More on the Principle of Equity and the Process of Accountability

Equity is defined as "accountability for earning and sharing a fair and balanced return to the customer, investor, and employees."

This principle can be depicted as an equilateral triangle. Accountability is maintained by a regular reporting of the Scanlon organization's performance to its customers, investors, and employees. (Some Scanlon organizations also include suppliers, community, etc.) A fair and balanced return for employees is usually accomplished through increased job security, more satisfaction, development opportunities and a Scanlon bonus system.

When performance beyond a historical baseline is made, (or when a predefined goal is met) a percent of the savings is shared between the employees and the organization. Performance can include financial and/or operational measures. (Financial measures include items such as after tax profits, return on investment, etc. Operational measures include items such as labor productivity, quality, reduced scrap, etc.) The Scanlon belief is to include all those in the bonus who influence performance in the organization. This usually includes, production and office workers, management, and in some cases long term contractors. In this way Scanlon practice differs from other systems that reward individuals, teams, or certain groups of employees.

Each Scanlon organization (usually through an equity committee) must make hundreds of decisions to design and maintain their own unique equity system. Typical questions include:

1) What areas of performance will be measured?
2) How should performance be tracked and reported?
3) What performance is needed to generate a bonus and what is the size of the bonus?
4) How is the bonus to be shared between the company and employees?
5) Who is eligible to receive the bonus?
6) What are the customer, investor, and employee expectations, and are we meeting them?
7) When and how is the Equity system reviewed and changed?

Within the membership of the Scanlon Leadership Organization are organizations that use Profit Sharing, Gainsharing, and Goalsharing to establish Equity. Each organization determines what measures are most appropriate for their organization to make sure they are being accountable to investors, employees and customers.