Engstrom Auto Mirror Case Study

1077 Words5 Pages
Engstrom Auto Mirror, a successful privately owned plant since 1948 in Richmond, Indiana, reached one of their biggest productivity setbacks in May 2007. In their near 60 years of business this was the company’s second cross with unprofitability since the 90’s, when technology was surfacing and causing tension between the company and their customers. The manager at the time was unable to adjust, deciding to resign in 1998. Nearing the end of the 90’s, Ron Bent was hired as plant manager. Leading into the new millennium, his plan was to implement an employee incentive plan to increase productivity with the employees using bonuses to allow their business to continue to thrive. That was the introduction of The Scanlon Plan, it reinforced…show more content…
At that moment, it was apparent to them that a loss in revenue occurred due to mishaps within the business. A multitude of behavioral matters coincided, causing a dysfunctional effect. A Dysfunctional Effect is when a change causes a negative event, such as a lapse in productivity. (Newstrom 2015). The employee’s motivation waned and the production of merchandise had severely diminished. The plant’s status as a certified supplier appointed to them by Toyota’s assembly line plant manager, was at risk (Beer 2008). The Scanlon Plan was brought into place in 1998 because of the initial inadequacy in employee drive. The Scanlon incentive increased the productivity of the workers for nearly 5 years, but motivation with capital cannot be sustained without a strong foundation of work determination. Workers were being given a dividend just to do what they were originally hired to do. The reward to influence the employees to work was greater than the actual act of communicating necessary responsibilities for the workers without an incentive. Bent trusted too heavily on the Scanlon plan to repair the work ethic rather than reiterating the psychological and economic contract. The psychological contract is the unofficial agreement between employee and employer which “defines the conditions of each employee’s psychological involvement- both contributions and expectations.”. (Newstrom 2015). The
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