Answer to Question 1
Answer: The Scanlon plan was developed in 1937 by Joseph Scanlon, a United Steel Workers Union official.
Scanlon plans have five basic features. The first is Scanlon's philosophy of cooperation. This philosophy assumes that managers and workers must rid themselves of the us and them attitudes that normally inhibit employees from developing a sense of ownership in the company.
A second feature is what its practitioners call identity. This means that in order to focus employee involvement, the company must articulate its mission or purpose, and employees must understand how the business operates in terms of customers, prices, and costs.
Competence is a third basic feature. The program, say three experts, explicitly recognizes that a Scanlon plan demands a high level of competency from employees at all levels. This suggests careful selection and training.
The fourth feature of the plan is the involvement system. Employees present improvement suggestions to the appropriate departmental-level committees, which transmit the valuable ones to the executive-level committee. It then decides whether to implement the suggestion.
The fifth element of the plan is the sharing of benefits formula. If a suggestion is implemented and successful, all employees usually share in 75 of the savings. For example, assume that the normal monthly ratio of payroll costs to sales is 50. (Thus, if sales are 600,000, payroll costs should be 300,000.) Assume the firm implements suggestions that result in payroll costs of 250,000 in a month when sales were 550,000 and payroll costs therefore should have been 275,000 (50 of sales). The savings attributable to these suggestions is 25,000 (275,000 minus 250,000). Workers would typically split 75 of this (18,750), while 6,250 would go to the firm. In practice, the firm sets aside about one-quarter of the 18,750, for months when payroll costs exceed the standard.
Answer to Question 2
C. Reactive/defensive tactic
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Major Areas Tested on the CMA and RMA Examinations
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