Engstrom found itself in a distress situation which resonated with the pattern similar to organizations which are knee deep in crisis. The descent of Engstrom was not attributed to a single event but a chain of interrelated events which led to the downfall of the plant. The Plant suffered setbacks on various fronts such as delivery schedules, customer satisfaction and production to name a few.
The issues which had a crippling effect on Engrtom and which played an important role in systematically disintegrating the plant are highlighted below. The Downturn When the focus of the investigation is turned towards identifying the origin of the issue, the Downturn of 2005 proves to be the main catalyst for the descent of Engstrom. The Downturn during the ill-fated year of 2005 caused a domino effect on the plant, employees were being fired and the downturn brought its own share of challenges and hardships to the plant.
Scanlon Plan The Scanlon Plan being an incentive oriented plan for the employees worked well during the yester years of the plant but the downturn of 2005 resulted in the plan being too expensive to be maintained and was eventually scrapped. Employees at the plant considered the incentives from the plan as a part and parcel of their salary as they had been receiving the bonus from a long time. When the bonuses stopped, they revolted and lost interest at work and this gave rise to the productivity issues.
Communication Communication being the basis of better and transparent governance was not taken up seriously which lead to distrust between the employees and the management. The management could not keep its employees on the same page as it had failed to maintain a proper communication channel which was crucial at that moment. Employee Engagement The key to build a successful relationship between the employees and the management is to dedicate time and attention towards employee engagement.
Employee Engagement is a two way communication/participation process where in both the teams can voice out their issues and opinions. There was no active participation by the management within the organizational framework on this regard which made the employees feel the management being inaccessible. DeMotivation The already frustrated employees started to feel dejected as the management turned a deaf ear towards them. They lacked the spark which they used to have earlier and thus they were demotivated to work and the production lines went in for a toss as the employee morale descended to an all-time low.
Trust Issues The trust issue arose from lack of communication from the management’s side while making changes to the Scanlon Plan, as the plan was revisited every year and the ratios were being changed. The explanation of why the ratios were being changed was not passed down to the lower level. Parity Issues The employees and the supervisors drew the same amount of bonus irrespective of the amount of work done by each of them. The supervisors performed less work as compared to the employees but still drew the same bonus.
This irked the employees and gave rise to fairness issues. Putting the Puzzle together As we have identified all the issues which lead to the downfall of the Plant, one can understand how the relationship between the issues had a rippling effect. The Scanlon Plan when launched worked well temporarily but it was vulnerable to changing economic trends. The plan was a great initiative but the way it was structured rendered it to be inoperative during the downturn.
Planners should have made the plan more flexible so that it could be tweaked as and when required to suit the economic environment rather than changing the ratios of the plan in line with the pay roll scale. Pay roll scale ratio is a great idea but it works only when all the parameters such as the economic situation, demand to supply chain and the production line works well. The problem arose when the pay roll scale was directly proportional to the sales as during a downturn sales drop and then the pay roll ratio leaves a lot to be desired and ultimately the Scanlon Plan goes for a toss.
With the downturn hitting the plant hard the management should have set up a crisis control board to rope in Employee representatives through whom they could have done a good job by discussing or communicating the pressing issues. From the analysis we understand that there was a communication gap between the management and the employees which resulted in an outcry when the pay roll ratios were being changed without educating the employees. The employees are the ones who are mostly affected by the decisions taken at the top so it is equally important to keep them in the loop.
Having a workforce working with low morale makes things very difficult especially when the situation is precarious. A low morale affects the production rate and the quality of what is being produced. The trust gained from customers can be lost with quality and other issues which directly affects them. The management should improve its visibility amongst the workforce, should encourage the workers to pool in their ideas of improvement and create a stable atmosphere in order to stay afloat.
Employees are the most precious assets of an organization as employees make or destroy an organization. The plant manager instead of wasting time by doubting the credibility of the plan he implemented, should have immediately switched to damage control mode and tried to revive the plant by making changes which were discussed above. Keeping the employees happy and motivated is the key. A creative way to keep employees connected with the organization during troubling times is to engage them in workshops, recognize their work and motivate them by instilling beliefs that they can!
