Financial And Ethical Issues At Engstrom Auto Plant

Ever since the economic downturn hit Engstrom Auto Plant in 2005, the Plant had since faced many employee, productivity, and bonus payment issues. These issues have led the company to its worst financial and ethical situations since its inception in 1948.The major problem that caused the business downturn is the increasing lack of employee motivation and trust of management. Employee morale has fallen drastically and it is seen as the lowest it has ever been and it is because of bonuses that has not been paid to employees for the past seven months. Employees have been used to receiving regular bonuses as part of their pay so they began to expect the bonus money on their paychecks instead of continuing to see the money as a bonus based on their

When the Scanlon plan was implemented in 1999, “the plan led quickly to an increase in productivity” (Engstrom, 2008). Employees began to feel that they were part of a team and had a purpose at work. Weekly meetings have been held within the company and employees felt that they now had a voice. One employee reported that after the implementation of the Scanlon plan, “People see themselves as a more cooperative workforce” (Engstrom, 2008). Nevertheless, as Scanlon bonuses became the custom instead of a true bonus as it was proposed, employee trust of the bonus calculations and fairness of bonus money being distributed, led employees back to where they were before the plan was implemented and employee “work ethic” (Newstrom, 2015) began to decrease. Instead of looking at a revitalization of the Scanlon plan earlier on, management appeared unconcerned to the escalating problems at the plant even though it was known that employee morale is at an all-time low and complaints are persistent. Joe Haley, the assistant plant manager, states that, “we both know employees have been complaining for months...” (Engstrom, 2008) and even the plan manager realized that employees became

Management is not meeting the psychological needs of the employees and breaking what Newstrom refers to as the “unwritten psychological contract” (Newstrom, 2015) employees’ sign when they become part of a company. With this part of the contract being broken, employees’ productivity decreases and therefore the economic contract becomes broken as well. As time goes on, this deepens the root cause of all issues at