Describe what a Scanlon Plan is and its 5 major elements

What will be an ideal response?

Answer: The Scanlon plan was developed in 1937 by Joseph Scanlon, a United Steel Workers Union official.
Scanlon plans have five basic features. The first is Scanlon's philosophy of cooperation. This philosophy assumes that managers and workers must rid themselves of the "us" and "them" attitudes that normally inhibit employees from developing a sense of ownership in the company.

A second feature is what its practitioners call identity. This means that in order to focus employee involvement, the company must articulate its mission or purpose, and employees must understand how the business operates in terms of customers, prices, and costs.

Competence is a third basic feature. The program, say three experts, "explicitly recognizes that a Scanlon plan demands a high level of competency from employees at all levels." This suggests careful selection and training.

The fourth feature of the plan is the involvement system. Employees present improvement suggestions to the appropriate departmental-level committees, which transmit the valuable ones to the executive-level committee. It then decides whether to implement the suggestion.

The fifth element of the plan is the sharing of benefits formula. If a suggestion is implemented and successful, all employees usually share in 75% of the savings. For example, assume that the normal monthly ratio of payroll costs to sales is 50%. (Thus, if sales are $600,000, payroll costs should be $300,000.) Assume the firm implements suggestions that result in payroll costs of $250,000 in a month when sales were $550,000 and payroll costs therefore should have been $275,000 (50% of sales). The savings attributable to these suggestions is $25,000 ($275,000 minus $250,000). Workers would typically split 75% of this ($18,750), while $6,250 would go to the firm. In practice, the firm sets aside about one-quarter of the $18,750, for months when payroll costs exceed the standard.