ENGSTROM AUTO

MIRROR PLANT

Alex Barbosa
Kelly Downes
Justin Domingo
Andy Fazzone
Dave Cass
 AGENDA

 Introduction
 Analysis
 PEST
 5 Forces
 SWOT
 Strategic Issues
 Alternative Evaluations
 Recommendation
 Pros and cons
 Implementation
 Conclusion
 INTRODUCTION

In 2007, the privately owned business located in Richmond,

Indiana began to face a problem.

Sales had recently declined, and a significant part of the

workforce had been laid off.

Productivity problems and product quality issues ensued, risking

costumer relationships.

The Scanlon Plan, implemented nine years earlier seems to

have contributed to the adversity Engstrom faces.
 PEST ANALYSIS

 Political/Legal Forces
 Union pressure on company to continuously earn bonuses
 Strong, “militant” union
 Economic
 Recession
 Drop in sales reduces bonuses
 Socio-demographic
 Technological
 Advancements implemented in company slowed processes and
increased production expectations
 5 FORCES

 Buyers
 Certified supplier for Toyota: products do not require a quality
inspection
 Relationship is at risk
 Rival Suppliers
 One other supplier recognized as a certified supplier
 Magnum Mirrors of America
 Mirror Controls International (MCI)
 Gentex Corporation
 Suppliers
 Substitute Products
 New Entrants
 SWOT ANALYSIS

 Strengths
 One of Two Certified supplier of Toyota
 Scanlon Plan works very well under a strong economy

 Weaknesses
 Recession meant the Scanlon plan didn’t work well
 Angered Employees becoming resentful of the company
 Too Many Employees created a payroll imbalance.
 SWOT ANALYSIS CONT’D

 Opportunities
 Their reputation for quality and reliability could justify a higher cost
to buyers
 The company is very cut and dry, non-monetary "extras" can increase
moral and overall productivity
 Internally, Haley has good relations with some of the workers.
 Threats
 The product-quality issues could jeopardize the certified status.
 The other company that is certified could absorb a lot of Engstrom's
sales from Toyota through item quality decrease
 STRATEGIC ISSUES

Initial economic Sales decrease, Because of the

recession causes leading to forced cuts company’s financial
in Scanlon bonuses, in
buyers to buy less situation, in 2006, 46
order to continue with
and Engstrom to of the 255 workers
the actual payroll.
produce less were laid off.

Engstrom faced a
negative economic
cycle, shown at the
right, due from the
weakness of the
Scanlon Plan, the
overall recession in
economy, and the
negative attitude of
workers.
Buyers, realizing
that quality is now Workers, feeling
being compromised, “cheated” out of their
take business regular and expected
elsewhere. This, with bonuses, begin to feel
lower production resentment toward the
numbers, yields low company.
return
Productivity and
quality are now
compromised by the
unmotivated workers.
 ALTERNATIVE EVALUATION

Motivation
 Scanlon Plan
 Company wide employee incentive plan
 Based on success criteria bonuses are awarded
 Total Payroll/ Total Sales is less than 32.6%
 Meant to boost employee motivation and productivity
 Bonuses hadn’t been given in 7 months since lay off
in 2006
 Management struggled with how to motivate angered
employees
 RECOMMENDATIONS

 Revise the program

 Change Scanlon ratio
 Bonuses based on total mirrors made rather than payroll/total sales
 Change suggestion system, increase number of suggestions
 Decrease the payroll
 Increase Employee Morale
 Recognize employees for achievements
 Set quotas
 Visual scoreboard of status per week
 Increase benefits and facilities (hygienic factors)
 Increase Productivity
 Train employees before the incorporation of any new technology
 Effective communication between management and employees
 Weekly employee Forums for questions and concerns
 REVISE SCANLON PLAN

 Pros
 Workers will be happier with the new ratio
 Based on total units produced
 Bonuses are more in the workers control
 Boost productivity
 Cons
 Put company at risk for financial loss
 Quality could slip
 Bonuses are guaranteed to workers regardless of sales
 IMPROVE PRODUCTION

 Pros
 Increased employee satisfaction
 Sets clearly defined goals
 Increases overall motivation
 Cons
 Quality could be compromised
 Progress is public to all workers
 Demotivation
 INCREASE PRODUCTIVITY

 Pros
 More units produced
 Increases employee confidence
 Employee trust in management restored
 Cons
 Time consuming
 Pressure on management for timely turnaround
 IMPLEMENTATION

Hold meeting with all workers Present/vote on new plan

Purchase and connect digital Increase hygienic factors in Implement employee of the
Boost Employee Morale scoreboard to production line workplace month program

Terminate employees Funnel extra payroll towards

Decrease Payroll Audit employees deemed unproductive bonuses

Annual Revisions Check productivity and financial standing Repeat evaluation process
 CONCLUSION

 Company suffers due to recession

 Employees lose trust with the company
 Current position creates opportunities to reevaluate the
relationship with the workforce
QUESTIONS?