This case study deals 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 wanted. In 2005, sales declined and a year later, Bert was forced to lay off more than 20% of the workers. The productivity dropped, employees’ trust was low and the quality issues began to resurface. Relationships with key customers, like Toyota, were at risk. Though the Scanlon Plan had broken down and a threat of a lay off or a shutdown had become a consideration. The employees are no longer seen the benefits of the incentive plan that originally showed them potential to make more money. The employees started to lose trust in the system of bonuses, and the trust in management entirely. They are starting to observe a lack of fairness in payment, valuing qualification over tangible compensation. Ultimately, employees were beginning to be more individually minded as opposed to having a group mentally so they stopped taking interest in the company.
In this case study, I will touch on the organizational issues that occurred such as the culture of Engstrom, the management that had to make pivotal decisions for the success of the plant, the situation that resulted from the downturn of the company. I will also cover the problems identified, such as the incentive plan, (Scanlon Plan) that was established and to discuss the solution that evolved from the action plan that was put in place to make the structure of the company a success.