The Scanlon Plan involved two systems: The Participation System and The Equity System The Participation

on System is comprised of an open suggestion system and two committees. The first was the production committee for which there was one for each department. This committee composed of one management representative and one or more non-elected non-supervisory employees. The committees job was to identify problems which interfered with increasing productivity, reduce costs and increase output. Small expenditure suggestions could be put in to effect immediately, while large expenditure items were sent to the second committee, which was the screening committee (Check, 1979, 9). The screening committee held representatives of senior management and an equal or greater number of elected non-supervisory representatives. It acted on the suggestions recommend by the production committee, and also assumed responsibly for suggestions not acted on by the production committee (i.e. oversight). Finally the screening committee oversaw the production of financial data supporting the assignment of the monthly bonuses. The participation system allows full communication throughout the firm on production improvements, financial position, upcoming changes and bonuses (Frost, Ruh, & Wallace, 1973, 282-285) Likewise the Equity System allows for the transparent calculations of two metrics. The ratio and the bonus plan. The ratio is normally calculated by the total payroll cost divided by the total sales value of production, within a specified timeframe that does not work to the disadvantage of either the employee or the employer. The ratio is used to calculate the payroll saving. The bonus plan works by assigning all cost savings for the period to a pool. Distribution of the pool is based on three requirements: Both the employees and the company receive fair shares A reserve fund is set a side each month for months when bonus deficits occur. Each member must receive a fair share of the pool. The advantage of the Scanlon Plan is that the company must go through an exacting analysis of profit and loss in order to derive the ratio (Lane, 1975), hence encouraging a focus on financial results. This audit is similar to the situation analysis in the ACTP methodology. Likewise the increased transparency, which means that all employees know the financial situation of the company, is also similar.

With both, performance improvements can be made in an open atmosphere free of denial and politics, and finally all staff receive the same bonus in order to recognise the contribution of both staff and management. It also makes administration easier. The disadvantage of Scanlon plan is that the very advantages can also be disadvantages. The equal bonus may not reflect the actual work or contribution performed by all staff, because education and specific skill sets may have a major effect on what savings were the most cost effective. Further, the Scanlon plan can take some time to introduce in to large companies, even though it was originally set up as a crisis measure (Check, 1979) because few multinationals (if any) existed when the plan was invented. This can mean that by the time the system is implemented financial ruin may be inevitable, especially if management were in denial about the firms problems (Castrogiovanni, Baliga, & Kidwell, 1992, 26). Finally, the Scanlon plan relies on the presupposition that the firm itself is inefficient in its operations; but as the turnaround of British Steel in the 1980s shows (Beauman, 1996, 16), the timing of the recovery is equally important, because market, currency and interest fluctuations still effect underlying profitability. Moreover as Hofer indicates (Hofer, 1980) company operations may already be efficient, and it is a strategic turnaround that is needed. Thats is super operational efficiencies wont work, if the firm is not correctly targeting the proper markets (O'Neill, 1986, 80-88). There has been considerable debate as to whether the Scanlon Plan actually works due to a both a lack of empirical research, and a surplus of partially biased research (White, 1979). The inclusion for the Scanlon Plan however, is included for historical purposes in relation to the next methodology created sixty-six years later.

The Scanlon Plan especially as practiced by Carl Frost with the Scanlon Roadmap installation process takes time to implement. It is not unusual for an organization of 200-300 people to spend a year involving, researching, and creating a plan. The Scanlon Plan is leader dependent. It requires top level involvement in creating the mandate and building commitment. It requires a servant-leader---someone who is willing to develop others. Since Scanlon Plans are relatively rare it can become difficult to find leaders with experience in knowing how to lead in a Scanlon organization. The Scanlon Plan requires Theory Y assumptions among most of the managers to be successful. (Workers want to work, the average employee has great creativity and ingenuity if given a chance to express them, etc.) Once a plan is installed it requires time and energy to maintain. A Scanlon Plan also requires a great deal of training and development of employees. In Organizations with large part time staff and/or turnover it can become difficult to develop employees sufficiently. The Scanlon Plan requires a great deal of sharing of information. Most Scanlon organizations are "open-book" organizations. This can be a disadvantage for organizations that prefer or require greater secrecy. While the Scanlon Plan can lead organizational change once a plan is installed and becomes a way of life for an organization it is difficult to go back. Employees like the information sharing, high involvement, equitable culture Scanlon creates. This can make it difficult in Scanlon organizations to acquire or merge with non Scanlon organizations. Some Scanlon organizations have become rigid especially in regard to how the bonus is calculated and have resisted needed change. The Scanlon Plan is an organizational wide system. It requires an organizational unit that makes sense to employees. For example, a plant, or a self sufficient unit, or a store, could develop a Scanlon Plan. An individual, team or department could not. While Scanlon plans have been installed in small and large organizations, very small organizations (30 or less employees) tend to not need the structure that Scanlon provides. Very large organizations may find it difficult to create the collaboration that Scanlon requires.