Costs and Benefits of Scanlon

"100 percent of all firms with Scanlon Plans report they are having a positive or very positive impact on productivity. Scanlon Plans produce the most consistent pattern of high ratings."

"The Scanlon Plan is one of the best kept secrets in American business. Every company using it properly has had dramatic, measurable improvement in productivity and profitability. We highly recommend it."

Research

Scanlon Plans have been extensively studied since the 1940s. Research results indicate that Scanlon Plans consistently increase productivity, reduce costs, increase quality, reduce scrap, increases employee involvement, improve communications, and improve labor relations. Douglas McGregor, the great management theorist, considered the Scanlon Plan representative of Theory Y management and cited Scanlon organizations in his landmark book, The Scanlon Process today is entirely consistent with modern views of quality, management, and leadership.

Research conducted at Sears has shown that Scanlon units have statistically higher financial performance, customer satisfaction, and employee satisfaction compared to similar nonScanlon units.

Research conducted by at the University of Wisconsin has shown that the Scanlon implementation practices have the highest correlation with gainsharing success.

Benefits

A survey sample of Scanlon Leadership members in 1991-1992 found an average financial gain of $2222 per employee per year. The median cost to administer a plan during this time was $135 per employee per year. The average bonus paid to employees during this period was $674, thus producing a median gain to payout of 127%. , the benchmark study of alternative pay systems conducted by the American Compensation Association, found gainsharing plans (including Scanlon) frequently produced a median gain to payout of over 200%.

Scanlon Companies have been rated among the top 100 Best Places to work in America. Scanlon Companies have received numerous quality awards including the Baldridge Award, the Shingo Prize, GM/Ford/Chrysler supplier of the year, etc.

Additional Cost

Of all major gainsharing systems, the Scanlon Process is the only one that is not copyrighted. Joe Scanlon gave his ideas to the world. It is not unusual for other systems to charge royalties, and/or to charge a percent of the first year's gains. These charges can easily equal 25% of the first year's gains.

Since a Scanlon Process is developed participatively and takes longer to install than other types of gainsharing plans, the greatest cost is the cost of wages paid during the development time. Other costs to consider are travel expenses (to meet with employees, to visit Scanlon organizations) and consulting fees. A typical Scanlon Process implementation requires two days a month of an expert consultant's time during installation. Since the client organization pays only for the consultant's time, and the objective of the consultant is to decrease client dependency, time and cost will vary based on the size of the organization and needs of the client. The Scanlon Leadership Network can provide consultants who specialize in implementing the Scanlon Process and who have been approved by the Network.