Is A Scanlon Plan Right For Your Business?



A scanlon plan is a type of gain-sharing program that rewards employees for their contributions. It places an emphasis on group of employees performance. A scanlon plan is intended to boost profits by establishing a direct connection between work and reward. While implementation can be difficult, scanlon plans can help accelerate your company’s financial growth. If you are a business owner who like to know whether a scanlon plan is right for your business, consider the following before making a decision.

Pro: Establishes A Link Between Work & Reward

Scanlon plans are a form of “profit-sharing”. This means that employees are awarded a pre-established portion of whatever profits they are responsible for bringing in. This aspect encourages improved productivity because it directly correlates one’s work with the results. Employees are often discouraged by the lack of satisfaction they get from their efforts. With the scanlon plan, however, they will be able to feel tangible results. While also working towards increasing their chances of getting rewarded, they are simultaneously contributing to company growth. Employee morale is vital to your business’s financial health, so consider the importance of this before deciding on implementing a scanlon plan.

Con: Implementation Is A Long Process

Researching, organizing and installing a scanlon plan is very complicated. Because of this, it can take a long time to complete. It is not unusual for a larger company of over a hundred people to take close to a year to create a working plan. Scanlon plans are also very leader-dependent. The require skilled individuals to implement them effectively. Those responsible for running the program need to be invested in developing employees. They also need to conduct constant analysis on finances to ensure that the plan is benefitting the company. With all this in mind, you need to determine whether or not you have the capacity to organize a scanlon plan while considering the size of your business. If you are not confident in your ability to implement one efficiently, a scanlon plan can be detrimental to your business.

Pro: You Gain Valuable Contributions

The profit-sharing aspect of scanlon plans is not just limited to an increased work effort. They also value new ideas that might help cut costs. Reducing expenses would count as a form of cost-saving. Therefore, it would fall under whatever an employee might be encouraged to do under a scanlon plan. Your business would then gain contributions or ideas from a wide range of employees. Some might not have been interested in sharing their ideas openly. However, the perks of doing so with a scanlon plan would encourage participation. Intelligent contributions are important for the growth of a business. A scanlon plan would increase your chances of gaining these contributions.

Con: They Require A Lot Of Information Sharing

Scanlon plans require that a business be extremely transparent with its data. This includes profits, projections, expenses and employee bonuses. All of this information is required to ensure that a scanlon plan is being fully implemented. If your business is one that values privacy, this can be seen as a disadvantage. Vital information would have to be transferred between multiple parties throughout the day.

Information on your company’s finances would become too readily available to those that might not have involvement in it. This can be a further problem if you decide to merge with another company. If they are unfamiliar with the culture of transparency inherent in scanlon plans, they might have difficulty adjusting to your business. If privacy is an issue for you and your company, a scanlon plan might prove disadvantageous.

A profit-sharing business model like scanlon plans creates links between reward and work. They are used to provide an incentive for employees to make more meaningful contributions. They are specifically designed for helping your company grow. Unfortunately, the difficulties associated with installing one might also prove detrimental. Consider all the pros and cons of implementing a scanlon plan before you decide to start the process.

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