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Case Study Memo #1

From:
Discussion:
Re:

Tony Dong
14728
Case Memo #1 Motivation: Engstrom Auto Mirror Plant

Issues/Problem
In the late 1990s, Rob Bent, a newly higher plant manager, implemented a Scanlon plan in order to
combat the issue at the Engstrom Auto Mirror Plant. Theoretically, a Scanlon plan serves to raise
productivity, profitability, and worker morale by offering monetary incentives to workers depending on
how well the company is doing; creating a tangible extrinsic reward that ties the worker and the company
closer together. In addition, workers are encouraged to be creative and suggest ways to improve
productivity at the plant, giving the workers a sense of value and making them feel as if they have a
bigger say in what goes on within the company, targeting the intrinsic motivation of the workers. Scanlon
worked incredibly well in the beginning or when times were good, but as soon as times became tougher
and less money was able to be allocated for the budget, distrust of management and questions of fairness
of bonuses came into question. Scanlon performed well when organizational factors such as strong
leadership, openness of management to accept new ideas, and readiness to participate from the workers
were present.
Fast forwarding to 2007, the company is facing productivity issues again. The central issue causing this
lack of productivity comes down to a lack of worker motivation. In addition, the problem is perpetuated
by an economic downturn that has caused several rough quarters at the company that has directly led to
the freezing of bonus plans for several months as well as company-wide layoffs. After years of
consistently receiving monetary, extrinsic rewards during good years, the workers have gotten used to the
bonuses and have not been making as much of an effort to become more efficient, proven by the dramatic
fall in productivity suggestions.
Alternatives
The first alternative to solve this issue is to allocate money from other areas to pay the workers bonuses.
The workers have been conditioned to expect bonuses so by shifting back to the norm, the plant can
potentially get back on track. The second alternative is to provide better job security and promise no more
layoffs. It seems as if what really caused all the tension were the initial layoffs of workers so by providing
the safety of knowing that there will be no more layoffs, the workers could be more willing to stop
grumbling. Lastly, the third alternative would be to revamp the Scanlon plan by making the bonuses
separated by task force within the company. This way, there will be no more lump percentage throughout
the entire company, and separate groups will be more motivated to do better than average in order to get a
larger bonus.
Recommendation
I believe that the third alternative of revamping the Scanlon plan is the best of the three alternatives
because it is not only the easiest to be implemented, it also allows the workers to be motivated to work
harder again. In the other alternatives, there is too much risk in terms of finding money to borrow or
allocate to make the workers happy. The largest bonuses should be allocated to the most important parts
of the companies because by making those sections the most productive, the overall productivity of the
company will rise as well, leading to larger profits. That being said, the less important parts of the
company could potentially become even less motivated which could make the problem worse. I think
being open with the workers and communicating the big picture is crucial to making this alternative
successful. If all the workers understand that the bonuses, job security, and profit will come as a result of
increasing productivity, they will be much more willing to work harder for the company. The big picture
needs to be established and well communicated so the workers can have real goals to work towards.