The Scanlon Plan - II

(The is the second of two articles on a union leader's plan for "management-sharing" in industry. Yesterday's article sketched the history and background of the plan; today's will take up the details of the plan, and discuss its limitations and possibilities.)

The Seanlon plan's basic aim is to make the workers contributing partners in an enterprise. There are two parts to the plan. The first is a formual for rewarding the workers by bonus for any increases in productivity due to their efforts or suggestions. The second part is a system of labor-management committees to sift these suggestions, and put the valuable ones into effect.

To set up the formula, union and management must decide some way of measuring the company's labor cost, and agree on a "normal" month's labor cost. Then if in any month the workers can reduce labor costs below this "normal," they get the saved difference between "normal" and actual labor costs, as a bonus. The bonus each man gets will be proportional to his wage rate.

As a channel for workers' suggestions, there is a "production committee," for each department in the shop. The job of these groups is to put into effect or reject any small suggestions. The more important ones are passed on to the overall "screening committee," made up of three union representatives, and three men from top management, usually the president. The screening committee's specific assignment is to handle the more important suggestions, and talk over problems of production; actually its discussions spill over into questions of sales, competition, the state of the industry, in fact all aspects of the company. (Only business that is specifically the union's, such as grievances and wage demands, is excepted). As a result of screening committee give and take, the employees have a much clearer idea of the company's problems and the reasons behind its decisions; management on its side gets a thorough report of problems in the plant.

The formula and the committees are the formal part of the plan. They are not, insists, an automatic blueprint for good labor relations. Labor relations are human relations, and cannot be governed by formulae. As Seanlon says, in describing the plan: "The adult process of sitting down and slugging out problems together requires a change of attitude." This is the one absolute requirement for the success of the plan. Whatever previous relations may have been, and Seanlon has successfully installed the plan in companies where they had been bad, there must at least be the willingness on both sides to undertake the "adult process."

Often it took the fear of imminent bankrupted to bring union and management around. This sort of life-raft conversion characterized most of Seanlon's clients in the late 'thirties, and, as he recounts, "Slichter's boys came down from Harvard and wrote theses about our work. They concluded that the plan worked, but they said it wouldn't work outside of a bankrupt situation. That was a challenge." Seanlon has met the challenge: his plan has worked as well in profitable plants as in failing ones.

Besides the attitude of union and management, there are other important factors. The amount of intelligence and imagination available on both sides counts heavily. Large size is a complication; most of the Scanlon plants are small--averaging perhaps 500 workers. (Seanlon, however, has installed the plan in a Canadian steel plant of 5,000, and is at the moment experimenting in a subsidiary plant of a large corporation). But in spite of the limitations, the 40-odd companies in which the plan has been introduced represent a very wide variety of enterprises.

When the Scanlon plan goes into operation, it tends to create a team where before there were two factions. The union is strengthened, in the new role of junior partner with a say in company policy. Men in the shop flood the production committees with suggestions. Production goes way up; spoilage and waste are cut down. As Seanlon says, "The men know who their competitors are"; the whole company becomes a competing unit.

The Scanlon plan is no panacea. There are plants where it will not work, and others where it will not work well. It has not been tried on a very large scale. But as a successful experiment in a more mature and productive labor-management relationship, it is highly significant.