Engstrom Auto Mirror Plant: Motivating in Good Times and Bad
There had been several rough quarters at the Engstrom Auto Mirror plant in Richmond, Indiana, a privately owned business that manufactured mirrors for trucks and automobiles and employed 209 people. For more than a year, plant manager Ron Bent and his assistant, Joe Haley, had focused their Friday meetings on the troubling numbers, but the tenor of their May 14, 2007, meeting was different. Both men sensed that they now faced a crisis at the plant. Bent was talking animatedly to Haley: “This is the third productivity problem in, what, two weeks? We can’t climb out of this downturn with performance like that.” He scowled as he signed the authorization to air-freight a large order to the Toyota plant where Sam Martinez managed the assembly line. The difference in cost was astronomical, and it had been necessitated by the slow pace of productivity at Engstrom, which meant in this case that a job due for completion on Monday wasn’t completed until Thursday. But Bent couldn’t afford to make a late delivery to Martinez; he was a prized but demanding customer who had designated Engstrom as a certified supplier one year earlier. Only one other supplier for Martinez’s plant had achieved certified supplier status—a recognition of both extraordinary reliability and quality. The worry lines on Bent’s face deepened. Certified status meant that Martinez had personally authorized Engstrom products to be used on the auto lines without a quality inspection. Along with productivity problems, product-quality issues had also been creeping into the work done at Engstrom. Bent hoped that he was not paying to air-expedite defective mirrors to Martinez. Haley said, “Ron, we both know the employees have been complaining for months, but yesterday and today the talk has been pretty hostile. I’m not saying there’s a definite connection between nearly late delivery and the grumbling I heard, but you’ve got to wonder.” Bent knew that Haley, in just four months at the plant, had developed good relationships with several workers and could pick up useful information about the mood. Haley said, “They’ve had it with the Scanlon Plan. You hear the griping everywhere: ‘What’s the point of having a bonus plan if no bonus is paid for months?’ And it’s not just the people who’ve always been active in UAW ____________________________________________________________
HBS Professor Michael Beer and Elizabeth Collins prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. All names and key data in this case have been disguised.
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APRIL 11, 2008
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[United Auto Workers], although the union could start taking a more belligerent position at their next meeting.”
Understanding Scanlon Plans
The first Scanlon Plan was developed in the 1930s by...