The Complex Structure Of Engstrom Auto Mirrors

Engstrom Auto Mirrors is a small, private company that manufactures automobile and truck mirrors. In 1998 the managers redesigned the plant operations by implementing new technologies, but the changes created some problems for the company. Low employee morale, productivity, and efficiency plagued the plant, which ultimately led to the resignation of the plant manager. Ron Bent, the new manager, believed that sustainable business growth was dependent on employee incentive plans. He eventually established the Scanlon bonus plan. The plan was consisted of three components: “the submission of suggestions for improvement by employees at all levels, the structure of the company committees that evaluate the suggestions, and then the sharing

The Scanlon plan was effective, but when the company did not pay bonuses timely and changed the ratio, employees lost motivation and trust in the plan. A critical element of the plan was the reserve which was supposed to cover bonuses if the company could not afford them. The employees were aware of this when they signed the Scanlon plan, so they felt cheated. This lack of motivation was further increased when employees saw that their output was not reflected in their bonuses. For instance, the complex structure of the Scanlon plan resulted in lower bonuses when performance increased. Another element of the Scanlon plan was to listen to suggestions of the employees. Employees complained and expressed their frustration often, but it never resulted in any

An employee may strive for the highest production levels by working fast and affecting quality of the products. Management might have to perform quality checks and employees could view this as a type of micromanagement. This option is not suitable for the long term. The second option may initially create frustration since it is a complete overhaul in the bonus pay structure. This plan may create more of a team environment since management and the labor workers will have to work together to reach goals. An additional component of this option could be to allow managers to receive their bonus if their direct reports receive theirs. This plan could survive long term due to its elastic nature. Goals can vary each month based on the industry and customer needs. Eliminating the Scanlon plan and paying all employees a salary is also a good option, but it will take time to put this plan into action. The time required may further diminish morale and production at the plant. The managers will need to hire a third party in order to determine what salaries would be standard for the industry. It is also important to consider the labor union’s involvement. If they feel that employees are not being paid adequate salaries, grievances may be filed or strikes may occur. This could result in an even colder climate at the