Gainsharing and Power: Lessons from Six Scanlon Plans 9781501722622

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Gainsharing and Power

DENIS COLLINS

Gainsharing and Power LESSONS FROM SIX SCANLON PLANS

ILR Press AN rMrRINT oF Cornell University Press ITHACA AND LONDON

Copyright© 1998 by Cornell University All rights reserved. Except for brief quotations in a review, this book, or parts thereof, must not be reproduced in any form without permission in writing from the publisher. For information, address Cornell University Press, Sage House, 512 East State Street, Ithaca, New York 14850. First published 1998 by Cornell University Press. Library of Congress Cataloging-in-Publication Data Collins, Denis, b. 1956 Gainsharing and power : lessons from six Scanlon plans I Denis Collins. p. em. Includes bibliographical references and index. ISBN 0-8014-3490-4 (cloth: alk. paper) 1. Profit-sharing-United States-Case studies. 2. ManagementEmployee participation-United States-Case studies. 3. Bonus system-United States-Case studies. I. Title. HD2984.C65 1998 97-39573 658.3'225-dc21

Printed in the United States of America. Cornell University Press strives to utilize environmentally responsible suppliers and materials to the fullest extent possible in the publishing of its books. Such materials include vegetable-based, low-VOC inks and acid-free papers that are also either recycled, totally chlorine-free, or partly composed of nonwood fibers. Cloth printing

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CONTENTS

LIST OF TABLES AND FIGURES PREFACE

vii

ix

Introduction 1

Part I Employee Involvement 1 Participatory Management and Scanlon-Type Gainsharing Plans 7 2

Conflicts of Interest: At Work and in Political Systems

3 Research Methods and Facility Profiles

44

Part II Four Nonunion Facilities 4

Cylinder Lifts: A Privately Owned Nonunion Facility, Small Bonuses 57

5

Foam Seats: A Publicly Owned Nonunion Facility, Modest Bonuses 80

6 Forestland: A Publicly Owned Nonunion Facility, Modest Bonuses 105 7 Innovations: A Publicly Owned Nonunion Facility, Large Bonuses 128

23

Contents

vi

Part III Two Union Facilities 8

Innovations-Brotherhood: A Publicly Owned Union Facility, Very Small Bonuses 153

9

Packaging International: A Unionized ESOP Facility, Abandoned Gainsharing 177

Part IV Summaries and Ethical Directions 10

Power Games, Outcomes, and Lessons Learned of Scanlon-Type Gainsharing Plans 201

11

The Ethical Superiority of Participatory 11anagement 233 REFERENCES SUBJECT INDEX AUTHORINDEX

261 273 275

TABLES AND FIGURES

Tables 1-1. Gainsharing case studies published since 1979 3-1. Profiles of six facilities

16

47

3-2. Survey factors: Statistical means and factor reliabilities 3-3. Correlation matrix for survey factors

53

4-1. Cylinder Lifts: Suggestions and bonuses per year

59

4-2. Cylinder Lifts: Monthly gainsharing bonus payouts 4-3. Cylinder Lifts: Survey factors

74

5-1. Foam Seats: Suggestions and bonuses per year

84

5-2. Foam Seats: Monthly gainsharing bonus payouts 5-3. Foam Seats: Survey factors

107

6-2. Forestland: Monthly gainsharing bonus payouts

114

122

7-1. Innovations: Suggestions and bonuses per year 7-2. Innovations: Monthly gainsharing bonus payouts 7-3. Innovations: Survey factors

91

99

6-1. Forestland: Suggestions and bonuses per year 6-3. Forestland: Survey factors

66

130 140

146

8-1. Innovations-Brotherhood: Monthly gainsharing bonus payouts 164

52

Tables and Figures

viii

9-1. Packaging International: Suggestions and bonuses per year 179 9-2. Packaging International: Monthly gainsharing bonus payouts 184 10-1. Nonunion survey factors: Statistical means

202

10-2. Management attitudes and behaviors toward gainsharing activities 209 10-3. Nonmanagement attitudes and behaviors toward gainsharing activities 210 10-4. Gainsharing outcomes common to all six facilities

217

10-5. Gainsharing outcomes specific to only one or a few facilities 218 11-1. Ethical foundations of political, economic, and organization theories 235

Figures 2-1. Conflict of interest between management and nonmanagement employees 29 2-2. Gainsharing solution to conflicts of interest between management and nonmanagement employees 36 2-3. Democratizing the workplace

40

PREFACE

This book is dedicated to Timothy L. Ross, Larry Hatcher, and all management and nonmanagement employees who are sincerely involved in democratizing their organizations. When I was obtaining my master's in philosophy at Bowling Green State University back in 1987, I knew that I wanted to document events that occurred at organizations actively engaged in ethical innovations. I went to the library and thumbed through hundreds of pages of names of consultants doing all sorts of consulting. As will be obvious from the final chapter of this book, I consider gainsharing to be an ethical innovation. To my pleasant surprise, there was a management consultant by the name of Timothy L. Ross located on campus in the business school who implemented gainsharing plans. Tim lives and breathes gainsharing, and it was extremely refreshing to locate an ethical idealist in an accounting department. From interviews with several employees at a gainsharing company, it was obvious that Tim had a profound impact on their everyday work lives. I am indebted to Tim for his insights and for opening the door to many gainsharing companies. Conducting research for Tim led to a meeting with Larry Hatcher. Larry had obtained his Ph.D. in psychology from Bowling Green State University and was teaching at Winthrop College, South Carolina. During his so-called summer vacation, Larry was driving around the Midwest conducting research for Tim. We had the pleasure of sharing hotel rooms and thoughts of freeing all the chickens cooped up along the interstate highway while surveying and interviewing management and nonmanagement employees about their gainsharing experiences. I am indebted to Larry for his infinite amount of energy and for setting the highest standard for research excellence.

X

Preface

I am also indebted to William C. Frederick of the University of Pittsburgh, who chaired my dissertation committee in 1990. Bill provided me with the academic freedom to pursue my thoughts and intuitions about the ethical dimension of participatory management. These thoughts were sharpened by the other members of my dissertation committee-Gary Florkowski, Carrie Leana, Dick Moreland, and Donna Wood. I am also indebted to the School of Business at the University of Wisconsin-Madison for providing me with an unimaginable amount of professional autonomy and support to continue this line of research. The field studies were made possible with the aid of several financial grants. I am grateful to the National Science Foundation Program for Decision, Risk, and Management Science, the Graduate School at the University of Wisconsin-Madison, and the Association for Quality and Participation for providing the necessary funding. I also thank all the academic journal editors and anonymous reviewers who commented on the evolution of my theory, research methods, and interpretation of findings. Portions of this book have appeared in several articles published in academic journals: "Self-Interests and Group-Interests in Employee Involvement Programs: A Case Study," Journal of Labor Research 16, no. 1 (1995): 57-79; reprinted by permission. "A Socio-Political Theory of Workplace Democracy: Oass Conflict, Constituent Reactions, and Organizational Outcomes at a Gainsharing Facility," Organization Science 6, no. 6 ijune 1996): 628-644, copyright© 1996, and "The Ethical Superiority and Inevitability of Participatory Management as an Organizational System," Organization Science copyright © 1997, The Institute for Operations Research and the Management Sciences (INFORMS), 2 Charles Street, Suite 300, Providence, R.I. 02904. "The Death of a Gainsharing Plan: Power Politics and Participatory Management," in Organizational Dynamics 24, no. 1 (Summer 1995): 23-38, reprinted by permission of the publisher, © 1995, American Management Association, New York, New York, all rights reserved. "How and Why Participatory Management Improves a Company's Social Performance: Four Gainsharing Case Studies," Business and Society 35, no. 2 (1996): 176-210, copyright© 1996, reprinted by permission of Sage Publications. You would not be reading the words of this book without the kind assistance of those associated with Cornell University Press. In particular, I wish to thank Robert Stem of Cornell University and Steven Markham of Virginia Polytechnic Institute for their very constructive comments on an earlier draft of this book, and Fran Benson for her editorial guidance.

xi

PREFACE

If it were not for the wonderful doctors and staff of Meriter Hospital's Oncology Department, particularly Dr. Thomas McFarland, you also would not be reading this book. Tom had the unpleasant task of informing me that I had an advanced stage of Hodgkins~ Disease shortly after I finished the first draft. Under his expert guidance, and with eight months of chemotherapy spread over ten months, the cancer entered remission and I began rewriting the final manuscript. Last, this book is possible only because of the willingness of the management and nonmanagement employees at Cylinder Lifts, Foam Seats, Timberland, Innovations, Innovations-Brotherhood, and Packaging International to tell their stories. I am indebted to them for their insights, openness, and ability to survive in a very difficult work environment. It seems like yesterday that a welder responded to my question about whether work was now more enjoyable because of gainsharing with this statement: "You're ___ me! You want to know if I'm happier working sixty-hour weeks in one-hundred degree temperatures fixing little broken pieces because I hand in suggestions, evaluate them, and get a little extra money for it? Don't play games with me!" May they and their families all experience enriching, meaningful, and economically rewarding lives. DENIS COLLINS

Madison, Wisconsin

Gainsharing and Power

Introduction

This book tells the heroic stories of management and nonmanagement employees at six facilities that implemented Scanlon-type gainsharing plans, a form of participatory management that includes a suggestion system, teams, and group-based bonuses. Like the leading characters in most good novels, some of these heroes have scars. Nonetheless, all six facilities realized significant benefits despite the many power games that were played out between and among management and nonmanagement employees. Involving employees in decisions that directly affect them has been praised in the management literature for over a century. Most of the classic organization scholars-Argyris, Bennis, Drucker, Herzberg, Katz and Kahn, Lawrence and Lorsch, Lewin, Likert, March and Simon, Maslow, McClelland, McGregor-mention the benefits of participatory management. High praise for participatory management has dominated many best-selling management books published in the 1970s, 1980s, and 1990s. Management magazines are filled with brief, enthusiastic essays aimed at encouraging managers to get on the gainsharing bandwagon and improve facility performance. Much scholarly research on gainsharing and participatory management suggests, however, that most efforts experience modest success. Some facilities have had tremendous success with Scanlon-type plans, even under very difficult economic conditions. Other facilities have failed miserably. If managed appropriately, the plans can work. But why are some plans managed effectively and not others? Given that so much has been written about how to do it right, why don't managers just de-

2

Introduction

sign the plans right, implement them properly, and provide support so that the plans will succeed? An essential factor underlying the research and commentaries on Scanlon-type gainsharing plan successes and failures is the role of power games. All attempts to decentralize organizations entail changes in power relationships. Implementing gainsharing is a threat to management power (and union power, if a union is present in the facility) and to traditional relationships between management and workers because each group's interests are being redefined. These fascinating issues are addressed in this book based on six field studies. Chapter 1 places Scanlon-type gainsharing plans in a historical context. It reviews the most recent research on gainsharing plans and concludes with a call to consider comparative gainsharing case studies from a political science perspective, rather than human relations or human resource management perspectives. Chapter 2 defends the need for a new theory of gainsharing based on conflicts of interest between management and nonmanagement employees. From political science research on changing from authoritarian rule to democracy, a conflict of interest theory of what happens when facilities implement Scanlon-type gainsharing plans is developed. Chapter 3 describes how six facilities with Scanlon-type gainsharing plans were chosen for this study and the data collection methods used. These particular facilities were chosen because they differed according to union status, size of gainsharing bonuses, and type of ownership. Each facility was given a fictitious name to preserve anonymity. Four of the facilities-Cylinder Lifts (Chapter 4), Foam Seats (Chapter 5), Forestland (Chapter 6), and Innovations (Chapter 7)-were nonunion, and two-Innovations-Brotherhood (Chapter 8) and Packaging International (Chapter 9)-were union. Each of the nonunion facilities was chosen because of variances in gainsharing bonus payouts. Examining facilities with different gainsharing bonus payouts provided insight into how employee participation in decision making or the size of the financial bonus affects an organization. Cylinder Lifts (1.2 percent/$18) had a very small average monthly bonus payout; Foam Seats (5.2 percent/$63) and Forestland (6.8 percent/$85) had relatively modest monthly bonus payouts; and Innovations (19.3 percent/$370) had a large average monthly bonus payout. In addition, Cylinder Lifts was privately owned, whereas Foam Seats, Forestland, and Innovations were publicly owned. The two union facilities were chosen after the four nonunion field studies had been conducted on the basis of how they could further an

INTRODUCTION

3

understanding of the gainsharing phenomenon. Innovations-Brotherhood, although part of the same publicly owned corporation as Innovations, had a very small average monthly gainsharing bonus (0.4 percent/$12). Packaging International, which also had a small average monthly gainsharing bonus payout (1.2 percent/$25), was employeeowned and abandoned gainsharing after six years. Seventy-four semistructured interviews with key informants served as the primary source of data collection for each field study. Ten to fourteen semistructured interviews were conducted at each facility. Each interview lasted thirty to forty-five minutes, on facility time, and each interviewee was guaranteed anonymity. The seventy-four interviewees consisted of thirty-nine managers (six per facility), eighteen nonmanagement gainsharing team representatives (two to four per facility), and seventeen other nonmanagement production employees (two to four per facility). Managers were chosen based on their key positions at different levels of the facility's hierarchy (typically the president, facility manager, controller, engineering manager, supervisors, and so on). Nonmanagement employees were chosen based on whether they were supportive of gainsharing by submitting many suggestions and being elected team representatives (go-getters), unresponsive by submitting only one or two gainsharing suggestions every year (fence-sitters), or adversarial by having seldom or never submitted a suggestion and speaking strongly against gainsharing (opponents). This interview procedure allowed for cross-verification by those who represented a different role in the facility (i.e., stories told by managers were verified by a nonmanagement employee) and the gainsharing coordinator. Gainsharing coordinators were interviewed first-at the end of each day, and just prior to departure. Additional information about each facility was gathered from the gainsharing suggestion logs, minutes of gainsharing meetings, facility newsletters, and other relevant facility documents. I attended review board meetings at the five facilities that still had gainsharing plans, as well as employee meetings, gainsharing team meetings, and work cell meetings whenever possible. Chapter 10 summarizes the six Scanlon-type gainsharing case studies in terms of trends related to power games and outcomes. In addition, the four nonunion facilities are compared based on the gainsharing evaluation and attitude surveys conducted at the time of the field study. Strategies for restricting and enhancing employee involvement and gainsharing bonus payouts are summarized. Each interest group is analyzed in terms of their reactions to the suggestion process, gainsharing teams and the group-based financial bonus. Gainsharing outcomes are summa-

4

Introduction

rized based on direct and indirect benefits to management and nonmanagement employees. Practical advice is provided on how to manage the power games that occurred at the six facilities. Last, Chapter 11 defends the position that participatory management represents a form of workplace governance that is ethically superior to alternative forms of workplace governance. It investigates the socialphilosophical assumptions that underlie prominent political and economic theories and applies them to workplace relationships. Debates in political and economic theory are framed in terms of the tension that exists within communitarian social philosophies and between communitarian