work the faster they roll towards their bonuses; this magical spell is a win-win situation for both the employees and the management. The management can cruise steadily over the wave of bonus motivated productivity and the employees can reap the benefits from the high production rate in terms of bonuses. The plan can be redrawn and a slight change can be made by making the entire plan revolve around the concept of productivity. When productivity assumes a prime position in the plan, employees will strive hard to reach the productivity goals set in the plan, as a result the bottom line of the plant improves and sales will expand (Newstrom, 2015). The management should be vigilant in doling out the bonuses as a monthly bonus will again lead to the repetitions of the same problem during turbulent times, instead setting up of checkpoints or target ratios will help the plant. The target ratio should be set up in such a way that when the payroll touches a certain level bonuses can be distributed, thus reducing the liability of the management in terms of bonuses. This will make the design of the plan all the more simpler and understandable by the employees. Further the plan can be made interactive by having an active participation from the employees in...

Words: 1095 - Pages: 5

Free Essay


...with a privately owned company, Engstrom Auto Mirror Plant, which manufactures mirror for automobiles and trucks. The company was managed by Ron Bent and his assistant John Hayley. Engstrom quickly became a certified supplier for Toyota under Bent’s management. Brent brought a system to Engstrom he had been part of at his former job. He modeled that system once he came to Engstrom, that model put in place was known as the Scanlon Plan, a company-wide employee incentive program, proved critical in building morale, such as reinforce teamwork and cooperation across work groups while they focus attention on cost savings and motivating employees to “work smarter, not harder” as well as increasing productivity and quality leading Engstrom in a major turnaround success. Bent had begun managing at Engstrom during a decreasing time for the plant. His purpose of working at the plant was to increase productivity and to make a turnaround in sales. The decision to use the Scanlon Plan would be implemented only if a substantial majority of workers agreed to want to use it. The plant had a long stretch of a number of years where the plant showed improvement. The workers responded well to the system that was put in place and productivity and sales had increased. For several subsequent years Engstrom workers received regular pay bonuses. Situations occur with any company, majority of the time there is a stretch when the business has a slow period. For Engstrom, it was a longer stretch then......

Words: 482 - Pages: 2

Premium Essay

Engstrom Auto Case Study Into

...Introduction Engstrom Auto Mirror plant is a privately owned business that manufactures mirrors for trucks and automobiles in Richmond Indiana. In May of 2007 the managers were experiencing a crisis at the plant. The most pressing issue at the time was the slow pace of productivity. Low productivity was increasing costs in other areas. Not only was Engstrom having productivity issues but they were having product-quality and moral problems as well. In order to explain the source of these problems we must analyze Engstrom’s history. A company’s past can greatly affect the present and future state of an organization (Schweitzer, S). Engstrom had enjoyed considerable success since it’s founding in 1948. However by the late 1990’s the company stopped being profitable during a period of transition to new technologies. Ultimately this resulted in the replacement of the plant manager with a younger more tech savvy individual. At this time employee moral was extremely low and productivity was at 40% of expectations. After studying the positive results of nearby plants the new management built the support needed to implement a Scanlon Plan at the Engstrom plant. The Scanlon Plan is an incentive plan that pays bonuses to employees. A key component of the plan is the concept of participative management. The idea behind this being that individuals will work harder to achieve an organization’s goals if they have the opportunity to take responsibility for their actions and apply......

Words: 564 - Pages: 3

Premium Essay

Ron Productivity

...2 STATEMENT OF THE PROBLEM Ron Bent, the plant manager, is ultimately responsible for solving the problem of declining employee motivation at Engstrom Auto Mirror Plant. Over the past two years, productivity, employee morale, quality of work, and sales have all declined. These are the results of the larger issues of employee motivation and communication within an organization. Things like productivity, quality of work, and sales are relatively short-term problems. Up until two years ago, they had been at exceptional levels ever since the implementation of an employee incentive program known as the Scanlon Plan in 1999. The plan was extremely effective in turning around the productivity and attitudes of many employees, as is evident by the employee feedback that management received. The case study presented by Beer and Collins offers workers’ praise for the new program such as, “I’m getting rewarded for thinking, not just for performing the same tasks every day”(Lutz, p.5) and, “People see themselves as a more cooperative workforce— Engstrom is now a better place to work than it was before we brought in Scanlon”(Andrews, p.5). Employee morale and motivation is a long-term problem for many organizations and that includes Engstrom. Before the Scanlon Plan was introduced, productivity was poor and tensions were high. In hindsight, Engstrom learned that its employees didn’t feel valued by management because they were not involved in changes that had large impacts......

Words: 399 - Pages: 2

Premium Essay

Engstrom Mirror Plant

...Milestone 2 Engstrom Auto Mirror Plant: Root Cause Case Study Analysis Sharon McClain SNHU The Engstrom Auto Mirror plant is located in Richmond, Indiana and employs around 200 or more people. The plant has been going through some changes over the last few years and has seen a decline in employee motivation. The focus today will be to determine some of the root causes of the problems facing the plant from an organizational view and a human behavior issue. The bottom line is determining how to solve the issues the company is facing and move forward. Some of the questions that will need to be answered is, “why is motivation at an all-time low, is the Scanlon plan benefiting everyone in the company and can the plan be revamped with the employees input?” From the beginning of the Scanlon plan, the employees were happy when production was good and they were receiving the bonuses. When the profits and sales decreased, so did the bonuses which led to disgruntled employees. It seems the employees were agreeable with the plan at the beginning even though they did not fully understand the concept of how the bonuses were calculated. So is it the Scanlon plan the root cause or the employees? As explained earlier, the Scanlon plan was put into place in 1999. It worked for many years then the company started facing issues with productions, profits, bonuses and employees. To answer the questions of the root cause, it is all stakeholders. First, in order to receive a......

Words: 1373 - Pages: 6

Premium Essay

Useful Paper

...Engstrom Auto Mirror Plant Case Motivating in Good Times and Bad Prepared by: Lily Yuan, Vicky Pan, James Xu, Kate Li, Issakson Wang, Ariel Cao, Vivian Fu 9 November 2013 Contents   Introduction to Engstrom   Scanlon Plan   Scanlon Adoption Plan at Engstrom   Problems and Solutions? 2 Introduction to Engstrom (I)   A privately owned business manufacturing mirrors for trucks and automobiles   Located in Richmond, Indiana   209 employees   Use Scanlon Plan as an incentive for staff 3 Introduction to Engstrom (II) Creation 1948 late 1990s Troubles:unprofitability,production delays Ron Bent hired 1998 Dec.1999 Scanlon plan is voted by 81% workers Downturn in industry 2005 46 employees lay off June 2006 Need a new solution! May 2007 Economical Context 1948 1990s 1999 2005 2007 Contents   Introduction to Engstrom   Scanlon Plan   Scanlon Adoption Plan at Engstrom   Problems and Solutions? 5 Scanlon Plan   Developed in 1930s by Joseph Scanlon, a cost accountant by training and a steelworkers’ union official at a steel mill facing bankruptcy.   The heart of the plan is the concept of participative management.   The three plan components: •  the submission of suggestions for improvement by employees at all levels •  the structure of the company committees that evaluate the suggestions •  then the sharing of the fruits of increased productivity through monthly bonuses Ideally work together to drive big changes in behavior and......

Words: 1200 - Pages: 5

Free Essay

Case Study on Engstrom

...Discussion: 14746 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 individual payment. The Scanlon plan was successful as long as the company as a whole was successful, because each employee’s bonus was entirely dependent on the company’s fertility. In the current situation, in the midst of this far-reaching industrial downturn, it is becoming much more difficult as a means of incentive. For a long time it worked well for Engstrom which, due to its small, private nature, allowed for a communal attitude throughout the company. Alternatives: It is clear that the Scanlon program, as it...

Words: 636 - Pages: 3