Root Cause Analysis: Enstrom Auto Mirror Plant Milestone

Organizational Issues

Engstrom Auto Mirror is currently facing a major organizational issue within the company. It has been identified that all of the current expenses are more than the actual profits that the company is receiving. All of this is affecting the company’s ability to pay the employees any bonuses that they used to receive. The program known as “The Scanlon Plan” was quite effective for Engstrom Auto Mirror Plant at the beginning. The motivation and increase in employee productivity all worked perfectly, but recently it has not been quite so effective and has started to fail.

Employee participation and motivation has dropped dramatically due to the fact that there is no longer any employee trust in the program or the company for which they are employed with. In addition, low employee morale has occurred thus there is a decrease in both production quantity and quality.

Communication with the employees has been identified as the major organizational issue for Engstrom Auto Mirror Plant.

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Communication is the main ingredient between a company and its employees on every relationship aspect of working and growing together. The success of any plan that is implemented by a company relies on an effective communication strategy to be in place. A good program had no effect if a poor method of communication is being utilized (Tourish & Hargie, 2004).

Root Causes

By analyzing this from a human behavior perspective, the root causes of decreased productivity, decline in employee motivation, and the evident dissatisfaction displayed by the

employees is a direct result from the ineffectiveness of the company’s Scanlon Plan.

As we further analyze the circumstances that caused the issues there should be pointed out as follows:

Low Morale of Employees

Employee morale began to take effect as the Scanlon Plan started to fail. The motivation for the employees to perform at the optimal level began to decline when they were no longer receiving bonuses for their extra output and efforts. When all bonuses ceased, the employees responded with anger and suspicion as if something that rightfully belonged to them had been taken away (Collins, Beer, 2008).

When the Scanlon Plan was being implemented, employees were not informed or consulted to by management on their input and views for the program. Distrust was then met by management from employees and the plan was deemed as being unfair. The calculations of the Scanlon Plan proved to be too complex which added even more distrust from the employees with each passing month that came and passed without any type of a bonus payout. This was against the expectancy theory that “performances will result in receiving the reward” (Newstrom, 2015). Due to this, an employee with low morale will likely lack in production deadlines and thus delays will occur all due to lack of motivation.

The Scanlon Plan

Upon the introduction of the Scanlon Plan into Engstrom Auto Mirror Plant, the company was achieving higher profits, recognized growth, and their standards of quality were consistent (Beer, et al, p5). The company did not make adjustments around the Scanlon Plan and failed to make the necessary adjustments to the plan before it was too late. Since the factors that originally motivated the employees were no longer evident, all motivation for the employees to perform as a higher level were no longer recognized (Newstrom ,2015). Ron Bent ,the plant manager ,was over committed to the plan but did not quite pay attention to the two -factor Herzberg model which led him to prolonging the effects of a plan that was no longer being effective for the employees. The Scanlon plan was quite effective for the short term because when it was first introduced the employees were happy and they felt a sense of satisfaction because the views and ideas were always listened to and taken into consideration and thus company morale was high. In the long term this was not the case any longer. The employees felt as though they were an important element of the company and their sense of involvement was increased but management was unable to make changes to the plan whenever any concerns with the regular employees was discussed in addition to being unable to adapt to the changing market. One of the main elements of the Scanlon Plan is the “productivity norm “which is based on the company’s performance .Due to the fact that the Scanlon Plan was implemented in a huge growth year for the company ,the average productivity norm base was higher .One of the criteria for determining the base norm is that the year that is being evaluated must be recent and with regard to performance and profits, the year must be an average year for the company (Geare,1976).

Low Productivity

Looking at this from an extrinsic point of view, Engstrom Auto Mirror Plant was focusing all their efforts on increasing employee productivity. Engstrom is now having trouble in meeting the deadlines on production and the increased costs of airfreight shipping for its customer’s orders the company is unable to recoup expenses even with the funds that are coming in for the present orders due to these increased costs. All of this contributes to why the employees are no longer being paid any type of bonus structure .The employees started to become more disillusioned due to all of their efforts going unnoticed and that productivity was no longer a factoring element on the bonuses that they were used to receiving .Stealing was becoming suspect within the ranks of the company as the employees were becoming more dissatisfied with the failed Scanlon plan that management had put in a place

Impact

The resulting impact of the organizational issues that are occurring with Engstrom Auto Mirror Plant is stemming from the low morale of the employees which has decreased productivity in the plant. All these issues closely lead to the layoffs and decreased sales which could eventually lead to the company closing its doors. Company management must open clear lines of communication with the employees and make them feel valued once again as this can be a beginning to the repair process. The Scanlon Plan at the Enstrom Auto Mirror Plant has been more based on maintenance or hygiene than that of motivation as this is what the Helzberg’s claims apply and was not recognized by the plant manager. By not realizing this, the resulting impact over time became negative, Plant management was obvious to the motivating factors and hygiene. In doing this, management focused more on improving on the Scanlon Plan than that of motivating the employees based on the factors that are legitimate such as recognition, advancement, achievement, growth, and responsibility. “A Scanlon program want perpetuate itself. You have to give it a shot in the arm every so often whenever the workforce may need it” (Collins, Beer 2008). This was quoted by the plant manager, Ron Bent. The plant manager clearly did not understand how the program worked and that it should have been replaced with a program that was more focused on actual motivating factors than a program that was just limited to inspire motivation amongst employees.