GAINSHARING
Impact of Scanlon bonus plan on retail store performance
Gainsharing plans such as the Scanlon programme can help boost store performance in retail organisations, according to a study published by the WorldatWork Journal examining the scheme's application in a large US retail business.
Increasing coverage of Scanlon plan in US
Although the Scanlon plan was first developed in the late 1930s, Scanlon-style programmes have become increasingly popular in the US during the last 20 years. According to one estimate cited in the WorldatWork study, as many as a fifth of Fortune 500 companies have incentive programmes that share the characteristics of a Scanlon plan for at least one unit within the company.
Implementation in service sector businesses
US research and anecdotal evidence from the UK - where gainsharing remains very much a minority pursuit - suggests that Scanlon is most common in manufacturing or processing companies. There has been little detailed research published in the UK or the US that could shed light on the effectiveness of Scanlon plans in service sector organisations.
To fill the information gap, the authors of this fascinating WorldatWork study, K Dow Scott, Jane Floyd, Philip G Benson and James W Bishop, looked at the introduction of a Scanlon plan by a major US retailer.
Faced with sagging sales and loss of market share, this worker-driven cost savings plan was implemented on a trial basis in six stores. For comparison purposes, data was collected from control stores that closely resembled the store adopting the Scanlon plan on a number of dimensions, including size, sales volume and location type.
Research findings
The researchers analysed customer and employees survey data as well as employee turnover data. The results were telling.
Stores with Scanlon plans:
| What is gainsharing? |
| A company- or factory-wide bonus plan in which the organisation and its employees share a percentage of any financial gains made from improvements in performance, calculated under a pre-arranged formula. An agreed formula determines how productivity-generated savings are distributed. This is generally based on a performance indicator - most commonly added value or some other measure of productivity. Some schemes also incorporate performance measures relating to product quality, customer service, delivery or cost reduction. |
| Scanlon plan The three traditional gainsharing plans are Improshare, Scanlon and Rucker, but modern schemes tend to be based on special formulae, with key indicators tailored to meet organisational objectives. The Scanlon formula measures labour costs as a proportion of total sales. A standard ratio - say, 50% - is determined, and if labour costs fall below that proportion, the savings are distributed between employees and the company on the basis of a pre-established formula. As the WorldatWork Journal explains, the concept is simple. "Scanlon believed that workers possessed the most knowledge of their jobs and if employers listened, they could find ways to substantially reduce costs. In return for helping the company survive, workers, according to Scanlon, should be rewarded with a share of the cost savings they generated." (K Dow Scott, Jane Floyd, Philip G Benson and James W Bishop, WorldatWork Journal, third quarter 2002.) |
Want to know more?
Title: The impact of the Scanlon plan on retail store performance , by K Dow Scott, Jane Floyd, Philip G Benson and James W Bishop, WorldatWork Journal, third quarter 2002.
Availability: Contact WorldatWork, 14040 N. Northsight Blvd, Scottsdale, Arizona, USA AZ 85260, tel: 001 480 951 9191 or email: worldatworkjournal@worldatwork.org.
For further details about WorldatWork visit www.worldatwork.org.
Posted 17 January 2003