Milestone Three: Solutions Development
Engstrom Auto Mirror Plant uses the company-wide Scanlon Bonus Plan. By conducting a Root Cause Analysis of the issues within the company, it is clear that Engstrom was suffering due to failure of the Scanlon Plan. Eventually, bonuses stopped coming and a lack of trust between employees and management began to form (Beer, 2008, p. 2175), which not only caused a decrease in motivation and productivity, but the company-wide work culture was threatened. Organizational improvements and strategic actions can be made in order to get Engstrom back on track.
Solutions Development: Organizational Improvement
An effective leader should be able to inspire, motivate, and support people in their endeavors to achieve a goal. They should be able to motivate their employees to willingly participate in goal achievement (Newstrom, 2015, p. 179). The management team at Engstrom Auto Mirror Plant lacks some major effective leadership qualities, which indirectly lead to the failure of the Scanlon plan. The management team at the plant should undergo leadership training courses before implementing any type of improvements to their current compensation plan. The leaders at the plant need to learn how to become participative (or supportive) leaders rather than consultative leaders. The significant difference is that participative leaders decentralize authority by allowing employees to give their input and act with their subordinates as one social unit. These leaders inform their employees about any conditions that may have an impact on their job, while encouraging employees to express any ideas that they might have that would help improve productivity and work conditions (Newstrom, 2015, p. 187). While under the Scanlon plan the management team at Engstrom did encourage and accept employee suggestions, but eventually the staff stopped leaving suggestions because they were not put into action (Beer, 2008, p. 2175). Due to other circumstances at the plant that will later be discussed, employees stopped giving management suggestions.
The failure of the Scanlon Bonus Plan is a major issue caused by the management team failing to be effective leaders. In short, the Scanlon Bonus Plan rewarded employees with monthly bonuses, calculated as the ratio of total payroll costs plus vacation and holiday accruals to the sales value of production (Beer, 2008, p. 2175). Employees received their bonuses in their regular paycheck, which eventually resulted in employees relying on said bonuses as their normal pay (Beer, 2008, p. 2175). While Engstrom could amend the current plan, I recommend that an entirely new plan be created. A new bonus plan would be most beneficial to the company because the employees have made it clear that they do not trust the current Scanlon plan, therefore any modifications made would probably not be trusted.
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