Case Study – Engstrom Auto Mirror Plant

Introduction

Organizational issues that are a product of human behavior can result in profound negative impacts on an organization. The case of Engstrom Auto Mirror Plant presents a typical scenario in which human conduct almost runs a business to financial ruin. The company in this case is located in Richmond, Indiana and has employee base of 209 workers (Beer & Collins, 2008). The manager, Ron Bent, and his aide, Joe Haley, are struggling with the rapidly declining employee morale at the firm in response to rampant job terminations and the discontinuation of the Scanlon Bonus Plan. The situation progresses rapidly and culminates in decreased employee confidence, productivity, and profitability, which put the company on the brink of a total shutdown. The analysis of this case study provides vital information on how best to handle morale issues in an organization.[cmppp_restricted]

Organizational Issues

The management of Engstrom Auto Mirror Plant needs to address various pertinent issues if it is to salvage the situation and retain its workforce. The falling morale levels amongst the employees are a result of the failure by the management to take employees’ suggestions seriously, the termination of the bonus scheme, and failure to integrate employees into the firm’s core operations. The management seems to have placed excessive importance on extrinsic issues, such as the Scanlon Bonus Plan as a part of a greater employees’ rewards scheme in an effort to motivate the employees but failed to cultivate the workers’ acuity concerning organizational justice. According to Weinstein (2014), managers ought to nurture perceptions of justice so as to create and maintain positive identities, guarantee compliance, and ensure fairness.

Secondly, there was a clear divide between the management and the approaches employed to boost employees’ motivation, performance, and productivity. Bent and Haley intended to increase motivation by introducing and coercing workers to buy into the Scanlon system. The end goal was to increase productivity, reduce quality issues, and save costs based on a production per labor hour ratio (Beer & Collins, 2008). However, perceptions of unfairness in the bonus scheme came up as employees noticed inequities in distributive and procedural justice. Equity theory postulates that organizational inequity results from individuals’ comparison of their contributions and rewards relative to those other members of an organization. Accordingly, people who perceive a mismatch between their ratio of inputs and outputs may develop feelings of guilt or anger and frustration (Gerhart & Fang, 2015). In the case of Engstrom Auto Mirror Plant, the workers felt as though their contribution was not being adequately compensated.  This resulted in hostility towards the firm and reduced morale and productivity.

This case presents justification for the relationship between employees’ trust in their employers, morale, and productivity. Maslow’s hierarchy of needs connotes that workers who are unsure of their future prospects at their current places of work and are uncomfortable with their employers lack the primary needs of belonging and security necessary for the proper and efficient functioning of a workplace (Deci & Ryan, 2014). Accordingly, the management ought to have followed the assertions of the leader-member exchange theory by avoiding the development of out-groups. Such employees lack fundamental employee-employer trust and have no access to career advancement opportunities (Gerhart & Fang, 2017).

Moreover, rather than implement a bonus scheme arbitrarily, the management should have aimed at supplementing it with regular and efficient performance feedback loops. There ought to have been ways for employees to provide feedback, which then ought to have been considered and implemented. The lack of clear communication channels is one of the reasons behind the breakdown of the Scanlon scheme and the calculation of bonuses. The resultant lack of trust created a psychological distance between employees and the employer.

References

Beer, M., & Collins, E. (2008). Engstrom auto mirror plant: Motivating in good times and bad. Havard Business School. 1-8.

Deci, E. L., & Ryan, R. M. (2014). The importance of universal psychological needs for understanding motivation in the workplace. The Oxford handbook of work engagement, motivation, and self-determination theory, 13-32.

Gerhart, B., & Fang, M. (2015). Pay, intrinsic motivation, extrinsic motivation, performance, and creativity in the workplace: Revisiting long-held beliefs. Annu. Rev. Organ. Psychol. Organ. Behav., 2(1), 489-521.

Weinstein, N. (2014). Human motivation and interpersonal relationships: Theory, research, and applications. Dordrecht New York: Springer.[/cmppp_restricted]