Engstrom Auto Mirror plant, as a privately owned business, it manufactured mirrors for trucks and automobiles. The managers aimed to increase productivity for sustainable development of the company. Back in 1998, to pursue highly productivity, the plant was redesigning its production lines to incorporate new technology, however, the transition was not smooth, some problems had emerged, such as the staffs' moral and efficiency declining and the internal contradictions being intensified between the managers and employees. As the result of it, the previous manger resigned in 1998. After that, the new manager, Ron Bent believed in the power of worker incentive programs and wanted to establish one at Engstrom. Eventually, the plant adopted the Scanlon Plan as incentive program because a substantial majority of workers wanted it. Due to institute the plan, the plant was achieving growth, higher profits and consistent quality standards, the employees were also receiving good financial rewards. Over a seven-year period, business had been good in the company, However, a downturn hit the industry in 2005 because of the declining of the workforce's morale along with the sales figures. In 2006, Bent had been forced to lay off 46 of his 255 employees. The trust between the managers and employees was shaken and the main problems by the complaints of workers was distrust of bonus calculations and question of fairness between the supervisors and employees. In this situation, Bent thought to make changes urgently before conditions deteriorated further.
There are several factors that cause the issues in the Engstrom. Firstly, according to the equity theory, employees focus on the fairness of their work outcomes in proportion to their work inputs. In the Engstrom, some employees thought that supervisors did not working as hard as them, however, the supervisors got the bonus probably higher or equal to them. Therefore, employees complained about unfairness and the...
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