The Scanlon plan is a profit-sharing program that involves employees in decision-making processes to benefit from their input. Employees are rewarded through profit-sharing plans, and the plan works best in environments where employees have long-term attachments to a single company. The plan improves efficiency and generates medium to long-term results.
The Scanlon plan is a model for business organization. This type of organizational structure is a profit-sharing program and seeks to involve employees more directly in business decision-making processes in order to benefit from employee input and input. Employees are rewarded for their contributions and assistance through profit-sharing plans, which disperse a portion of the economic benefits generated by a more engaged workforce among members of that workforce. These plans work best in environments where employees have relatively stable, long-term attachments to a single company.
Joseph Scanlon, for whom this type of management plan is named, implemented the first such system in the early years of the Great Depression. His initial goal was to save companies threatened by economic collapse and to do so by drawing on the collective skill and wisdom of the entire workforce in a given company. Early examples of the Scanlon plan were generally successful, and this approach to labor management relationships has steadily caught on over the next several years.
A simple rationale is at the heart of the Scanlon plan: if all employees have a personal, tangible financial stake in a company’s success, they will be more active contributors to its success. This bet is usually created through a revenue sharing system. In such a system, employees are part of the process of allocating labor and capital resources within the firm. Employees then collectively share a portion of any cost savings they are able to generate through systematic improvements or more dedicated and productive work.
Employee suggestions are typically filtered through committees. In a standard Scanlon plan, a number of manufacturing committees operate at the departmental level to solicit and discuss ways to improve productivity. A selection committee operates at a higher level and is made up of members of the workforce and management representatives. This committee reviews progress made in efficiency improvements and calculates the amount of additional compensation to be paid to workers as part of these improvements.
A Scanlon plan can dramatically improve the efficiency of production and operation in any business, large or small. These plans produce a smooth incremental improvement and generate medium or long-term results, producing rather rapid cost savings. Such plans are most effective when they have time to work. Furthermore, they greatly benefit from real, rather than formal, participation by both workers and management. If both workers and managers are actively engaged in a Scanlon plan and adhere to it over the course of multiple years, the rewards can be substantial.
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