Engstrom Case Study

Bonuses of managers could be paid out in shares which they are obliged to keep for a certain time period, e.g. 5 years. That way the share price on the long term is of importance for the managers and the goal of the shareholders is aligned with the goal of the managers. However, the share price is dependent on much more factors than the performance of just one manager. There is a risk that managers would feel they have little to none influence on the share price and still make risk full decisions. Another possibility would be determining the bonus of a manager on their performance in the long run, e.g. 5 years. A combination of these two bonus

In order to appropriately recommend an incentive plan, one must first identify the main issues with operation at Howe 2 ski. Howe 2 Ski has experience increased competition resulting in a decreased market share. Smaller market share increases the negative impact a lack of productivity and customer dissatisfaction has on Howe 2 Ski’s profits. The decreased production of both the molders and Sales-Persons result in increased inventory and higher cost of production. Furthermore, Howe has attempted to establish an incentive pay program that has served to be ineffective and has fostered low morale within the organization.

Give contests to the workers between each other and give points to the workers for whatever good things they have done and also must deduct points when they do not do well suppose for example when a worker keep absenting themselves must deduct points for every absence so the staffs will turn up every day and they will be motivated to turn up for work for everyday and put in such a way that that the staff who earns the most points will get rewarded with the most bonus and that will motivate the staffs to do good

In May 2007, the Engstrom Auto Mirrors plant was facing the crisis. The business was doing badly and the sales had started to decline in 2005. Thus, there was a steep reduction in plant productivity and employee morale was all time low. The company used Scanlon Plan as an incentive for staff. The core element or foundation of the plan was concept of participative management, where management and staff together will decide the bonuses based on revenues for that year.

The employees would spill the food and be careless and also give out extra toppings to their friends. This would bring the percentage up and at the end of the month when manager would not receive the bonus they would realize the reason of not getting it. The manager set the benefit from 6 to 12 hours for the pizza, and salad. The employees got frustrated some still worked and some quitted. The manager hired new workers. For a time being, the manager started getting bonuses but, after a while the same issue raised because, the new workers were not happy of the policy as far as they got use to of the environment. Later, manager realize that the manager should spend more time in the franchise instead of leaving it on the workers and also the reward system has to be change because, employees were not satisfied with only the managers receive the bonus and the rest would not get

I would argue that the unlimited upside and downside of a manager’s bonus potential based on a single business unit’s performance causes great chaos because it may be driven by factors beyond one’s control and not necessarily as the result of “true” strong performance. Yes, the upside is great! In 2000, the Dermatology group stands to pocket 200+% of their target bonus due to a competitive exit. However, Dermatology’s favorable EVA was driven by unsustainable share gains, a fluke in the market.

Most of us like to be valued as an employee and a person. This plan did not allow the employees to feel this way. As the morale dropped, so did production and from there, the bonuses dwindled. Instead of looking at themselves for the lack of bonuses, they blamed management. Their lack of understanding on the rate changes did not help the process. According to Maslow’s Hierarchy, the employees’ needs were not met and frustration created tension, which created low to no production. The company faced major decisions and needed this situation to be resolved quickly. The managers faced a crisis and needed a solution before the plant was forced to close its doors and have to lay off the employees.

How do the managers motivate their employees to perform better? Well, there are two ways to do this: extrinsically and intrinsically. Extrinsic means that the employees are being motivated from the outside-in, and intrinsically means that they are motivated from the inside-out. If a firm is extrinsically motivating, the employees are being supervised or managed. They are given certain tasks that they are expected to complete, and everything is being monitored. The effect this has is

Engstrom should provide a space in which workforce can communicate by having managers listen to them and asking them questions. People generally know the right answers if they have the opportunity to produce them. For Engstrom creating teams and committees with members from each production department to management is important. A committee can help improve the line workers morale with ideas such as improvement for production, and meeting delivery deadlines. A committee of managers from each department within the plant who will work with plant line workers to make suggestions and improvements for employee morale and improvement. The teams formed should be from all functions and staffed with members whose talents match team tasks. Committees are

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

One of the valued but demanding customer, who had considered Engstrom as a certified supplier, was requesting a large order but Engstrom was unable to deliver on time due to the low productivity problem. The plant manager along with his assistant were already dealing with the troubling numbers when this happened. While the task was a tough bone and not easy to tackle, and there were a lot of factors needed to be taken in to consideration. The leadership started to analyze and break down the main causations other than the overall economic trend that dragged the company into the turmoil, as it turned out, it was the low, frustrated employee morale and diminished work satisfaction.

The manager’s retaliatory approach to lower the loss percentage was not a motivational factor for the employees at all when he changed the number of hours employees had to work to receive free food from 6 hours a day to 12 hours. Evidently the employees did not respect his authority as the change did not seem to have an effect on them nor did it give them any motivation to do better. These jobs where minimum pay jobs

The salary structure is inconsistent with people carrying out identical jobs having pay differences of up to £3,000 pa. This may cause friction within the team. Even when the company promotes an incentive bonus scheme for the production staff, the targets have not been met. And so the bonuses have never been paid. We do not know from the information given whether the targets are unrealistic or the workers do not see the scheme as being worthwhile. The production workers seem to be on a different path to the company’s.

Chuck is the plant manager for the aluminum siding product line. Just like Betty, he has no college education but has had fifteen prior years of management experience. So far, he has been managing the plant for four years. He is responsible of overseeing twenty people within the plant. He has appointed two of his most capable employees to maintain the equipment since the equipment manufacturer has gone out of business. The other eighteen employees have remained on the shop floor to carry out the manufacturing duties. One major problem within this plant is employee retention. The average employee works at the company for about three years and later seeks a similar job elsewhere that pays higher wages. Employees are stating that the working conditions are poor, there is a lack of pay incentives, and rumors have been spreading that the plant may be sold in order to improve the company’s financial standing. As a manager, Chuck is not aware of the issues that employees are bringing up to the COO. It is also stated that Chuck does not seem to interact with his employees. The only time he does so is when they have a problem. In addition, the production goals are not being met and while he keeps requesting new equipment the company keeps struggling financially.

Make moral judgement: To avoid these issues employees should collect information by investigating within other production factory, compare the salary status with them and raise the voice at top level management.