How a Successful Scanlon Gainshare Plan Positively Impacts a Company’s Bottom Line

While there are many intangible benefits of gainsharing that are enjoyed by the companies who employ that management style there are also numerous tangible and measurable benefits.

Some of these benefits are:

• Reduced turnover / improved retention
• Employer of choice status to attract and hire the best
• Lower costs
• Improved safety
• Higher quality
• Better on-time delivery performance

Read the full details about each Scanlon gainshare plan benefit and how it boosts the bottom line.
See the full article >

Welcome New ISS Partners

ISS is pleased to announce partnerships with two more organizations focused on employee development and involvement.

EPIC-Organizations:

Paul Davis founded EPIC-Organizations, www.epic-organizations.com, to assist progressive servant leaders who want to develop Scanlon processes in their organizations.

The Business Center:

Donald Barkman established The Business Center in 1988 in Oakridge, Tennessee, www.bizcenter.com, to provide consulting and training services in the areas of human resources and organization development.

Learn more about EPIC-Organizations and The Business Center on the ISS website. Go to the ISS partners page >

The Chandler Chamber of Commerce

The Chandler, Arizona Chamber of Commerce monthly newsletter carried the ISS article entitled “The Invisible Hand” (page 11). This article dealt with the fact that not only are Scanlon driven gainsharing plans good for companies and their people but they also make a strong and positive societal impact.

Download the Chandler Chamber Newsletter [PDF 3,820 KB] >

Case Study: Mechanical Seal OEM and Service

The Challenge: A multi-state mechanical seal OEM and service organization with approximately 310 employees had just gone through a lengthy and divisive union decertification effort that resulted in union-free status, but left many wounds and a divided work force. Morale was generally low, turnover was high in a very competitive hiring climate, and there was little teamwork.

How Scanlon Gainshare Transformed the Company: A well supported Scanlon gainshare plan dramatically increased employee morale and pride in process ownership resulting in quality improvement, increased on-time delivery, a boost to the bottom line, and employer of choice status in a very difficult hiring environment. Read the case study >

Case Study: Titanium Investment Casting Company

The Challenge: A titanium investment casting company had just gone through yet another change in ownership and an intense union organizing effort. Morale was low and a substantial number of employees did not trust the Company. Communications were limited and there was little to no identity with the Company or the mission of the Company. Additionally, many employees felt that they should receive the same wages and benefits as the employees at a competitor just 60 miles away.

How Scanlon Gainshare Transformed the Company: A Scanlon gainshare plan with full senior management support dramatically improved management/worker communications while significantly improving safety performance, retention, cost of quality, on-time delivery, and inventory turns. This resulted in historically high EBITDA (Earnings Before Interest, Taxes and Depreciation Allowance). In addition, bonuses averaged 4-8% monthly after the 50-50 split between the company and the employees. Read the case study >

Sincerely,

John R. (Bob) Browning
ISS Consulting

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Reduced Turnover / Enhanced Retention:
Companies that involve their employees through gainshare find that the increased identity experienced by their employees significantly reduces turnover. This is particularly true of Scanlon driven gainshare plans.

Employer of Choice:
Successful gainshare companies have a distinct advantage when it comes to the competitive world of talent acquisition. Successful gainshare companies stand toe to toe with their competition on wages and benefits AND offer the opportunity to earn bonuses, share financially as well as psychologically with the success of the company and be valued for their contributions.

Improved Safety:
Accidents cost money and the employees of gainshare companies quickly recognize that safety pays.

Higher Quality:
Re-work is expensive, scrap is even more expensive. Do your employees know your organizations cost of quality?

Better On Time Delivery Performance:
Employees of gainshare companies recognize the importance of satisfying the customer in the most elementary ways. Furthermore they understand and are encouraged to explore what they can do to deliver on time every time.

The above is just a partial list. There is no substitute for each member of the enterprise having ownership of the process.

Case Highlights:

An employee contest was held to name the employee gainshare plan and the winner was “Close Harmony In Producing Seals” CHIPS.

Challenges:
The Company had just gone through a lengthy and divisive Union decertification effort that resulted in Union free status but left many wounds and a divided work force.  Morale was generally low, turnover was high in a very competitive hiring climate, and there was little teamwork.

Solutions:
The Division HR Manager worked with  a renowned Gainsharing expert² to design, write and implement the plan. A fulltime Gainshare Coordinator³ position was established to assist in bringing the plan to maturity.  The organizations Chief Financial Operator⁴ became a strong believer and carried that message consistently by word and action.

Benefits:
Employee morale was dramatically improved. Employees took ownership in the processes and were pleased that they knew how all jobs and skill sets interacted to deliver high quality, on-time product.  The Divisions already stellar financial results improved significantly and the organization became an employer of choice in a very difficult hiring environment.

1. Mr. Al Dubrow, subsequently became the President and Chief Operating Officer of the entire Energy Equipment Group.
2. Dr. Timothy L. Ross
3. Ms. Mary Miles, an outstanding employee oriented human resources professional
4. Mr. Chris McKee, CFO

Case Highlights:

This 1998 installation was in a titanium investment casting company that had been through a number of ownership changes and whose employees had very little identity with their “current” employer.  They had recently been through a brutal Union organizing campaign which the Company won solidly.

The company labored in the shadow of a far larger competitor in Portland Oregon who competed for generally the same customer base. This companies wage and benefit package was superior to the instant case.

Employee contest to name the plan and the winner was: T—- Employees Achieving Milestones (TEAM).

Challenges:

The organization had just gone through yet another change in ownership and an intense Union organizing effort by the IAMAW.  Morale was low and a substantial number of employees did not trust the Company.  Communications were limited and there was little to no identity with the Company or the mission of the Company.  Additionally, many employees felt that they should receive the same wages and benefits as the employees of the aforementioned competitor just 60 miles up I-5.

Solutions:

A gainshare plan modeled after the Scanlon process was designed and written by the senior Management Team with assistance from the Scanlon Leadership Network and it’s President¹.  A well respected member of the HR team was appointed as a full-time Gainshare Coordinator².  All employees were educated on the Principles and Processes associated with Scanlon driven gainshare plans.  Production councils were inaugurated and an overall Screening Committee was created.  Management/worker communications were dramatically improved.  While the President³ who initiated the plan left the company shortly after implementation the organization was extremely fortunate to get a new President⁴ who was a strong believer in employee involvement and a gifted leader.  Monthly meetings were held with every employee on every shift by this President and he focused the Senior Management Team on success through people.  During these meetings the variables that made up the gainshare calculation were presented, explained and studied.  These meetings did not take the place of the monthly Production Council meetings or the monthly Screening Committee meetings that were held without fail.  The Gainshare Coordinator was very well liked and respected and her enthusiasm and passionate nurturing of the plan in it’s infancy was indispensable.  The goal was to improve EBITDA⁵ by focusing on:

• Safety performance
• Turnover
• Cost of quality
• On time deliveries
• Inventory turns

Benefits:

Initially employees were somewhat overwhelmed by the new openness and they did not know how to contribute.  As they went up the learning curve, due in large part to the Presidents willingness to invest money and time in the nurturing of the process, they became partners in the plans success. Significant improvements were made in every one of the 5 measurements and this resulted in historical highs in EBITDA.  Bonuses were averaging 4-8% monthly after the 50-50 split between the company and the employees.  Several negative improvement months were experienced and this proved to be healthy for the plan as it gave the Company President opportunity to explain what had happened.  It was rewarding to see employees genuinely interested in why the companies results were as they were each month.

1. Mr. Paul Davis
2. Ms. Lisa Cox an outstanding, employee oriented human resources professional
3. Mr. Rich McKinney
4. Mr. Randy Turner, still the President of what is now a $60 million business
5. EBITDA – Earnings Before Interest, Taxes and Depreciation Allowance

Antonio Fernandez

Antonio is one of the original members of the ISS team. He brings a wealth of domestic and international financial expertise to ISS clients.

With over 38 years of financial contributions he has proven to be an extremely organized and analytically driven problem solver. Time and again Antonio has been able to apply his financial acumen to complex problems resulting in improved bottom line performance. He has repeatedly demonstrated his ability to direct complex projects from concept to fully operational status.

Learn more about the robust financial experience Antonio brings to ISS clients.

Read more >

Just like you must stir the coals of a campfire to keep it burning you also must stir the environment to bring up new outlooks and ideas in what seemed to be a stagnant pool.

Do Scanlon Plans Ever Run Out of Ideas?

While it may be possible to run out of ideas that possibility is remote and would require total management inattention. It would take a state of nature where nothing ever changed. Every day is exactly like the last, in every regard, as long as the company is in business.

Let’s look at a company that is involved in the manufacture of some product. The more complex the product and the production process the more opportunity there is for different eyes to see different things. But let’s take a simple product as a base for this discussion.

Read more >

What if each member of a company was not only allowed to but actually encouraged to, take ownership of the processes and employ their full capacity to make it successful?

Leaders who would like for their human resources to embrace the same passion for the company that they do would be well advised to take a page out of Adam Smiths remarkable book, “The Wealth of Nations.” This writing is considered by many as the manifesto of Capitalism and, most interestingly, it was published in the year 1776 – that date ring any bells??

The Scotsman, Adam Smith, said, and I paraphrase, that the true beauty of capitalism is captured in the strivings of each individual member or family for their own well being collectively acting as an “invisible hand” drawing all of society to a better future.

Now, with that thought in mind, would not the same principle apply to the members of a collective endeavor, say, a company?

Learn how gainsharing works.  Read more >

A truly involved workforce is an awesome competitive weapon... that is the key to unlocking the door of economic excellence.

Can a system that epitomizes cooperation, openness and trust exist and prosper in a house seemingly divided?

The historical adversarial relationship between companies and Unions is well known. Companies drive for increased profits and reduced costs (and a big one is people) while Unions drive for workers rights and increased pay and benefits.

In pre-Union days workers were viewed as simply a physical tool of production. This view of the worker led to the continuing abuse of workers, in many instances, and, not at all surprisingly, to the union movement. Workers needed protection because of how they were viewed-tools of production. They were certainly not viewed as Human Resources.

Learn how gainsharing plans operate and thrive in unionized companies. Read more >

Building a Corporate Culture That Produces the People and Results You Want

Do your employees feel valued for their minds as well as their bodies? Are they proud of what they’re producing?

If you have a culture that supports and encourages quality, you’ll have a quality product. If your culture supports ingenuity or loyalty, that’s what you’ll get.

In this brand new ISS videocast, hear how ISS consultants help clients develop a culture that attracts and nourishes highly productive people!

Click here or on the image at right to view the videocast on building  corporate culture.

Click here to sign up for the FREE ISS Update quarterly newsletter about maximizing the human resource Constant Contact — Email subscription services you can trust

Antonio Fernandez

Antonio is one of the original members of the ISS team. He brings a wealth of domestic and international financial expertise to ISS clients. With over 38 years of financial contributions he has proven to be an extremely organized and analytically driven problem solver. Time and again Antonio has been able to apply his financial acumen to complex problems resulting in improved bottom line performance. He has repeatedly demonstrated his ability to direct complex projects from concept to fully operational status.

Antonio spent 15 years with E.I. DuPont de Nemours Co. Mexico a chemical, mining and explosives manufacturing business. During his tenure he held positions as Accounting and Tax Manager, Treasury Manager, Strategic Planning Manager, Director of Finance and Treasurer of the Board of Directors for the mining operation.

During the last 10 years of his career he was Co- Owner and CEO of the Carbel Group-Mexico a Pharmaceutical Manufacturing Company. In his leadership role he established commercial joint ventures with Korean and Japanese pharmaceutical companies introducing new biological product lines for sale to the Government Health Authority. Antonio divested his position to a local Mexican management group when he decided to return to the United States.

In 2007 Antonio took over the CFO duties for Marks Engineering and Construction where he directs and oversees all financial and administrative activities of this start up company.

Antonio’s leadership style is one of inclusion and personal growth for his constituents. He believes in the value of individuals and the fact that all to often only a small portion of their ability is tapped. He is acutely aware of the singular importance of a financially healthy organization for job security, growth and competitive ability.

Antonio resides in The Woodlands in Houston Texas with his wife Grace who is an accomplished artist and graduate of the Academia Nacional de San Carlos School of Art. They have 2 children, Grace and her husband Stacey, and Tony who works for DeBeers Diamonds.

Just like you must stir the coals of a campfire to keep it burning you also must stir the environment to bring up new outlooks and ideas in what seemed to be a stagnant pool.

While it may be possible to run out of ideas that possibility is remote and would require total management inattention. It would take a state of nature where nothing ever changed. Every day is exactly like the last, in every regard, as long as the company is in business.

Let’s look at a company that is involved in the manufacture of some product. The more complex the product and the production process the more opportunity there is for different eyes to see different things. But let’s take a simple product as a base for this discussion. How about making nails? Nails have been around for a few hundred years and the All American Nail Company is quite good at making them. In any given year there are 100 people employed by AANC and together they manufacture nails. The first question that needs to be asked is, “What is the purpose of AANC?” The workers answer to that question is very different in a Scanlon driven organization. In Scanlon companies the purpose is not to make nails but to make money by satisfying customers better than anyone else. It makes money by making nails that are higher quality, lower cost and always timely to name a few of the characteristics of success.

Every new person coming into an organization looks at the business through different eyes and interprets through different subsets of experience and education. This happens naturally. However in most companies such interpretation is heartily discouraged. Why, because in order to maximize this aspect of the human resource, information must be shared. That means trust. As Joseph Scanlon said workers can contribute far more than is generally accepted BUT they must have an understanding of the necessary. What, how, why, where, when etc., the “necessary” in bringing the product to market.

The environment (weather, politics,markets, etc) is constantly changing, the culture of the factory, the town in which it is located, the state in which the town is located etc, etc, all are subtly, and of course, some times not so subtly, shifting and changing over time. Technology is advancing continuously and in a great many cases, exponentially. Change, change and more change!

To capitalize on the opportunities presented by change it is necessary to be “change friendly.” That is, always inquisitive, always asking why, how, is there a better way? Such an environment stimulates change in a great many cases rather than chasing change. It is an environment of contagious self confidence in the best sense This a key reason why the culture is so critical to long term success in gainsharing. The culture of a company helps it to cope with its environment. The more open, inclusive and sharing an organization is the more information its people have to work with and the more self confidence they develop.

The ISS logo is a flame. If a campfire is left to itself after being lit it will not last nearly as long as a fire that is periodically stirred. Just like you must stir the coals of a campfire to keep it burning you also must stir the environment to bring up new outlooks and ideas in what seemed to be a stagnant pool. Regeneration or reinvention of the process is mandatory.

(Regeneration and reinvention are exciting topics that will be discussed in future ISS Updates)

In conclusion, “Do Scanlon Plans Ever Run out of Ideas?”

Not likely, but the fire must be tended and the necessary must be a way of life.

A truly involved workforce is an awesome competitive weapon... that is the key to unlocking the door of economic excellence.

Can a system that epitomizes cooperation, openness and trust exist and prosper in a house seemingly divided?

The historical adversarial relationship between companies and Unions is well known. Companies drive for increased profits and reduced costs (and a big one is people) while Unions drive for workers rights and increased pay and benefits.

In pre-Union days workers were viewed as simply a physical tool of production. This view of the worker led to the continuing abuse of workers, in many instances, and, not at all surprisingly, to the union movement. Workers needed protection because of how they were viewed-tools of production. They were certainly not viewed as Human Resources.

At this point it is wise to look at some of the data in an article published in Business Horizons entitled, How Unions View Gainsharing.* The authors list reasons why Unions may oppose gainsharing and the top 5 are:

• Management may try to substitute it for wages
• Management cannot be trusted
• Peer pressure to perform may increase
• Bonus calculations are not understood or trusted
• Union influence is undermined

The authors also found reasons that Unions may favor gainsharing and the top 5 here are:

• Increased recognition
• Better job security
• Increased involvement in job activities
• More money
• Increased feeling of achievement of contributing to the organization

In order for gainsharing to have a chance in a Unionized facility the two lists above must be understood and dealt with openly and frankly as soon as possible.

There are documented cases where Scanlon type Gainsharing plans can operate and thrive in Unionized Companies. It takes great courage on the part of Management and great courage on the part of the Union but it can be done. The very first Scanlon implementation was in a unionized plant. What became known as the Scanlon Plan was created and implemented by a United Steel Workers local President, Joseph Scanlon.

I will close this article by simply saying that in no case can a house realize it’s true potential by being totally divided. Fortunately it is very possible to protect your interests and still focus on the competition. The old mindset of trying to get more of the pie must be replaced by the new mindset of making the pie BIGGER. If the leaders of the people, that is the Management/Union nexus, can embrace the fact that neither can be near as good alone as they can be together, then the battle is as good as won. A truly involved workforce is an awesome competitive weapon. Joseph Scanlon said it best…

“Nobody knows more about the work than the worker. There are a great many things that the worker can do if he has a complete understanding of the necessary. Given the opportunity of expressing his intelligence and ingenuity, he becomes a more useful and more valuable citizen in any given community or in any industrial opportunity.” ~ Joseph Scanlon

Leaders, that is the key to unlocking the door of economic excellence. Do it, for your people, for your Company, for your community and for the competitive ability of the United States of America. You will be a leader of a truly involved workforce whose human resources are maximized.

*How Unions View Gainsharing, Timothy L. Ross, Larry L. Hatcher, and Dan B. Adams. Business Horizons, July/August 1985, No. 85403

What if each member of a company was not only allowed to but actually encouraged to, take ownership of the processes and employ their full capacity to make it successful?

Leaders who would like for their human resources to embrace the same passion for the company that they do would be well advised to take a page out of Adam Smiths remarkable book, “The Wealth of Nations.” This writing is considered by many as the manifesto of Capitalism and, most interestingly, it was published in the year 1776 – that date ring any bells??

The Scotsman, Adam Smith, said, and I paraphrase, that the true beauty of capitalism is captured in the strivings of each individual member or family for their own well being collectively acting as an “invisible hand” drawing all of society to a better future.

Now, with that thought in mind, would not the same principle apply to the members of a collective endeavor, say, a company? What if each member of a company was not only allowed to but actually encouraged to, take ownership of the processes and employ their full capacity to make it successful (something progressive companies encourage)? What if each member was also able to share in the gains resulting from such total involvement (something very, very few companies do)?

What would the performance of your organization be if everyone cared as much about its’ success as you do? They want to, they can and they will if you only give them the chance and allow them to share in the gains of working together.

I am not suggesting that you, the owner(s), who bear the burden of the bad times simply share the good times (profit sharing). I am talking about beating historical performance, the good years and the bad years, and reaching new performance highs. When new highs are reached the resulting gains are shared.

The average executive’s compensation is a function of how well the organization is doing. If it is doing poorly-base pay, if it is doing well-base pay plus bonus-if it is doing really well-base pay plus bonus plus company car-if it is doing stunningly well-base pay plus bonus plus company car plus country club membership, plus stock options.

The average workers compensation is a function of elementary mathematics and bears ZERO correlation to the performance of the company. If it is doing poorly-base pay, if it is doing well-base pay, if it is doing really well-base pay, if it is doing stunningly well-base pay plus a holiday turkey.

Let’s go back to another “what if.” What if each and every individual on the payroll had a solid competitive base rate AND a chance to make a monthly bonus if collective performance exceeds historical standards?

Well, how do you do that? Fortunately there is a process with over 70 years of history that allows you to open that door. It’s simple, however it takes courage and a deeply held belief that the human resource is far more capable than most organizations realize.

If this brief article interests you I encourage you to explore the world of gainsharing. It is a marvelous system of management that allows work to become a creative and fulfilling exercise for the benefit of the company, the customer and the employee. It’s not just a win-win, it’s a win-win-win!

More information, from many different sources, is available on our website www.issgainshare.com.

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