Engstrom Auto

The decrease in productivity in Engstrom Auto in 2007 was due to management’s failure to recognize and react properly to the negative impact of the business downturn on employee morale.  The Scanlon Plan implemented by Bent in 1999, was no longer an effective motivation tool.  Although the Plan had been highly effective during the facility’s growth period, employees had grown frustrated with the lack of rewards provided after business slowed down.

There are several motivation theories that apply to the Engstrom situation.  Those employees who survived the layoff in 2006 had not received a bonus in seven months.  Given the negative business environment, employees were likely experiencing low self-efficacy.  The low production efficiency and high rate of quality defects are expected results according to the self-efficacy theory.  “People with low self-efficacy are more likely to lessen their effort or give up altogether” (Essentials of Organizational Behavior, p. 106).  

Additionally, the employees were questioning the fairness of the bonus plan.  The Scanlon Plan no longer met the requirements contained in the Organizational Justice model.  First, the employees did not believe the plan met the definition of distributive justice.  This is apparent in their complaints regarding the bonuses received by supervisors.  The fairness of the outcome of the plan was questioned.   From the start, the plan included a complex calculation to determine the bonus payout.  This was further complicated by management’s decision to revise the ratio four times during the 5 years from 2000 to 2005.  As a result, the employees no longer believed in the procedural justice of the system.  The fairness of the process itself was questioned.  According to our text, procedural justice most strongly relates to employee trust and job performance.  

Finally, after several months of no bonus payments, the employees no longer had any expectations of positive rewards.  This is consistent with Victor Vroom’s expectancy theory of motivation.  The employees were no longer confident that their efforts would result in rewards from the company.  They appear to place a low value on the effort-performance relationship.  If the employees increase their efforts, they are not confident it will result in improved company performance.  Additionally, they do not appear to believe increasing their efforts would result in a high performance-reward relationship.  Their lack of trust of management prevents them from believing increasing their efforts would result in a return of their bonuses.