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The Scanlon Plan - I

By Maxwell E. Foster jr.

(This is the first of two articles on a plan for "management-sharing" in industry. Today's article sketches the plan's history and background; tomorrow's will discuss the details of the plan, its present application, and its potentialities).

In 1938, Joe Scanlon was president of his local at an Ohio steel company which had been organized two years before by the Steel Workers Organization Committee, (now the United Steelworkers). The industry was still groggy from the effects of the depression: Scanlon's company was nearly bankrupt, and he was afraid it would fold, leaving the men without jobs. So, with some persuasion, he induced the company's president to go with him to S.W.O.C. headquarters in Pittsburgh to consult Clinton Golden, at that time vice-president of the steel-workers.

Worker Participation

Golden was surprised and pleased by the visit, a strangely unorthodox one in a period of bitter industrial strife. He advised the two to dope out a way of enlisting worker cooperation to keep the business going. So Scanlon sat down with the management and worked out the first edition of his productivity plan. Under it, the workers were encouraged to suggest ways of increasing productivity, and were rewarded by bonuses for any such increase. The men in the plat thus became participating members in the enterprise, with a stake in the company's success and responsibility for its success. The plan worked: it pulled the company out of the red and made it into a profit-making business.

The plans' success soon had other marginal steel companies pounding on the door of union head-quarters asking for similar help. Golden, chiefly to save union jobs, got Scanlon to Pittsburgh and put him to work installing his plan in these companies. Besides having been an open hearth worker, and a professional boxer, Scanlon had had training as an accountant; his ability to understand business problems won him the respect of management. Whenever a failing company took his advice, they stayed in business.

Over and above the fact that union jobs were saved, Clinton Golden was impressed by the implications of Seanlon's work, which he discussed at length in his book. "The Dynamics of Industrial Democracy," written with Harold Ruttenberg in 1941. The plan, with its worker-participation principals, had put the union in the new positive role of a copartner in the enterprise, a very difference one from the necessarily negative role of the typical fighting union.

Scanlon stayed with the Steelworkers until 1945. In that year, he had spectacular success in the Adamson Company, a small factory in Ohio. Introduction of the plan increased profits 250% and brought bonuses of 54% of wages to the workers. There were two results: the Adamson Company appeared in an article of Life, and Scanlon was invited to M.I.T. to work in the Industrial Relations section, where he is now, dividing his time between teaching and installing the plan.

Profit-Sharing Plans

The Scanlon plan is unique in that it was developed in union headquarters. The so-called "profit-sharing plans" have been management creations. These generally are in bad favor in labor circles because of the frequency with which they have been used to subvert the union by "buying off" the workers. Profit-sharing has not been especially successful or popular in this country--only about one-half of one percent of business use it in any form. Of these, a few have recognized that profit-sharing must be coupled with a degree of "management-sharing" to be most successful. But no scheme has gone as far as Scanlon's in seeking this worker participation in the enterprises.

Nor has any other plan found, as Clinton Golden puts it, "a greater era of mutual agreement between labor and management." Fifteen years ago, industrial relations were often in a state of civil war--there was no area of agreement. Since then, the general acceptance of unions and collective bargaining has set out at least a small area of agreement by contract on wages, hours, and working conditions. The Scanlon plan goes a big step further. By delegating some of management's responsibility for increased productivity to the workers, and regarding them for increase, the plan gives the two parties a wide area of agreement: the common goal of making their enterprises increasingly productive.

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