Scanlon Plan

Tags: Glossary

A form of gainsharing that returns cost savings to the employees, usually as a lump-sum bonus, is a productivity measure. This program dates back to the 1930s and relies on committees to create cost-sharing ideas for labor costs. As a result, productivity has increased while unit cost has decreased. Profit-sharing, on the other hand, is a profitability measure.

What is Scanlon Plan?

The Scanlon Plan is a unique approach to gainsharing that has been widely adopted by organizations around the world. It is a program that aims to increase productivity and reduce unit costs by involving employees in the cost-sharing process. This plan, which originated in the 1930s, has proven to be highly effective in motivating employees and improving overall organizational performance.

At its core, the Scanlon Plan operates on the principle of sharing cost savings with employees. When an organization implements this plan, it establishes committees consisting of both management and employee representatives. These committees are responsible for generating ideas and suggestions to reduce labor costs and increase productivity.

The Scanlon Plan differs from traditional profit-sharing programs in that it focuses on productivity rather than profitability. While profit-sharing distributes a portion of the company's profits to employees, the Scanlon Plan emphasizes the importance of reducing costs and improving efficiency. By involving employees in the cost-saving process, the plan creates a sense of ownership and encourages them to actively contribute to the organization's success.

One of the key benefits of the Scanlon Plan is its ability to align the interests of employees and the organization. By providing employees with a direct stake in the cost-saving efforts, they are motivated to work more efficiently and identify innovative ways to reduce expenses. This not only leads to increased productivity but also fosters a culture of continuous improvement within the organization.

Furthermore, the Scanlon Plan promotes collaboration and teamwork. The committees established under this plan serve as platforms for employees to share their ideas and suggestions. By involving employees from various departments and levels of the organization, the plan encourages cross-functional collaboration and the exchange of knowledge and expertise. This collaborative approach often leads to the development of creative and effective cost-saving strategies.

Another advantage of the Scanlon Plan is its ability to create a sense of fairness and equity among employees. By distributing cost savings as a lump-sum bonus, employees feel rewarded for their contributions and efforts. This recognition not only boosts morale but also enhances employee engagement and loyalty towards the organization.

Over the years, the Scanlon Plan has proven to be a successful tool for organizations seeking to improve productivity and reduce costs. By involving employees in the cost-sharing process, organizations can tap into the collective knowledge and expertise of their workforce. This not only leads to increased efficiency but also fosters a sense of ownership and commitment among employees.

In conclusion, the Scanlon Plan is a gainsharing program that has revolutionized the way organizations approach cost-saving and productivity improvement. By involving employees in the cost-sharing process, organizations can harness the collective power of their workforce to drive efficiency and reduce unit costs. The Scanlon Plan has stood the test of time and continues to be a valuable tool for organizations striving for excellence in logistics and beyond.

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