Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad | 2175 HARVARD BUSINESS SCHOOL | BRIEFCASES 3

which in turn drive improvements in productivity, thereby ensuring the payment of bonuses. The culture in a Scanlon plant also typically becomes more change-friendly, as workers have the opportunity to make more money by changing the status quo for the better. While all Scanlon plans share these characteristics, the plans can be tailored to support an organization’s specific strategy. Plants like Engstrom were focused on cost savings, which means producing more per hour of labor spent. The bonus for everyone at Engstrom was therefore based on that ratio—production per labor hour. Organizations with different strategies base their Scanlon bonuses on different factors, but at Engstrom, pursuing higher productivity that drove labor savings was the linchpin. Exhibit 1 shows the basic financial and structural components of the plan at Engstrom. The Path to Plan Adoption at Engstrom Engstrom Auto Mirror, which had operated since 1948 and enjoyed considerable success for much of its lifetime, had become mired in unprofitability by the late 1990s. The plant at that time was redesigning its production lines to incorporate new technology. The transition was not smooth, and increasingly long production delays irritated and eventually alienated customers. The plant manager lacked the sophistication with technology necessary to find solutions quickly and was inept at working with an increasingly militant union (he claimed that the union was “laying in wait” for him to make mistakes and “wanted to hurt management financially on grievances”). Embittered and tired of conflict, the manager resigned in 1998. Ron Bent, a successful manager in his mid-40s, was hired away from a camshaft production plant to attempt a turnaround. Bent believed strongly in the power of worker incentive programs and wanted to establish one at Engstrom. Owing to his experience with...