Engstrom: Resistance to Change

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1. There are a large number of problems at Engstrom. Worker morale is decreasing, and this is a combination of a few factors. The company instituted a Scanlon plan to drive productivity increases using cash bonuses. The employees have become accustomed to these bonuses, in part because the plan called for a reserve, which allowed Engstrom to pay out bonuses even when targets were not met. This created a disassociation between performance and reward. The employees now have a sense of entitlement. This manifests itself in reduced efforts to improve productivity, suspicion of management and in dissatisfaction when they do not receive their bonuses. There is also the question of fairness. The Scanlon targets related to both revenue and payroll. Therefore, management plays a role in the final results. In addition, external factors also play a role in the results. Productivity improvements alone are not solely responsible for improving the ratio. For example, a recent downturn in the industry has hurt sales, largely through no fault of the company or its workers. Because management has a role to play in the ratio, the workers rightfully want to see management's bonuses tied to the same performance metrics as their own. They do not want to see their bonuses cut for things that they did not do. These issues are significant. Productivity is slipping, and so is workmanship. The workers' sense of entitlement is at absurd levels, and management has fallen into complacency. The
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