Ron Bent, the manager of Engstrom Auto Mirror Plant in Richmond, Indiana, faced the failure of the Scanlon Plan he implemented to motivate employees nearly nine years ago. However, he had several options to resort to instead of the old incentive strategy. In fact, he could choose between the individual-based, group-based, and organization-wide plans. The latter motivates people to work as a team to achieve great results. The only weak point is that employees may group against the least efficient units.
To convince the workers to accept the plan, Bent used one of the basic persuaders, which was to make the person believe that he or she had been the source of the idea. One may divide several reasons for the plans failure. Primarily, the system was too difficult for ordinary workers to understand. The second issue was that from the employees perspective, managers did not work hard to receive orders and attract clients while the burden of responsibility had fallen on all the ordinary workers. Finally, in the beginning, workers were promised to receive 38% of the sales value of production though they were able to offer some improvements in the means of production to make items with the lower labor input. However, the ratio had been constantly declining; consequently, people did not receive the sum determined by the initial conditions and considered it the moving carrot instead of the normal benefit plan. To improve the situation, Bent should show the workers that he highly praised their efforts and used the weighted indexes to calculate the bonuses for the workers of the manual labor and the managers separately. Meanwhile, during the recession, he might increase the ratio to the initial conditions to restore the bonus payments.
The case study examines a challenge that the Engstrom Auto Mirror Plant in Richmond, Indiana faced. Primarily, the manager of the enterprise, Ron Bent, faced the decline in the rate of employee performance. It was not the first time the plant was suffering because of the low productivity as nine years ago, Bent was appointed to solve the similar issue. According to the adopted Scanlon Plan, the workers had to reduce the share of the payroll in the overall value of production to the maxim percentage of 38%. If they managed to do it, all employees were to receive the bonuses calculated as a ratio between the bonus balance and the participating payroll. Consequently, both productivity and social atmosphere at the plant had significantly improved. However, when the automobile industry faced recessions, the plant started receiving less quantity of orders. The bonuses had not been paid for seven months, and Bent had to lay off 46 of 255 workers (Beer and Collins 2). Those events had negatively influenced the spirit of employees and made them work less efficiently. Moreover, the quantity of improvements offered by people had decreased from several hundred to nearly fifty per year. The Scanlon Plan stopped working properly, and Bent had to invent the new way to inspire labors to work harder.
The paper will consider the reasons that motivated Ron Bent to resort to the Scanlon Plan. Moreover, factors that resulted in the failure of the plan will be identified. On the basis of the thorough analysis, some important recommendations of the way Bent can motivate employees will be developed.
When choosing the motivation plan, Bent expected it to increase the intrinsic incentive of the employees. On the one hand, he did not want people to overwork though desired them to improve the production process. The Scanlon Plan was the best to realize the purpose as its motto sounded work smarter, not harder. The plan presupposed that people had to work more intensive because the amount of bonuses received by their colleagues depended on the overall performance. One may state that such approach is strongly related to the concept of homo economicus that acts selfishly to maximize its gains and contribute to the general welfare.
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Undoubtedly, Bent had to choose the most appropriate motivation plan from a number of options. The first group of probable actions was presented by the individual-based plans. According to them, the manager is to find the most talented and motivated employees to promote them. However, the first problem related to the individual-based motivation plans is that not all people will desire to compete. It may be explained either by the inherent reluctance to rivalry or by the understanding of the low chances to win by most of the representatives of the workforce. The second issue is the growth of contradictions between employees, which may negatively influence the atmosphere in the team, and the complexity to measure individual performance of every person. Moreover, as Bent stated, such a plan could gotten so out of line that workers would work up to 150% of their day rate (Beer and Collins 3).
On the other hand, group-based plans freed of the most of the negative characteristics inherent to the individual-based plans and inspire the division of the workforce within the plant. Furthermore, they can stimulate some units to produce more than the other groups can process. As a final point, the plant may face the structural imbalance and suffer either from the overproduction of some items or from the underutilization of the potential of the most efficient units.
In comparison to aforementioned plans, organization-wide incentive plans motivate employees of the plant either to work harder or to offer improvements for increasing the efficiency of every productive unit. The only conflict among workers may arise on the basis of the low productivity of the workforces representatives. On the other hand, such approach motivates units to increase their productivity in order to contribute to the common welfare.
In the very beginning of the implementation of the Scanlon Plan, managers decided that it would have been approved only in case the 75% majority of employees to support it (Beer and Collins 4). Undoubtedly, such approach allowed making workers feel responsibility for its future success. One should note that the managers did not force people to accept the Scanlon Plan but created favorable opportunities for them to get in touch with it and realize its advantages.
There were several reasons of the plans failure. The first was the complexity of the calculation system as employees even called it to be full of bean-counter jargon (Beer and Collins 5). When did not receive bonuses for seven months, people were not sure whether the plant had faced the decline of orders or it was a managerial trick aimed at reducing their wages. Bearing in mind that gossips are more likely to spread than facts, one may state that the system itself had created the background for the growing discontent.
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The second reason was the inadaptability of the plan to the systematic risk associated with market or industry (Nguyen). In fact, the decline of the plants efficiency was primarily caused by the market recession. However, Bent did not manage to explain it to the employees as well as could not adjust the system to oppose external threats.
Finally, the system was designed to motivate workers to reduce the ratio between the bonus balance and the participating payroll to 38% (Beer and Collins 4). However, Bent endeavored to motivate people to work harder instead of work less poor. Consequently, the ratio had decreased to 32.6%, and employees considered themselves deceived. They were told that the surplus of the production would be given to them; however, instead, the plant had been constantly increasing its efficiency and profitability. The effect of the moving carrot was among the main causes of the failure.
Bents approach to motivation system of the personnel was successful for a couple of years. Therefore, he should continue the Scanlon Plan, which is both efficient and familiar to the employees. However, he should adjust it to the new economic environment. Primarily, to start paying bonuses, Bent should increase the ratio to at least 38% as it used to be. In this case, workers will see the plan working again, and the manager will partially return his authority. Furthermore, during the crises, Bent should use the weighted indexes to calculate the share of bonuses for the workers of the manual labor and the white collars. Such approach will promote the distribution of incomes from the second group to the first and will ensure people that managers are protecting common interests more than personal welfare. Finally, Bent can introduce the temporary system of the individual-based motivation. However, to avoid problems with the unions, the prizes should be products or services rather than money. This approach will allow Bent to motivate people to work harder in order to receive the unique items. In addition, unlike money, these prizes will not cause negative tension among the workers.
When Bent implemented the Scanlon Plan, all employees became engaged in the process of receiving profits and were more likely to help each other. At that period, he refused to anticipate the individual- or group-based motivation plans because they were designed to inspire the intensive growth of the performance while Bent sought to increase the intensive performance of the workers. However, during the general recession, the plants turnover decreased, and employees started blaming managers of not receiving bonuses. To solve the issue, Bent can introduce the initial conditions of the adopted plan to allow workers receiving bonuses. Moreover, he can use the weighted indexes to calculate the bonuses for the workers and managers in order to promote the growth of incomes of the first group.