Root Cause Case Study Analysis

Engstrom Auto Mirror Plant: Motivating in Good Times and Bad

Root Causes of Known Organizational Issues

From a human behavior perspective, there are root causes of known organizational issues that we should explore when analyzing the Engstrom plant. Some organizational issues the plant is facing are the decline of employee satisfaction and motivation, decrease of productivity and quality, and lack of trust in management. Poor communication from upper management can be seen as a root cause of the above mentioned organizational issues.

The Scanlon plan was introduced to Engstrom Auto Plant as an incentive plan to increase employee motivation to improve the plant’s performance. By rewarding the employees with monthly bonuses for exceeding their standard performance, the plan was a flawless mechanism to give everyone added satisfaction to their work life. Unfortunately, the plan would fail, and this failure would lead to mistrust in management and low productivity and quality of plant’s products. Additionally, many aspects that were successful after the implementation of the plan and contributed to a healthy work environment, such as employee satisfaction and motivation, were also deteriorating.

A root cause of the above mentioned organizational issues is poor communication. Open communication leads to employee satisfaction (Ganesh, 2016)In order for an organization to succeed, the proper employer-employee communication has to happen to keep employees satisfied with their workplace.Poor communication can also, in some cases, align with poor leadership. According to Newstrom, two traits of positive leadership are inclusion and intentionality. (2014, p.186) Inclusion is the act of increasing positive engagement and knowledge between the employer and the employee so as to make the employees feel they are valued. Intentionality is making the company’s purpose clear to employees. We can see that both of these features have direct negative consequences on the relationship between the employees and the employer at Engstrom.

When implementing an incentive system, it is critical that the organization has all information and details available to employees to make sure they understand what is expected of them to receive these bonuses. Management failed to be transparent about the plan’s bonuses, and because the calculations were too difficult for the employees to understand clearly, questions and suspicion developed within the organization. If the company does not effectively communicate instructions, or in this case the fine print of how the bonuses are calculated, employees will not only lose trust in management but will also lack the motivation to exceed performance expectations.

Lack of trust in management is a well-known organizational issue, and poor communication can also be traced back to it. Employees are the most important factor of any organization and should be handled as such. (Ganesh, 2016)They want to feel as if their managers have their best interest at heart. When it is obvious that they may not, employees will begin to feel unappreciated and may even retaliate against the establishment. When analyzing Engstrom plant, we can note that employees felt that the percentage of the bonuses the employers was receiving was unfair since they were not working as hard as the employees. (Beer & Collins, 2008) This also led to employees not being considered as equal partners to management anymore. After the Scanlon plan started, employees were submitting suggestions and seeing a lot of their suggestions not only being carefully considered, but also implemented. Once the employee-employer relationship ended, employees no longer felt the need to submit suggestions to management because they were no longer being heard and they began to question the integrity of management.

Lack of productivity can also be the result of employee retaliation. The Scanlon plan was introduced to negate quality and productivity of the employees of the plant. Once the plan was beginning to fail and the employees stopped receiving their bonuses, they began to feel that there no need to perform even their minimum job demands anymore. Not only did they not meetthe requirements all together, they also began to produce defective products, and putting the plant in financial danger. Production issues can also stem from stress in employees who worry and are more anxious on a day to day basis. Workplace anxiety is troublesome because it may contribute to the increased separation between work and family life, increased job performance issues, and can lead to unethical behavior from employees. (McCarthy, Trougakos, & Cheng, 2016) When employees are so worried about the future of their organization or how unfairly they are being treated, it can lead to productivity issues because they are stressed and distracted at work.

Lastly, motivation and lack thereof should also be analyzed. Employee motivation is a combination of personal individualities as well as workplace environment. (Ganesh, 2016) In some cases, monetary rewards work best for motivating employees to perform at the best of their abilities. According to Newstrom, the expected level of performance would be greater if an employee were rewarded for their efforts and performance (2014, p. 127). Such is the case if an employee was rewarded in the beginning, and the rewards were taken away; the employee’s performance would be low, as their motivational factor has been stripped from them. Continuous reinforcement was what the Scanlon plan brought to the organization for employee motivation. Employees were consistently rewarded with bonuses every single month. They began to depend on their bonuses and viewed it as normal compensation.When the bonuses began to diminish employees then felt that there no need to perform above the standard.

We can compare the monetary reward using to motivate Engstrom employees to the equity model, which means the employees want their reward system to be fair. (Newstrom, 2014) The model explains the concepts of over-reward and under-reward. When an employee is over-rewarded for their performance, they will attempt to restore the balance by working harder to prove the reward is justified. When analyzing Engstrom and the Scanlon plan, this is what happened after the plan was in place. Employees were excited about their extra bonuses and kept their productivity and work ethic maximized. Over time, the bonuses became scarce and the employees were then under-rewarded for their efforts and performance. The model suggests that if an employee is under-rewarded, they will take offense and react by working less.

We can also analyze employee motivation using the expectancy model. The expectancy models says valence (how much the employee wants to reach a goal), expectancy (belief that effort will result in a completed task), and instrumentality (belief that the completed task will indeed result in a reward) is what makes up motivation. (Newstrom, 2014) If all three factors of the expectancy are met, then the employee is motivated enough to give more effort towards the task. In Engstrom’s case, employees are expected to receive a reward every time they reach the organization’s goal. Over time, instrumentality began to dissipate as the employees were doing the work but were not receiving the bonuses. Slowly but surely, expectancy and valence began to also dwindle, as the employees were not only producing defective products, but also began to care less and less about the tasks they were demanded to do.

With poor communication and poor leadership from management being root causes of organizational issues, we can conclude that employee motivation, quality and production of products, and lack of trust in management were inevitable. As a result of the equity model and the expectancy model being poorly aligned with the organization, the three issues above were on the decline and eventually led to massive lay-offs across the plant. Ideally, if the models were practiced with precision and truthfulness, the future of the company would be more optimistic.

References:

Beer, M., and Collins, E. (2008). Engstrom Auto Mirror Plant: Motivating in Good Times and Bad.Harvard Business School Brief Case, 082-175.

Ganesh, A. (2016). Understanding the Relationship between Employee Motivation and Customer

Retention. Vilakshan: The XIMB Journal of Management, 13(1), 101-114.

McCarthy, J.M., Trougakos, J.P., & Cheng, B.H. (2016). Are anxious workers less productive

workers? It depends on the quality of social exchange. Journal of Applied Psychology, 101(2), 279-291.

Newstrom, J. (01/2014). Organizational Behavior: Human Behavior at Work, 14th Edition.

[MBS Direct]. Retrieved from https://mbsdirect.vitalsource.com/#/books/1259734374/