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FINES wiII be charged if book is returned after the date stamped beIow. e... ’,_ k . .. P MS ' 357-9533; W ABSTRACT THE SCANLON PLAN: CAUSES OF SUCCESS By- John Kenneth White The Scanlon Plan (SP) is a systematic approach designed to help an organization achieve its goals through use of a formal par- ticipation program and a financial bonus. The Plan has been imple- mented in numerous organizations and has met with varying degrees of success. This study examined some of the factors that may account for this variation in success. Most existing research on the SP has relied mainly on data collected from individual organiza- tions which does not allow for systematic examination of those variables that can be measured only at the organizationwide level. ‘The present study attempted to remedy this situation by examining the construct of SP success and its correlates at both the igtgg_ and iggggprganizational level of analysis. The relationships were examined with data collected from 4000 employees from 22 manufacturing organizations, 21 of which have or have had a SP. At the intraorganizational level two measures of SP success were used: (1) employee self reported participation measured at the individual and work group level, and (2) perceived SP success measured at the individual level. Perceived SP success and John Kenneth White participation were highly related but the value of the finding was limited by the fact that the relationship was investigated only at the individual level of analysis. At the interorganizational level three measures of SP success ‘were used: (1) whether the SP was subsequently retained or abandoned, (2) mean level of participation reported by the employees, and (3) a SP success rating completed independently by three judges. The three measures were highly interrelated, and the rating provided a very reliable (.97) measure of SP success. At the intraorganizational level, participation was signifi- cantly related to work group size (inversely), employee background characteristics, length of service, and expected level of SP success measured four years earlier; but was essentially unrelated to mana- gerial attitudes toward participative management policies. These managerial attitudes were independent of length of service, but were positively related to work group size and the extent to which managers believed they would be rewarded for following participative management policies. At the interorganizational level, SP success was positively related to the number of years a company had had a SP, average mana- gerial attitudes toward participative management policies, chief executive officer's attitudes toward participative management poli- cies, workforce characteristics, and expected level of SP success measured four years earlier; but was not related to company size. The study concluded with implications for theory and practice and suggestions for future research. THE SCANLON PLAN: CAUSES OF SUCCESS By John Kenneth White A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Psychology 1974 Copyright by John Kenneth White 1974 ACKNOWLEDGMENT S This dissertation reflects the contribution of many people. I‘would like to acknowledge the generous.help of the many representa- tives from the participating organizations without whose help the study would never have gotten off the ground. My guidance committee provided invaluable assistance in help- ing me transform.some fuzzy ideas into a meaningful study. I am grateful to Dr. Frank Schmidt for both his stylistic and method- ological contributions; Dr. John wakeley for his assistance in keeping the study integrated and goal directed; and Dr. Fred Wickert for his help in turning it all into a presentable package. I would like to express special thanks to my chairman Dr. Carl Frost. Among other things he is directly or indirectly respon- sible for all that I have learned about the Scanlon Plan; and, he has provided me with many other valuable learning opportunities throughout my graduate studies. Thanks are also due to the "fifth floor crowd" who, in addi- tion to providing a stimulating environment, have made being a graduate student a much more enjoyable experience. Final consideration must go to my wife, Sharon, for her infinite patience and understanding throughout my entire career as a graduate student. ii FOREWORD The Scanlon Plan (SP) is a tool to help an organization increase its effectiveness. There are many other tools that can be used to reach the same goal and it is the achievement of the goal, not the particular tool used, that is important. The reader should keep in mind that while the present study is concerned only with the SP, it does not mean to imply that other approaches are any less valid as tools for achieving the desired result. Also'the SP is not an all or nothing concept but can, and has been, successfully integrated with other approaches. Furthermore, many of the activities that take place under the name of the SP are common to other approaches and therefore the present study may have direct implications for other approaches which have component activities that parallel those of the SP. The focus of this study was the total Scanlon Plan concept rather than particular aspects of it. Previous studies of the Plan have emphasized different 1evels--from the individual to the total organization; and/or different approaches to the Plan-~the psychological versus the financial aspects. Because of the current interest in social science approaches to organization development in general, and because the SP is associated with the Psychology Department at M.S.U., most of the recent research (at least here at M.S.U.) has focused on the individual or small group level and on the psychological aspects. However, the SP originated as an attempt to improve or.at least maintain iii employee income in the face of problems without sacrificing company solvency--the idea of enriching the quality of work life and satisfying ego needs came later. Similarly, the idea of "companywide" is emphasized in the SP literature. Indeed several of those most closely associated with the SP would argue that by definition a SP cannot succeed independent of the company's success. Therefore, it seems only appropriate that examination of the SP should incorporate this financial and macro focus in addition to the more psychological and micro approach. The present study is an attempt in this direction. However, a macro approach often necessitates looking at the entire organization as the unit of analysis which introduces problems that are not normally encountered in psychological research: 1. Small Ns - the difficulty of getting appropriate research sites often precludes getting enough degrees of freedom for findings to reach conventional levels of statistical significance. 2. Unrepresentativeness of sample - the difficulty of getting research sites precludes the possibility of getting samples that are really representative of the population (of organizations) to which one would most like to make generalizations. 3. Lack of experimenter control - it is virtually impossible for the researcher to exert any control over variables at the organi- zationwide level and hence interorganizational comparisons are plagued by extraneous influences. When these interorganiza- tional comparisons also involve interindustry comparisons, the economic environment can exert profound differential effects; iv '33 {E however, restricting analyses to intraindustry comparisons severely reduces generalizability of results. Because of these reasons, such studies are rare. After reviewing the literature for their text Comparative Studies in Organizational Behavior, Graham and Roberts (1972) concluded: "At present there is a dearth of interorganizational field research in contrast to the vast quantity of single organizational studies...such studies are rare because they are expensive in time, effort, and money. No longitudinal investiga- tions are presented [in the text] because few good ones exist [pp. 131- 1321." However, as these same authors point out, the need for such research is strong. Because much of the substance of the SP is in- dividual and perceptual, but success of the SP is to a great extent an organizationwide phenomenon, this study attempted to combine analysis at both the inter and intraorganizational level. With the limitations of such an approach in mind - onward. TABLE 'LIST OF TABLES. . . . . . . . 'LIST OF FIGURES . . . . . . . CHAPTER I. INTRODUCTION. . . Background. . . . . . . . History . . . . . . . Underlying Principl . Shift in Emphasis . . Potential Benefits. . Extent of the Scanlon Relationship to Other Basic Structures. . . . . Financial Structure . Summary . . . . . Plan OF CONTENTS Approaches. Participation Structure Interrelation of the Two Structures Scanlon Plan Success. . Definitions . . . . . Participation . . Literature Review . . Participation . . Causes of Scanlon Plan Success. . Conceptual Model. . . . . . . Scanlon Plan Literature Overview. Scanlon Plan Case Studies . . Ability and Motivation to Participate Intracompany Scanlon Plan Success . Personnel Characteristics . . Situational Characteristics . . Companywide Scanlon Plan Success. . Personnel Characteristics . . Situational Characteristics . . Scanlon Plan Process Variables. Summary and Interpretation. . . . Plan Of ’ Studl . I O O O O O O O O I 0 Conceptual Model. . . Research Model. . . . vi Page viii ix [.1 mCh-l-‘UwI-‘H 22 24' 29 30 30 34 38 39 39 43 45 46 51 53 53 61 63 63 64 72 77 78 78 80 Page Variables Assessed and Variables Omitted. . . . . . 81~ KnothQBeBI I I I I I I I I I I I I I I I I I I I I 82 Hypotheses and the Conceptual Model . . . . . . 92 CHAPTER II. METHOD 0 e e e e e e is e e e e e e e ’e e e e 'e 94 Sample. . . . . . . . . . . . . . . . . . . . . . . . . 94 Variables Measured. . . . . . . . . . . . . . . . . . . 94 Data Analyses . . . . . . . . . . . . . . . . . . . . . 99 Scale Development and Construct Validity. . . . . . 99 Hypotheses Testing. . . . . . . . . . . . . . . . . 103 Interrelationships Among Success Measures . . . 103 Intracompnay Scanlon Plan Success . . . . . . . 104 Intercompany Scanlon Plan Success . . . . . . . 105 CHAPTER III. RESULTS AND DISCUSSION. . . . . . . . . . . . 107 Interrelationships Among Scanlon Plan Success Measures. . . . . . . . . . . . . . . . . . . 107 Intracompany. . . . . . . . . . . . . . . . . . . . 107 Intercompany. . . . . . . . . . . . . . . . . . . . 108 Causes of Scanlon Plan Success. . . . . . . . . . . . . 113 Intracompany. . . . . . . . . . . . . . . . . . . . 113 IntercompanYI I I I I I I I I I I I I I I I I I I I 120 CHAPTER IV. SUMMARY AND CONCLUSIONS. . . . . . . . . . . . 129 The Scanlon Plan. . . . . . . . . . . . . . . . . . . . 129 Scanlon Plan Success. . . . . . . . . . . . . . . . . . 130 Intracompany. . . . . . .‘. . . . . . . . . . . . . 130 Intercompany. . . . . . . . . . . . . . . . . . . . 131 Causes of Scanlon Plan Success. . . . . . . . . . . . . 131 Intracmpany. I I I I I I I I I I I I I I I I I I I 131 Intercompany. . . . . . . . . . . . . . . . . . . . 132 Implications for Theory and Practice. . . . . . .~. . . 133 TheorYI I I I I I I I I I I I I I I I I I I I I I I 133 PracticeI I I I I I I I I I I I I I I I I I I I I I 134 Directions for Future Research. . . . . . . . . . . . . 136 REFRENCES I I I I I I I I I I I I I I I I I I I I I I I I I 137 APPENDIX. Questionnaire Items. . . . . . . . . . . . . . . 144 vii Table LIST OF TABLES Sample Scanlon Plan Bonus Calculation . . . . . . . ’ Number of Employees in Plants Using the Scanlon Plan Represented at the 1957 Conference . . . . . . Corporate Size Distribution of Companies Attending Scanlon Conferences: In Terms of Annual Sales Volume (in 000,000). . . . . . . . . . Hypothesized Relationships Between the Independent Variables and Rated Scanlon Plan Success. . . . . . Sample: Sources of Questionnaire Data. . . . . . . Mean PDM of Non—Scanlon Plan Companies and Companies where the Scanlon Plan is Subsequently Retained or Abandoned . . . . . . . Hypothesized Relationships and Obtained Correlations for the Independent Variables and Rated Scanlon Plan Success. . . . . . . . . . . viii Page 15 66 66 91 95 110 121 LIST OF FIGURES Figure Page 1 Causes of Scanlon Plan Scucess: Conceptual Model . 4O 2 Relationship of Hypotheses to the Conceptual Model. 93 ix '--.‘ '4 :wu I'VU. In {i l‘. (I! 1 CHAPTER I INTRODUCTION Background History The origins of the Scanlon Plan (SP) can be traced to a small financially troubled steel mill during the depression. Joe Scanlon, who worked there as an operator in spite of his cost accounting back- ground, took a leading part in a successful drive to organize the company. As president of the newly formed local, he was caught in the dilemma of the workers wanting increased wages and the company on the verge of bankruptcy. He along with other union representatives and the company president took their predicament to Steelworkers VP, Clinton Golden, who told them that only they themselves could solve the problem and suggested that they go back and try to enlist the help of all the workforce. The workers responded with enough sug- gestions to maintain wages and provide a healthier performance for the company. The success of this effort led to Joe Scanlon taking a position with the Steelworkers and using this new approach to help other small financially troubled companies. However, the major impetus that really got the Plan going was its success in the Adamson Company. Up until this time the approach had been used to alleviate crisis situations. iBut Adamson was a profitable company and the president wanted the Plan to improve an already healthy company rather than to avert a crisis. fPhe Plan was begun at Adamson on January 1, 1945. The first month jproduced a bonus of $4200 that was distributed as a percent of base ‘pay'to the 100 employees; and wages were already highest in the in- «instry! The year ended with a 46 percent increase in "productive efficiency." Life Magazine (Chamberlain, 1946) reported on Adamson's success, and the SP was on its way. Doug McGregor became aware of Adamson's success and persuaded .Joe Scanlon to join the Industrial Relations Staff at MIT. Jack Ali, union president at Lapointe Machine Tool Company, and Ed Dowd, execu- tive VP of the company, read the §i§g_article about Adamson's success .and tracked down Joe Scanlon at MIT. On December 1, 1947, the SP was implemented at Lapointe. It was very successful and was described to the business world in what is probably the best known article on the SP, "Enterprise for Every Man" by Russell Davenport (1950).: Scanlon died in 1956 and McGregor died in 1964, but their work has been carried on principally by two others both of whom are still active in implement- ing and improving SP installations: Fred Lesieur, who was union presi- dent at Lapointe, now has his own consulting firm specializing in the SP; Dr. Carl Frost who worked with Scanlon and McGregor while he was. on the MIT Industrial Relations Staff from 1946 to 1949, joined the M.S.U. Psychology Department Staff in 1949 and has been very active since then in helping area companies implement.the SP. In 1968 many of the organizations which Dr. Frost had helped implement the SP 1“ we“ IQ" ' v .abp -- i. -o 1211 9.. “b I.” I“ e.- ‘5 incorporated as the Midwest Scanlon Associates.1 This association has ‘provided the member companies an opportunity to share their experience saith the SP, and has contributed to the growth and success of the SP in the Midwest . Underlying Principle IThe basic notion underlying the SP is that present in every work- :force is a reservoir of creativity and experience that if properly tapped tuas the potential to greatly increase productivity.’ According to TMCGregor (1960) this potential can be realized by what he calls $2557 gration - "the creation of conditions such that members of the organiza- tipn can achieve their own goals best by directing their efforts toward Ehe success of the organization [p. 49]." The SP uses two basic struc- tures to try and put this principle of integration into practice: financial structure and participation structure. From a labor-management relations viewpoint the SP attempts to C focus effort on increasing the size of the pie" whereas typical manage- 'ment-labor relations through use of the collective bargaining process focuses solely on how to split up the existing pie. Shift in Emphasis Since its inception,:£he emphasis of practitioners and researchers interested in the SP has shifted from purely financial to a more psychological orientation. There are several reasons that may account for this occurrence: 1The name of the organization has subsequently been changed to the Scanlon Plan Associates. 1. Two of its strongest proponents are professionally trained psychologists - Drs. McGregor and Frost. 2. The general interest of industrial-organizational psychologists in the key SP concepts of participation in decision making (PDM) in particular, and in organization development in general. 3. The current trend, both in professional and secular circles, to place emphasis on nonfinancial needs and motives is evidenced by the interest in the "quality of work life" as a focal point for studying organizations. 4. The application of the SP to companies that were not facing immediate financial crisis. However, the financial emphasis has not been completely ignored as evidenced by two recent articles on the SP (Doyle, 1970; Ross & Jones, 1972) that have appeared in finance/accounting journals. Potential Benefits As originally conceived the direct benefits of the SP were in- creased pay for workers and increased profitability for the company by providing a larger production base over which to spread the fixed costs. However, it became apparent that there are other, somewhat indirect, benefits to both the workers and the company that may arise from a successfully Operating SP. These include: Company: - other cost savings or company directly sharing in the bonus Employees: Labor relations: - improved customer service - quality, delivery time - reduced turnover and absenteeism - more knowledgeable and hence more versatile labor force - greater willingness on the part of the workforce to accept changes - favorable recruiting position in a tight labor market - increased competence of leadership - forces company to become more aware of costs - better morale, job attitudes, and general atmosphere job security - education - personal and career growth - chance to satisfy social and ego needs - better morale, job attitudes, and general work atmosphere In some situations the SP may eliminate the need for implementing unions and formal labor-management bar- gaining by providing employees with the influence for which they might otherwise turn to a union. Where there is a union, the SP may facilitate collective bargaining in two ways: (1) As the employees become more knowledgeable about the company and trusting of management and vice versa, both parties may be ablg_ to bargain more objectively. (2) Because of better management-labor relations in general both parties may be motivated to bargain more sincerely. Similarly, in non-unionized situations the SP may facilitate the achievement of mutually acceptable wages, working conditions, and relationships. Extent of the Scanlon Plan In light of the possible benefits discussed above it would appear likely that the SP would have received widespread adoption, but such is not the case. It is difficult to get accurate figures on the number of companies that have or have had the SP. Lesieur and Puckett (1968) say they know of 120 to 130 situations utilizing a SP and estimate that "there probably are anywhere from 300 to 500 situations in the United States and Canada employing some version of a Scanlon-type plan [p. 77]." However, others are far more conservative in their estimate of the extent of the Scanlon Plan. Helfgott (1962) writes that "Despite the widespread publicity given the Scanlon Plan, no more than a few dozen companies operate with it [p. 14]." Notwithstanding Helfgott's comments to the contrary, although the SP has been around for 30 years, it has ng£_received widespread attention. Indeed the SP seems to be considerably less well known than much more recent organization develop- ‘ment approaches such as job enlargement, Managerial Grid, and the Likert Survey, although it appears to be no less successful than these more recent approaches. There are several reasons that may account for this situation: 1. Simply because it has been around, it is not new and "fashionable." 2. It has centered around a few individuals (particularly Frost and Lesieur in recent years). 10. 11. Related to the above point, the vast majority of SP applications have been geographically located within a relatively small radius of either M.I.T. or M.S.U. The general emphasis on technology to improve productivity and the assumption that machine pacing reduces the importance of employee motivation. It has often been assumed (be it true or not) that its applicability is limited to small companies that do not rely on high techno- logical sophistication. It got started in a mature industry and union and hence did not spread by natural growth. The death of Joe Scanlon, the SP's originator. The death of Doug McGregor, the SP's most famous spokesman. The fact that none of the prominent authors in the area of organization development has identified with the Scanlon Plan or attempted to integrate it into the current literature on organization development. Awareness of situations where the SP has been tried and abandoned. The American cultural emphasis is on individual achievement and rewards based on individual achievement while the SP emphasizes group achievement. 12. The fact that industrial and union leadership has not taken any strong initiative in the area. However, there are several factors that have served to promote the SP. McGregor's Human Side of Enterprise (1960), which has received widespread attention both in psychology and business circles, has a whole chapter devoted to a favorable discussion of the SP. In the psychology literature Katz and Kahn (1966) and Strauss and Sales (1957) discussed the SP in some length; and the Plan has received some attention in business oriented publications, most notably Fortune (Davenport, 1950) and more recently Harvard Business Review (Lesieur & Puckett, 1969). Also, one of the goals of the Scanlon Plan Associates has been to dis- seminate information about the Plan. Relationship_to Other Approaches The basic structures incorporated in the SP, PDM and group in- centives, have been used extensively by themselves and in some cases have yielded some dramatic successes. Undoubtedly the best known long term study focusing on PDM is the Marrow, Bowers, and Seashore (1967) monograph describing the use and results of participation at the Harwood and Weldon pajama factories. Similarly, some very positive results have been reported for Rucker Plans (Dowd, 1955; Steen, Fye, Orth & Strong, 1961; Torbert, 1959) which have a financial structure not unlike that of a SP but tend to place considerably less emphasis on PDM. However, the SP seems to be unique in its emphasis, focusing equally strongly on both the financial and participation structures. Probably the approach that comes the closest to this dual emphasis on employee contribution and financial reward, and one that has.received considerable attention of late is productivity bargaining. However, notwithstanding Rosow’s comments to the contrary,2 the SP is §g£_a form of productivity ' bargaining which is described by the same author (Rosow, 1972) as "management induces labor to accept new working methods in exchange for gains in pay and working conditions. That is...management defines the changes it seeks and labor responds with modifications...until a suitable bargain is reached [p. 79]." Clearly, employee participation in the SP framework is much more than just this passive acceptance of changes put forth by management. Basic Structures As mentioned several times above, underlying the SP are two structures - financial and participation. This section attempts to explain these structures and the rationale for their use in a SP system. Financial Structure The financial structure of the SP is a companywide 53232 bonus. The major purpose of the bonus is to reinforce employee contributions and provide an equitable means for distributing the savings that result from these contributions. The bonus also serves to lend credibility to managements' expression of interest in employee participation by tieing the goals of the SP to those of the company - something that is often lacking in other organization development programs. The obvigus question is why a group_bonus2 From an expectancy motivation approach (g;gb_ Vroom, 1964) it would seem that the instrumentality of an individual's 2"Indeed the Scanlon Plan is itself a form of productivity bargaining [Rosow, 1972, p. 88]." 10 performance in relation to economic outcomes should be higher under a system.that ties pay to individual performance. However, there are several problems associated with such individual incentives. McKersie (1963) lists nine possible disadvantages: The discussion has highlighted a number of disadvantages of this approach. For example, it (1) emphasizes manual effort and fails to recognize the importance of mental effort, (2) focuses only on improv- ing labour costs and misses the importance of other savings, (3) is not applicable to jobs with long cycles of accomplishment, (4) over- looks the gain that can come from focusing people's attention on non- standard conditions, (5) heightens resistance to change, (6) does not emphasize coordination among different groups within the enterprise, (7) fails to recognize the financial need for dependable income and completely overlooks non—financial needs, such as the desire for group acceptance and status achievement, (8) presents problems of administra- tion - a tendency exists for the system to become demoralized, and (9) contributes to cleavages already present within the organization [p. 205]. Additional problems that may arise with this approach are: 1. It may reinforce quantity at the expense of quality (or require additional inspection to maintain quality). 2. It may reduce the mobility of the workforce both from a motivation and ability viewpoint as employees may be unwilling to leave the job they have mastered to learn a new one that would involve at least a temporary drop in earnings. Similarly, it may contribute to employee resistance to technological innovations. 3. It may lead to informal but powerful norms that put restrictions on output. 4. It is difficult and expensive to set up and maintain (e.g. How do you allow for real differences in equipment and machinery?). 11 5. Because it is impossible to set up standards that are truly isomorphic with total contribution to the company, it may be difficult to get workers to perform the essential but nonincentive aspects of their jobs (e.g. machine maintenance). 6. It cannot be readily applied to jobs that involve nonstandard products or frequent changes in procedure. 7. Its applicability is being limited by the ever increasing ratio of indirect to direct labor. 8. It is not compatible with the emphasis on group participation such as is incorporated in the SP. There is some empirical research that bears on this issue. How- ever, most of the research in this area has compared individual and work group incentives and has not looked at companywide programs. “In two ‘Britishflfactories Marriot (1949) found a tendency for productivity to de- crease as group size increased and that workers on individual incentives were more productive than those in the smallest groups. Other variables ~that have been shown to affect the appropriateness of group incentives include the nature of the incentive and how it was developed (Babchuk & Goode, 1951; Lawler & Hackman, 1964), nature of the tasks (Babchuk & Goods, 1951; Marriot, 1957), and the existing social conditions (Selekman, 1941). However, while this research does point out that certain situ- ational and personnel variables may pose limitations on the appropriate- ness of a group bonus, there is not sufficient evidence to make generali- zations. Lawler (1971) does make these generalizations but more on the :e I 12 basis of rational than empirical foundations. Hi§_conclusign is that ,__._ *l #4——-- h— . Scanlon-type bonuses are most applicable in small, centralized, process organizations. In practice SPs are found mainly in small and centralized (the two are highly related) situations but usually involving batch and mass rather than process types of technology. In/summary, it appears that although the financial reinforcers may not be quite as powerful under a group incentive, the number and types- 1 of behaviors reinforced is much greater (including such indirect behaviorslqv as cooperation, trust, openness, etc.) and the benefits so gained may offset the loss in motivational power. Furthermore, the need to reward A individual achievement can be accomplished through a well developed merit increase/promotion system that is not incompatible with the SP. As MeKersie (1963) writes: The endorsement of group incentive plans should not be inter- preted to mean that all individual incentives are outmoded. On the contrary, recognition of the individual is extremely important ...individual rewards, such as promotional Opportunities and merit awards, need to be strengthened in order to help close the motiva- tional gap. The emphasis of...[the previous points]...has been on wage payment systems. For this aspect of compensation, arrangements should apply more to groups than to individuals. However, the wage structure...should provide the necessary incentives for eliciting and rewarding individual accomplishment [pp. 211-212]. However, individual bonus incentives are certainly not always inappro- priate. There are numerous specific situations where they may be the best alternative and have yielded very beneficial results.3 3Individual incentives are most appropriate in situations where: (l) interdependency among workers, and hence need for cooperation, is low, (2) tasks involved are very stable, and (3) a standard can be developed that accurately reflects total contribution to the organiza- tion's success. In practice very few situations meet all these criteria. :‘ a‘ l.’ '1‘! 13 One of the most common situations is that of sales commissions which are frequently retained in SP companies.4 The second issue is how to define the group that receives the ___'._—-——- _.. *_ ,— --._. __ - — _—_ -—. bonus, and its relation to other bonuses that may be in effect. In a puremSP bonus everyone participates in the one bonus and no other bonuses operate. The rationale for this is that as soon as some are excluded or are extended a special bonus, some of the problems dis- cussed above may emerge. However, in practice there are many exceptions to this rule. Restrictions vary from excluding just the chief executive officer (CEO) to including only direct labor. Similarly, other bonuses have been retained alongside the SP bonus. In addition to the salesman example mentioned previously some companies have retained the typical discretionary executive bonus; indeed one company that has achieved national acclaim for its success with the SP had, until recently, a discretionary executive bonus (paid out on top of the SP bonus). Another discrepancy that occurs in practice is to have separate SPs operating in different parts (plants) of a large company. A good case can be made for this approach if there is little interdependency among the units or if interunit cooperation can be accomplished through other means such as the profit center approach. The third issue is how the bonus is distributed. Almost uni- -.p—uwu- 'Ii—‘h-H u... ‘_-_. versally it is paid as a straight percentage of base pay (including 4It is interesting to note that in the very successful participa- tive management program described by Marrow, Bowers, and Seashore (1967), individual piece rates for production workers were retained. The author is aware of one situation where such individual incentives have been used along with a modified version of the SP; when the SP was imple- ‘mented in this large company the employees were given the option of continuing with their individual incentives or switching over to the group bonus. l4 overtime). The rationale for this is that the existing wage structure should reflect relative differences in employee contributions to organizational effectiveness, and therefore should provide a sound base for distributing the bonus which results from additional employee contributions to the organization's effectiveness. However, inasmuch as U.S. federal wage and hour laws prohibit doing otherwise, it is point- less to debate the merits of this approach. However, it should be pointed out that this payment system amplifies the need for a sound and equitable wage structure because it will magnify any existing wage in- equities. The final issue is how the bonus is determined and paid out. Historically, and still typically, it is done by determining a base ratio that reflects the historical ratio of total labor cost to sales value of production. When this ratio is applied to actual sales value or production it yields "allowable payroll." The difference between this figure and actual payroll becomes the bonus pool and is paid out on a regular basis, usually monthly. However, because this bonus can be negative, a reserve portion is usually set aside to reimburse the company for deficit periods. At the end of the SP year, positive re- serve balances are paid out (negative reserve balances are absorbed by the company) and a new reserve fund is begun. A second modification in the bonus determdnation is to split the bonus so that the company also gets a share. If it is all paid out as in the above example, the only savings accruing to the company are indirect, so to offset this several companies split the bonus typically paying the employees 75% and the com- pany 252. A simplified example of a typical SP bonus calculation is pre- sented in Table 1. 15 Table 1 Sample Scanlon Plan Bonus Calculation 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) Gross Sales Less Returns and Allowances Net Sales Plus Inventory Variation (Increase - +) Sales Value of Production Allowed Payroll (Base ratio - 25% 25% X 100,000) Total Actual Payroll Wages & Salaries 20,000 Benefits & Vacation Reserve 1,000 21,000 Bonus Pool (#6 - #7) Reserve (25%) Net Bonus Company Share (25%) Employee Share (75%) Participating Payroll (Wages & Salaries) Percent Bonus (2,250/20,000) Reserve for Deficit Months $ 98,000 - 2,000 $ 96,000 4,000 $100,000 25,000 21,000 $ 4,000 1,000 $ 3,000 750 2,250 $ 20,000 11.25% $ +1,000 16 ‘However, there are several problems that can occur with such a bonus system: 1. It does not directly reinforce savings in non—labor costs (and may even encourage waste). Depending on the particular situation, and the company employee split, it may not'yield any direct payoff to the company. Bonus payments may not correspond to company profitability. It does not compensate for shifts in labor content resulting from changes in product mix. It may be difficult to adjust when such adjustment is required by change in factors that would affect the base ratio. Such things as: (1) Changes in selling price without corresponding changes in wages or material costs and vice versa, and (2) changes in technology, particularly increased use of capital equipment. Ideally a bonus should: 1. 3. From a Accurately reflect employees' contribution to increased produc- tion and improved performance. Maximize the perceived relationship between the financial payoff and employee contributions. Correspond to company performance and profitability. motivational point of view it is obvious why the bonus should reflect employee contributions. There are two reasons why it should 17 also correspond to company profitability: (1) One of the goals of the SP is to get employees to identify with the entire organization and work toward its success. This is more likely to come about when their financial outcomes correspond to those of the company. (2) Either the employees or the owners are going to be very disgruntled if the bonus and profits go in the opposite direction. The degree to which these three goals are compatible is influenced by the nature of the organization. However, for any one organization, the way their particular bonus is determined can have a significant effect on the degree to which these goals can be simultaneously achieved. The goals are certainly interrelated but the relationship is a complex one. For example it may appear that there is an obvious strong and direct relation- ship between the first two goals (perceived versus actual reflection of employee contributions). However, this may not be the case:h Really accurate measurement may require so many financial adjustments that employees may not understand and hence may not believe the accuracy of the bonus figures whereas coarser, less accurate, calculations may in- ’crease the bonus' credibility. As pointed out by Helfgott (1962) and Ross and Jones (1972), SP bonus calculations can become exceedingly com— plex, and in more than one case the failure of a.SP has been partly at- tributed to a lack of understanding resulting from the complexity of the bonus calculations. Similarly there can be a discrepancy in the relation- ship between perceived and/or actual contribution and company profitability. The nature of the organization may be such that profits are disproportion- ately affected by outside technological or market forces, or select groups within the organization such as R & D, product design, or marketing, and 18 not subject to being significantly influenced by a large portion of the" employees. Where there $p_this potential for employees to significantly influence profits, the participation may not have matured enough to realize this relationship (both real and perceived) between employee contribution and company profitability. Using the type of formula discussed earlier (labor savings only) the above goals are most likely to be achieved when:1 (l) the major contribution, real and perceived, that employees can make is to increase labor efficiency, and (2) company profits are strongly related to labor efficiency. However, because these conditions may not occur and because of the other limitations of a labor only formula discussed previously, several variations have occurred. When there is a major change in technology, it is normally accompanied by an adjustment in the base ratio although some companies have passed on the "unearned" bonus (lygy_not resulting from increases in labor efficiency) arguing that the loss is offset by savings that arise from not having to overcome worker resistance to the innovations. Thereflpre many instances where the base ratio has been successfully adjusted following changes in technology. However, as reported by Helfgott (1962), there are also several cases where SPs have-gotten into trouble because the parties were unable or unwilling to make the needed adjustments. One approach to reducing the need for such adjust- ments is to set aside a portion of the bonus for purchase of capital equipment. In this situation employees "pay" for the equipment out of present bonuses and receive the benefits in future bonuses. However, there are problems with this approach. Since it serves to postpone 19 bonus payments some of the motivational benefits are lost. It also increases the complexity of the bonus calculations which may lead to difficulties as discussed above., To reduce the difficulties arising from changes in product mix, one company uses standard labor hours, instead of the base ratio percent of sales value of production, to determine allowable payroll. These are engineering determined standards that are also used as the basis for product costing and pricing decisions. Another possible approach to the problems resulting from changes in product mix is to substitute value added by manufacture for sales value of production. This automatically compensates for different labor allowances resulting from changes in product mix when these dif- ferences are proportionally offset by changes in cost of materials or supplies (iygp_constant profit margins). If the value added by manu- facture is determined by subtracting material and supply costs at standard, then the characteristics of the bonus would be essentially unchanged,--the base ratio would simply be a larger.percent of a proportionally smaller amount. However, if materials and supplies are coated at actual, then variances in these would also contribute to the bonus and thus the bonus base would be greatly expanded. This is precisely what several companies have chosen to do. This corresponds exactly to what takes place in the Rucker Plan developed by the Eddy- Rucker-Nichols Company. In this Plan an examination of historical data is used to determine employees "share" of value added by manufacture. kmen actual payroll is below this guaranteed "share" then the difference is distributed in the form of a bonus usually with 25% held in reserve 20 as is done with the SP bonus. The effect of this is identical to that of a SP bonus if savings occur only in labor efficiency and the employees receive 100% of the bonus. However, with this system employees have the opportunity to earn a bonus on savings in materials and supplies as well as increased labor efficiency, and furthermore are prevented from earning a bonus by increasing labor efficiency at the expense of increased use of materials and supplies. Certainly this approach has some appeal. In addition its inventors claim adjustments are seldom needed. As Torbert (1959) writes: Rucker has shown that, for the United States as a whole, factory workers' pay has been proportionate to production values for 50 years. The relationship has prevailed to within i 1.663%. Labor's average share has been 39.3952; management's, 60.605%. (For individual industries and com- panies similar stable relationships have been established.) Booms, depressions, wars, changes in political leadership in the nation, and the introduction of increasing amounts of labor and time-saving machinery have scarcely affected the ratios. Labor time, says Rucker, has been out about 70% since 1914, but wages have made up almost precisely the same per- centage of value added by manufacture [p. 88]. In light of its obvious appropriateness it is curious as to why this specific approach has not been more widely applied to SP8 (certainly one possible reason is the copyright of the Rucker Plan claimed by the consulting firm and indeed all the cases described are those where it has been set up by the one consulting firm). In the Rucker Plan cases reviewed by this writer, some reference was made to employee participation but it certainly did not receive nearly the emphasis it does in the Scanlon Plan case studies. Another benefit to the Rucker Plan approach to bonus determination claimed by its proponents is that it does not require the collection of any data in 21 addition to that which is normally collected for routine accounting purposes.5 However, a very similar approach has been incorporated into the SP. By selectively adding costs other than wages to the bonus base and proportionally increasing the base ratio essentially the same result has been achieved. As the bonus base is broadened, the share of the bonus that the company receives must increase. One company with a bonus base that includes many costs in addition to wages, splits the bonus 60-40 with the larger share going to the company. This is not unlike the Rucker Plan which in effect splits the bonus so that the employees share corresponds to the proportion of labor cost to value added by manufacture. This has certain appeal for in effect it says that labor's share of the bonus corresponds exactly to labor's share of the total company effort. The result is that a one percent increase in productive efficiency (value added by manufacture) results in a one percent bonus and a one percent increase in the company's position. The ultimate in broadening the bonus base is to go to profit sharing. With some notable exceptions, profit sharing has usually 5An interesting sidenote is the emphasis that authors of the Rucker Plan articles place on the precision used in determining employees' "share." Considerable discussion centers around the care with which this figure is determined (by the consulting firm) and one author (McKersie, 1963) goes so far as to suggeSt that one Of the differences between the SP and the Rucker Plan is the greater precision used to determine the Rucker "share" than to determine the SP base ratio. How-. ever, there is no reason why the soundness of the SP base ratio is not as critical as that of the Rucker Plan except that possibly the Rucker Plan lacks the implicit assumption present in the SP that adjustments can be readily made when the need arises. However, as mentioned pre- - viously, Helfgott (1962) argued that difficulties in making such adjust- ments may contribute to the failure of the SP. It may be that this dif- ficulty in making such adjustments is more appropriately interpreted as a symptom rather than a cause of failure of the SP. 22 suffered from the problem that employees do not perceive any significant relationship between their contribution and profits.. Furthermore this problem is often aggravated by the fact that usually profit shares are only determined and paid out annually and then often at management dis— cretion rather than as an unqualified right. Summa y. What is the best way to compute the bonus? Unfor- tunately there is no single answer.for what is best will depend on the particular situation. Example: Company A manufactures a large volume of a standardized product which it sells to a few large customers. Therefore, sales (at least in the short run) and hence production volume depend on customer needs. If_a labor only formula is-used, the only way a bonus can be earned (short of building inventory) is to reduce wages, number of employees, or average bonus worker--all of which may be unrealistic. Howsver, in this same company_thepemay be a considerable potential savings in materials and supplies and by broadening the bonus base to include these a health bonus could be earned. (This description is exaggerated because in practice labor costs can be reduced without threatening employees' job security through company growth and natural turnover.) Company B on the other hand sells to a large number of customers and because of a large backlog of orders needs to increase production volume. In this case where employees gpp increase the volume of production the labor only formula may well be effective. Ideally the bonus should: 1. Correspond to company profitability. 23 ,2. Should include as many as possible of the costs over which the employees have some control and as few as possible of the costs over which employees have little control. 3. Should maximize the perceived relationship between employee contributions and bonus payments. As discussed previously, this may not correspond to the above point. It would seem that a "proper" bonus (as above) is necessary but not sufficient to assure the perceptual relationship. (See following two points.) 4. Should be as simple and straightforward as possible. 5. Should provide feedback as immediately as possible. Too often bonuses only tell how you did and not how you are doing and lose much of their motivational effect. There may be a tradeoff between this point and the second point because as more is added to the bonus base it becomes succeedingly more difficult to provide prompt feedback, whereas with the labor only formula it may be possible (given a stable payroll) to actually fore- cast the bonus and provide feedback on a weekly or even daily basis. An alternative to the second point is that the bonus base should expand as the SP matures. To begin with, particularly if there is no history of participation, the bonus base should be limited to the costs over which management allows employees control, and over which employees believe they really do have some control. Then, as (if) employees actual and perceived control increase, the bonus base should be 24 correspondingly broadened. With this idea the bonus base can be thought of as on a continuum starting on a limited basis (probably labor only) and eventually going to profit sharing as participation and identifica- tion with the entire organization increase. There is some evidence that this has happened. One company that started out with a labor only formula, subsequently broadened their bonus base to include quite a few additional costs. By all indicies their Plan is better because of the switch and they are currently considering going all the way to profit sharing. Another example of this ppy_have occurred in a situation described by Jehring (1967). This company had a SP which originally was very successful but deteriorated as the base ratio was net adjusted to reflect increasing labor content in the product mix. The plan was sub- sequently replaced with profit sharing with positive results. The article is written as a contrast between the unsuccessful SP and the successful profit sharing. However, it seems very likely, although ignored by the author, that the profit sharing succeeded in part because of the learning and maturation that occurred under the SP. Participation Structure The participation that takes place in a successful SP occurs in two forms: (1) the structural committee system for formally processing suggestions, and (2) the unstructured but equally important increased influence in the immediate job situation. Although the literature has tended to emphasize the former, the development of the unstructured participation is an integral aspect and was very apparent even in the early SPs. Much of this unstructured participation corresponds to the sorts of things that have more recently received a lot of attention no ..<- kc: ‘Ia. 0". at: .1. I... a 'IOI a. ”L: -\ e . I: 'e: . \ o.- (h) (I I): (I) 25 under the headings of job enrichment.and job enlargement. These involve increasing the scope of an employee's job'to include influence over such things as scheduling, inspection and quality control, job assignments, and work methods. The structured aspect of participation has shown very little variation either across companies or over time. In the original or pure form employee suggestions are entered on a special form and sub- mitted to a production committee. There is a production committee for each department usually consisting of the supervisor of that de- partment and one or two elected or perhaps union appointed employee representatives. This committee then has the responsibility to evaluate suggestions and either explain to the suggestor why it is not feasible, or implement it if it seems good and does not affect other departments or require more than a set amount of capital expenditure. This committee cannot reject suggestions; if the suggestion cannot be resolved at this level, it is automatically sent to the screening committee as are those suggestions which affect other departments or involve relatively large capital outlays. The minutes of these production committees are taken up at the next monthly screening committee meeting which is usually held as soon as bonus figures for the previous month are available. This committee is usually made up of a senior company executive who chairs the committee, a senior union official (ex-officio) if the company is organized, and elected or appointed representatives from the different departments and levels within the organization. .This committee has the responsibility for acting on suggestions forwarded up from.the production committees by implementing them or assigning specific responsibility for further 26 investigation where needed and.reporting back to the suggestor whatever action is taken. This committee.does,not replace thedecision making 7 .1 . __.~—- role of top management—~it is_a consultative body that brings the resourcesof the company to management's attention so that the latter can make better informed decisions. Another important function of this committee is to provide feedback on the previous month's performance and explain the reasons behind it. This should be done with enough care so that the participants understand it well enough to explain it to the peOple back in their department., This meeting also provides an arena for general communication among the representatives from the different areas in the company. Specifically it provides an opportunity for tap management to communicate the current company position--the “an—- an—o—Mr" m market situation and sales forecast,.prob1ems and changes expected in the near future, and other items of general concern. K\\ The difference between this system and typical suggestion plans ‘\ is obvious. By using the SP bonus rather than individual prizes to \\;: reward suggestions, problems (parallel to those associated with individual 5, piece rates as discussed previously).are-avoided.. ‘) " _..—- Some natural variations have occurred in large organizations, particularly in multiplant situations, where a "super screening committee" may preside over the screening committee for each plant not unlike the works council found in many European organizations. Conversely in very small companies or in small departments the production committee as such may be replaced by the entire work group or department. However, in some medium sized companies where production committees would seem appropriate they have ceased to exist at least in practice if not ‘ ' vJ-q" :a “Us 5 12'. 35 .‘i:'1'nr on-avs "’ P 'IeL t V 0.... “ha . . f“:: ‘3‘“: h. ,. 27 formally. There are several reasons that may contribute to this situa— tion: (1) Foremen may not have the authority or inclination to really act upon employee suggestions.and may even interpret such suggestions as a threat to their position. (2) Even when the foremen do have the authority and inclination to act employees may not perceive the situa- tion as such and may simply see it as more efficient to submit sug- gestions directly to the screening committee. Another frequent variation is-for.suggestions to be processed without ever formally being written down. -While this is not necessarily bad, it may lead to problems. The communication aspect of the sug- gestions system--letting other parts of the company know what is going on--may be lost. Also because there is no formal record, it is diffi- cult to assure that suggestions always are followed up on. One company has tried a quite different variant on the participa- tion structure. Borrowing from the recent organization development emphasis on team building, production committees have been replaced by work teams. These teams are composed of the de.facto groups that work on similar or interrelated jobsand their immediate supervisor. It was felt that suggestions could be more effectively dealt with by these groups rather than going through the intermediary representative. Suggestions that cannot be dealt with at this level are processed to the appropriate area through the "linking pin" structure (Likert, 1961) which may or may not correspond to the traditional chain of command, and no screening committee as such is used.. This approach has some distinct advantages but may also contribute some possible disadvantages: (1) When the appropriate "link" is not readily available there may be . . f1, 28 a delay in transmitting and feeding back suggestions; particularly a suggestion that involves two distinct departments that are not effec- tively "linked" until you get to the executive committee. The ad- vantages arising from the heterogeneity.of the screening committee may be lost. A work team does not have the broad representation that characterizes the screening committee and may not be able to act as quickly or creatively as could a screening committee. The "arena" function of the screening committee may be lost. Management's explana- tion of the current situation and future plans may be distorted or lost in transit if they are passed through the "linking pin" structure. Upward communication could be reduced preventing top management from keeping abreast of what is happening throughout the company. Similarly, staff-line communications may be hindered. Problems that may creep into the formal participation system are: 1. Action on suggestions is not taken or taken after unnecessary delay. 2. The action that is taken is not reported back to the suggestor or there is unnecessary delay in the reporting back. (People may be reluctant to report back turned down suggestions.) 3. There is unnecessary delay (or complete failure) in implementing suggestions that have been approved. Obviously when any of these three situations is allowed to occur, rein- forcement of suggestions is reduced and one would expect the frequency 0f suggestions to diminish. 29 Another problem that has been discussed in connection with both production and screening committees (particularly in connection with unsuccessful SP3) is that they may get off the topic and deteriorate into gripe sessions (Helfgott, 1962; Gilson & Lefcowitz, 1957). Interrelation of the Two Structures The above discussion of the two structures has not emphasized their interdependence. However, the strength of the SP is not either of the structures but the unique combination of the two into a meaning- ful total system. The structures interrelate in several ways: 1. The first and obvious relationship is that the participation structure provides a key means by which the bonus can be earned. The financial structure may provide a testing ground for participa- tiOn. If a SP is introduced into a situation which previously was characterized by little or no PDM, then it has to be developed. The bonus provides a good place.to start. Employees feel they have a right to ask questions about their paycheck. Their initial attempts at participation may take place in the form of asking questions about the bonus, how it is.determined, and what factors affect it. If such early inquiries are reinforced, then participa- tion may follow. Indeed it seems.that in early stages the bonus dominates much of the talk regarding the SP but then as the partici- pation matures it seems that other aspects become increasingly important and emphasis on the bonus is reduced. As mentioned earlier the financial structure may lend credibility to management's expressed interest in increasing employee PDM. 30 Very often when a company attempts to implement such programs as participative management it is perceived by the employees as a gimmick or an attempt to manipulate them. However, when it is specifically tied to a possibility of an increased pay- check, it is far more likely to be perceived by the employees as a sincere interest, 4. Again, the financial structure should be set up so that the employees perceive it as accurately reflecting their contribu— tion. Although often not done in practice, it would seem that this is far more likely to occur if employees participate in determining the financial structure of the bonus. This occurred in some of the very early SP8 and may have contributed to their success. This idea is also supported by research done by Lawler and Hackman (1969). In this situation the company was trying to develop an incentive plan to encourage greater attendance. They found that employee participation in the development and implementation of the incentive system had a significant impact on its success and.further suggested that the effects of this participation may have been stronger than the effects of the mechanics of the financial structure. Scanlon Plan Success Definitions Before defining Scanlon Plan Success (SPS), it is necessary to define the SP, and this requires determining the focus from which the SP is being examined. Three such approaches are apparent in the 31 published SP literature. ,The first approach looks at the SP as a too —._ - y- . _.. - _... e...— ’ - ..._._,___F‘__ .- for achieving good industrial and labor relations. This approach is a logical one when wewconsider the origins of‘the SP, the backgrounds of Clinton Golden, Joe Scanlon, and Fred Lesieur, and in general, the experience with the SP in the East. This emphasis is apparent in the titles of many SP articles: "Causes of industrial peace under collective bargaining..." (Schultz & Crisara, 1952), "The Scanlon Plan: A frontier in labor management cooperation" (Lesieur, 1958), "Profit sharing under collective bargaining..." (Scanlon, 1958), "The causes of industrial peace revisited" (Northrup & Young, 1968), ”Some experiences with a union—management cooperation plan, ” (Tait, 1952), and ”Local union ex- periences with a cooperation plan," (Lesieur, 1952). However, this labor-management emphasis has not been employed in the area companies who have the SP, and indeed only two Midwest SP companies are organized. Therefore, such an approach seemed to be an inappropriate way to focus on the SP, and SP success, in the present study.. The_second approach to the Scanlon Plan is that of a financial _' m _-_—_-.1 . I _ . wou—-—_-.—-- incentive system for increasing employee productivity. Again, this “_..—“_- ...——> emphasis is apparent from the.titles of.several articles on the SP which mention only the financial aspects: "A-contrast between two approaches to total system incentives" (Jehring, 1967), "wage payment methods of the future" (McKersie,.l963), "Group wage incentives: Experience with the Scanlon Plan" (Helfgott, 1962). However, this focus again seems inappropriate in light of the emphasis the SP has received here in the Midwest. 32 The third apprgaph,_§ndmrhe one used in this study, is that o—-—-..-..._ ,' the SP is an approach t9 organizational development (0D)- This has been _.___.....——o-— the focus of the several authors, mainly psychologists: Frost, wakeley, and Ruh (1974), Katz and Kahn (1966), McGregor (1960), Strauss and Sayles (1957), and Ruh (1971). This approach differs from the first‘ two in that it emphasizes the psychological processes as well as the formal sturctures that come into play when an organization attempts to increase its effectiveness through use of the Scanlon Plan. How- ever, the structural components of the SP.must not be ignored. One of the main features that distinguishes the SP from other OD approaches is the attempt to alter structural as well as process influence systems within the organization. Another prerequisite to defining SPS.is discriminating between Scanlon Plan and SP8. Lesieur and Puckett (1968) fall into this trap by dismissing unsuccessful SPs described in the literature as not really being SPs in the first place. Such an approach is not very useful in helping understand what makes a.SP succeed or fail. The approach taken in this study is that to a great extent it is the structural mechanisms that define.a SP.and it is the success of these structures in achieving certain outcomes that define Scanlon Plan Success. With this, and the OD focusgdiscussed.previously the following definition of SP was derived. The SP is a system whereby there is a ' companywide structure for employee participation in improving the orgsni- 1 gption's effectiveness and sharipg.in cost.reductions and where the pgpbers of the organization purport to have a Scanlon Plan. Three different definitions of SPS were used in the present study. It was stated at the outset that the principle underlying the 33 SP is that present in the workforce is a reservoir of creativity and experience, that if properly tapped has the potential to greatly increase the organization's effectiveness. Based on this organizational develop- ment approach to the SP, the first defintion of SPS was derived: The extent to which the full effort, experience, creativity, and innovative ability of the entire workforce through the use of the SP is directed toward increasing the organization's total effec- tiveness. (SPSl) The second definition of SPS, chosen partly for practical measure- ment reasons, is whether or not the SP is subsequently abandoned or re- tained (SPSZ). It was expected that there would be a strong but less than perfect relationship between this and the previous definition of SPS. Where SPSl is high it is very unlikely that the SP would be abandoned. However, where it is low it is very possible that the SP would remain "on the books." One of the hypotheses focuses directly on the interrelationship of these two definitions. Such definitions are very broad and useful only at the company level of analysis. However, as was mentioned previously, much of the substance of the SP is individual and perceptual and can be meaning- fully examined at the individual or subunit level. Therefore, a third definition of SPS, participation in decision making (PDM), was used. Certainly PDM is not synonymous with SP8 as defined above. It is broader than SPS in that it is applicable to non-Scanlon situations. At the same time, though, it is a much narrower approach in that it takes considerably more than just a lot of PDM to assure high degrees of SPS. However, there are three reasons why it was chosen as an index of SPS. First of all it is central to successful SP--it is the major process by which the contributions of the workforce are directed towards 34 enhancing organizational effectiveness. For example Frost et a1. (1974) discuss the principles of identity, participation and equity, and view the SP as a tool for transforming these principles into or- ganizational reality. However, in their discussion participation occupies a central role; it is not coincidental that the principles are discussed in the above order. Identity is defined as articulating the organization's objectives and the resources available for achieving theme-a process that enables effective participation to take place and provides a focus for such participation. Equity follows participation and is the return (social and egoistic as well as financial) an employee receives for his investment, and serves to reinforce and main— tain his participatory behavior. The second reason for using PDM is that it is that aspect of SPS which is most applicable to the individual and subunit of analysis. Again, looking at the Frost et a1. framework, the other two key concepts, identity and equity, are considerably less applicable, (and less readily operationalized) at the individual level than is PDM. The third reason for using PDM as an index of SP3 is that of practicality. More readily than other concepts it can be, and has been reliably measured at the individual level. Participation. There are several issues, often ignored, that are relevant to the discussion and definition of participation in decision making (PDM) particularly as it operates in a SP situation: 1. Area of influence. Most existing definitions of PDM are in- adequate for defining its use in the SP because they include only the influence an employee exercises in his relationship with his supervisor and ignore his ability to influence the larger system. For example, PDM has been defined as: "a mode 35 of organizational operations in which decisions are arrived at by the very persons who are to execute those decisions [Lowin, 1968, p. 69]," and "the amount of participation of A is...the amount of A's influence on the decisions and plans agreed upon, or equivalently the amount of influence that B, C...accept during the joint decision making process [French, Israel, & As, 1960, pp. 3-4]." Simiarly, although not put forth explicitly as a definition of participation, Heller & Yukl (1969) define the extreme end of their influence continuum as "decisions that the manager allows subordinates to make on their own [p. 230]." In addition to excluding the influence a subordinate has in areas other than in his relationship with his superior, these definitions also assume that the source of increased employee influence is the superior, and fail to in- clude employee influence derived from organizational structures rather than supervisory leadership style. Type of influence. Another issue, largely ignored by the above definitions of PDM is that employees can participate vicariously or indirectly. An example of indirect participation is when an employee submits a suggestion that is taken up by others when he is not present. He is exerting influence but it is a quite different phenomenon from the face-to-face joint decision making implicit in the previous definitions. Similarly, an employee can participate vicariously--although an employee may not exert direct influence, his groups may be exerting influence. Such participation is common in the union situation and appears to 36 have made up a considerable part of the actual emplbyee influence that took place in the original Coch and French (1948) study. Total amount of influence. This issue, raised by Tannenbaum (1968) deals with the fact that the total amount of influence (control) need not be a constant and therefore increasing sub- ordinate influence need not.proportionally reduce superior in- fluence. Whether the total amount of control in an organization is constant is not clear; however, it is clear that the total amount of perceived influence can vary, and hence a definition such as Heller & Yukl's (1969) may be inappropriate at least for dealing with perceived PDM. Perceived versus actual influence. This issue, hinted at above, concerns whether it is objective or subjective employee influence that is most relevant. This issue has been discussed by Hoffman and Meier (1961), Lowin (1968), Hackman and Lawler (1971), March and Simon (1958), and Tannenbaum.and Smith (1964). Lowin's summary is the most concise. As he points out, it is the particular motives and reinforcers operating that determine the apprOpriateness of the two approaches. Where ego motives/reinforcers clearly pre- dominate, then perceived PDM would be the most apprOpriate. In the Scanlon situation where both ego and financial motives and corresponding rewards are operative, then it is both sorts of participation that are of concern. Lowin adds: It is important to note, however, that perceptual and objective PDM measurements are probably correlated over time. During a series of events the absence of all real influence will surely be recognized as such (viz., the perception of no influence). 37 The veridicality of long-term influence perception is a useful concept for it enables us to argue that the tactical (manipulative- deceptive) versus organic (true) PDM issue is largely a Specious one. It is incredible that tactical PDM could long exist in the absence of organic PDM [pp. 77-78]. 5. Unit of analysis. This last issue deals with the level of analysis at which PDM is being examined. Mbst authors (as in the above definitions) discuss PDM in connection with leadership and hence the unit of analysis is usually the superior-subordinate dyad. However, PDM can apply to a work group, a department, or an entire organization as well as an individual. Likert (1967) has done the most work in this area. He discusses participation as an organiza- tionwide system of management as well as a departmental and in- dividual level phenomenon. The problem involved here is that if PDM is measured at the individual level, as it usually is, then how should scores be combined to get a department or companywide index. The obvious and easiest approach, and the one used by Likert, is simply to average scores. However, implicit in this approach is the assumption that PDM is compensatory--very high levels of PDM in one department, for example, can compensate for average amounts of PDM in another department to yield a fairly highly participative management system.. This, however, is probably not the case. Discrepancies in level of PDM, especially when they are seen as such, may be just as important as the average amount of PDM when it comes to achieving desired outcomes. However, although this simple averaging procedure poses these problems, there is no viable alternative, and it was used again in this present study. 38 Based on the above issues the following definition, adapted from Likert (1961, p. 228), was used.to define PDM as.it occurs in a Scanlon situation: The extent to which employees influence the methods and activities of their job, departmentJ and entire organization. One of the hypotheses explicitly deals with the relationship between companywide average individual PDM and the companywide SPS measures. While it is expected.that the relationship is a strong positive one, because of the inapprOpriateness of simply averaging PDM scores and because SPS involves more than PDM it is expected that the relationship is less than perfect. Causes of Scanlon Plan Success (SPS) From the above definitions of SPS at the company level and the above definition of PDM which was used as an index of SPS, it is ap- parent that there can be meaningful variance in SPS across organizations as well as across individuals and groups within organizations. At the intracompany level, using PDM as the SPS criterion, it would seem that participation is likely to be high when the parties to such participation are able and.motivated.to participate and where the situation and structures are conducive to participation. At the company- wide level SPS would be high when the.PDM.is.high.and focused toward the objective with appropriate feedback.and refocusing—-"putting it all together." There are two categories of variables that are likely to bear on SP8: (1) Antecedent/independent variables--these are characteris- tics of the situation and of the personnel that can exist independent of the SP and before a SP is implemented. Within.this category there is likely to be interactions, particularly situational characteristics 39 affecting personnel characteristics. (2) The second category of variables are those involving the SP processes and structures--the way in which PDM takes place, its.consequences, and their subsequent in- fluence of these consequences on future PDM. Conceptual Model. Figure l shows.a schematic portrayal of this framework. As in all such models it is an oversimplification. It may not include all the appropriate types of relevant variables and certainly there are more possible interactions than.those indicated. However, its intended purpose is to provide a framework for examining those variables that may affect SPS,-not to explain all the possible relationships. Literature Review The literature was reviewed to (1) see the extent to which the model is viable, and (2) identify some of the personnel and situational characteristics that may enter into the model. Specifically the literature was examined to determine:. (numbers correspond to those in Figure l). 1. Evidence that PDM was related to SP8. 2. Evidence of factors other than PDM that contributed to SP8. 3. Evidence that manager and employee ability and motivation con- tributed to SP8 in general and PDM in particular. 4. Evidence of personnel characteristics that contributed to such ability and motivation. 5. Evidence of situational characteristics that contributed to such ability and motivation. 40 HzmzwomomszM nz< Mo It appears that this problem is-most likely to occur when the SP is installed as a solution to financial problems--a not uncommon Situation: Financial difficulty or an intolerable incentive system is a favorable climate for seeking a change.7 Where a company has been foundering, adoption of the plan has seemed to work, at least in the short run [Helfgott, 1962, p. 42]. 75 However, Helfgott goes on to confirm the idea that when the SP is iaastalled solely for this reasgn, it may only last as long as does the crisis: The signal stimulus for adopting the plan is that of desperation and the desire on the part of companies, unions and employees to save their plants and their jobs. As problems are solved, however, interest in the plan cools considerably, and its dramatic benefits taper off [p. 43]. lfln the Midwest, most of the SP installations have not been adopted (out of desperation and hence this problem-has not been as severe. The second issue, feedback on performance, would from a: Ipsychological viewpoint appear to be a critical ingredient in integrat- ‘ing effort toward a common goal. However, not one of the SP articles treviewed for this study devoted any significant attention to this- issue. This feedback can take the form of either bonus earnings or shorter term production accomplishments.. Psychological principles suggest that this feedback would be most effective when it is given frequently and in a form that is readily.understandable to the people receiving it. However, in practice both of these principles arelfre- quently violated. It is not atypical that the only feedback.employees receive is a report on bonus earnings and this often two weeks after the end of the month in which the bonus was earned. In such a case the employees may learn how they did but not how they are doing. liurthermore, often this feedback is in the form-of complex financial 1:erms whose relationship to specific production accomplishments is Iaot clear. However, there are some notable exceptions. One Mid‘ ‘West company provides weekly feedback by department that shows 76 Ixroduction accomplishments along with the production needed to keep the bonus in the black. Ideally the feedback should: 1. Be frequent. 2. Follow accomplishments as soon as possible. 3. Be presented in a way that includes both financial data and other units such as particular jobs or production runs that may be more meaningful to the employees. Ideally it should be presented in such a way that employees can see what levels of production correspond to what levels of bonus. 21 am not aware of any company that has completely achieved the third lpoint, 1:5;7-employees know (in shop floor terms) exactly what has ‘to be accomplished to earn a certain size bonus. The reason is simply ‘that to do this is time consuming at best, and very often the data are not available at all. To provide this information requires that the ¢:ompany know in advance of the bonus period what the product mix and .actual payroll will be. Furthermore, this assumes a labor only formula. .As the bonus base is expanded, the difficulties increase. The ideal may never be achieved but certainly in most situations there‘is lilenty of room.for improvement. ~It seems that the accounting personnel finest play a key role in helping the companies improve the feedback on Performance that they provide, a task. that: should be greatly facilitated 1D‘yhrecent advances in data processing technology. Unfortunately there is little in the published literature 'that bears on this point. However, it is interesting to note that in the earliest SP case described (Chamberlain, 1946), feedback on 77 Ixroduction was given daily. (The article includes a photograph of ‘tlae company treasurer setting the "hand" on a large clock-like "13roduction indicator.") 1> Managerial Attitudes 2) Managerial A, Plan fails -——> Plan abandoned attitudes While either of the above two causal sequences would yield support for the specific hypothesis tested, only the second example provides sup- port for the general hypothesis that managerial attitudes cause success/ failure of the SP. 93 memonuonmm Tl Mug Hoeoz ngnooaoo canon I we 9 Muse 233 BE: 2me 3786 mm Hmm om az.Aw|||._ Illwvaz zen: gazcuemazH 3.90355 E H /\ 11L? . moHamHmwsogo $22025 m e m N a: maemHoHHmoz mmmeuenHm oomH 0H em. me name _ .m eaoaoum mama .wez umeeee on. a me. me meme m Heme meme wceueuaueem Hana: moa e me. 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This variable, used in hypothesis 24, refers to two companies and represents a judgment by the investigator. Currently, one of the companies exhibits no evidence of a functioning SP while the other has achieved some success,--earning sub- stantial bonuses and having regular screening committee meet- ings. Rated Scanlon Plan Success (RSPS)--H. 2,5,14,15,16,l7,18. Three raters independently rated companies with a paired comparison technique according to "the extent to which the full effort, experience, creativity, and innovative ability of the entire workforce, through the use of the Scanlon Plan, is directed toward increasing the organization's total effective- ness." The raters included (1) the consultant who had the major responsibility for setting up most of the Scanlon Plans, (2) the past executive director of the Scanlon Plan Associates, and (3) a researcher who had collected data from most of the companies involved. Three separate sets of paired comparisons were done to generate ratings that corresponded (period of time and companies involved) to survey data collected from these companies. The remaining ten variables were all measured with data collected from six separate questionnaires. Four of the variables involve biographical data: 7. 8. 9. Employees length of service (SENIORITY)--H. 10. Managers length of service (TENURE)--H. 12. Number of employees in a work group (W-SIZE)--H. 9,11. As used in H. 11, a direct measure of "WHSIZE" was.obtained. However, as used in H. 9, the information had to be inferred from the number of employees who returned questionnaires in- dicating to whom they reported. 10. 11. 12. 13. 14. 15. 16. 98 Background characteristics of the workforce (BACK)--H. 8,18. This was measured by empirically weighting sixteen items con- cerning education, sex, religiosity, and geographic background. These items are the same items that were used in the White (1972) study with the addition of the item "sex." The items were coded in the same manner as in the White (1972) study as described in the Appendix. Managerial attitudes toward participative management policies (MA)--H. 6,11,12,13,l6,l9,20,24. These were measured by an instrument developed by Miles to assess attitudes relating to his human resources--human relations model of management style (Miles, 1965). The scale consisted of 27 Likert-type items. Chief executive officer attitudes toward participative manage- ment policies (CEO-MA)--H. 17,21,25. These were based on the same instrument as above. Where a single person could be identified (from whom data were available) as head of the line organization, just his responses were used. Where such a per- son could not be identified (or where his data were not avail- able) an average score of the tOp two or three executives from whom data were available was used. Perceived extent to which participatory behavior is reinforced (R)--H. 13,20,21. These were measured by six items also ob-. tained from the Miles instrument. Participation in decision making (PDM)--H. l,2,3,4,6,7,8,9,10. This was indexed by five Likert-type items. Expected level of SPS (EXSPS)--H. 7,22. This was a nine item scale of different dimensions of desirable outcomes that the SP could help achieve. Perceived level of SPS (PSPS)--H. 1. This scale was developed by changing the tense in each of the nine EXSPS items from future to present tense. All the items for the scales (variables 10 through 16) and their response alternatives are reproduced in the Appendix. Six separate instruments were used. Following is a list of the variables used in the present study that were obtained with each of the instruments. With the exception of the second instrument which was given only to employees with supervisory responsibilities (wallace, 99 1971), they were all given to all levels and in most cases all the employees in the organization sampled. Questionnaire Variables Measured 1. "You and Your Job" PDM, SENIORITY, BACK, (W—SIZE) 2. "Attitudes Toward Admdnistrative Policies" TENURE, WASIZE, MA, CEOHMA, R 3. "Scanlon Plan Research Questionnaire" EXSPS 4. "Follow Up Scanlon Plan Research Questionnaire" PDM, PSPS 5. "Your Job and the Corporation" PDM 6. (Title Unknown) PDM Table 5 shows which questionnaires were used with each of the organiza- tions. Data Analysis The following discussion of data analysis is divided into two sections. The first section deals with scale development and construct validity. The second section concerns hypotheses testing. Scale Development and Construct Validity Independent validity measures were not available for any of the variables used in this study (except of course for the interrelation- ships among PDM and the SPS measures which were treated as hypotheses) and therefore no direct estimate of validity was available. This section focuses on reliability, and discriminant validity of scales based on comparisons of these reliabilities with correlations with other variables 100 measured in a similar fashion. The following variables, by nature of the measures involved, were assumed to have high reliabilities and validities: abandoned/retained SP, Scanlon/non-Scanlon, company size, time, subsequent success/failure, seniority, tenure, and work group size. Rated SPS. Three separate sets of paired comparisons were done: 1. Ranking of the seven companies (#s l, 2, 3, 4, 5, 6, & 7 in Table 5) from which PDM data were available,--ranked accord- ing to SP8 at the time the PDM data were collected. Three judges independently completed the task although one judge was unable to make two of the comparisons requested. The interrater rank order correlations were .75, .94, and .89. The ratings were combined by a technique (Lawshe & Balms, 1966) which allows for missing data. The Spearman-Brown prophecy formula yielded a reliability estimate of .96 for the composite ranking. 2. Ranking of thirteen companies (#8 l, 2, 3, 4, 6, 7, 8, 12, 13 14, 15, 16, & 23), ten from whom managerial attitude (MA) data were collected,--ranked according to SP8 at the time the MA data were collected. The ranking was done by the same three judges providing interrater reliabilities 05 .89, .93, and .89 and a reliability for the composite of .97. 3. One of the companies (#1) involved in this study and.in the above ratings actually had twelve separate SP units within the company. These separate units were ranked according to SPS-at the time the PDM data were collected. Only one judge did the ranking so no reliability estimate is available. Participation in decision making. This five item scale was. developed as part of prior investigations (Ruh, Johnson & Scontrino, 1973; White, 1972). The measure is narrower than the definition of participation presented earlier in that it only taps participation in the immediate job situation and ignores employee influence in other areas. This was necessitated by the fact that to test the hypotheses 9For the six companies that were used in both sets-of com- parisons, the rankings were very similar (rho - .96). 101 the measure had to be applicable to non-Scanlon situations which it would not have been had it included items regarding influence through the Scanlon committee system. Because the scale is a self report measure, it yields a perceived participation score that undoubtedly includes an attitude component. As mentioned previously, the SP is concerned with both actual and perceived PDM. The fact that it correlates more highly with itself than it does with several other attitude measures indicates that it does in all like- lihood tap at least some variance in actual participation. As measured in four different questionnaires the scale yielded alpha reliability estimates of .63, .89, .85, and .81 on samples siZes of 26, 69, 382, and 2030 respectively. When correlated with scales of job attitudes relating to job involvement, satisfaction, motivation and identification, also measured by Likert-type items on the same questionnaires, the cor- relations (nine in all) ranged from .38 to .58 with a median of .50. (These other scales all had high internal consistencies so these cor- relations were not significantly limited by lack of reliability.) Thus the PDM measure is reasonably reliable and does appear to be measuring something other than just a general attitude toward the job. Expected level of SPS. This nine item scale had alpha re- liabilities of .91 and .86 on samples of 75 and 56 respectively. The scale was developed prior to, and independent of, this investigation and the precise rationale for the items chosen is unknown to this in- vestigator. However, the scale does involve a reasonably inclusive list of the beneficial outcomes that a SP could be expected to bring about. The fact that it correlated .69 and .29 with a reliable 102 (a - .88, .75, & .87) measure of job satisfaction indicates that it probably is tapping more than just a general attitude toward the job. Perceived level of SPS. This scale is the same as the above scale except that the items were all changed from the future to the present tense. The measure was obtained from only one sample (N - 101) providing an alpha of .91 and a correlation with job satisfaction of .69. Managerial attitudes toward participative managgment policies.. This scale was taken from the instrument developed by Miles. The in- strument includes three basic statements regarding participative man- agement policy: (1) encouraging subordinates to engage in participa- tion in their own departments, (2) allowing subordinates to participate in setting their own performance goals, and (3) allowing subordinates to adapt and modify their job procedures. Under each of these three statements are nine questions, three regarding the extent to which they agree with the policy, three regarding whether the policy would improve attitudes, and three regarding whether the policy would improve per- formance. Within each of these subgroups of three items, one item refers to the rank and file level, one to the manager's own level, and one to the manager's supervisor's level. These items were intended to make six nonexclusive nine item scales measuring (1) general agreement with PDM, (2) effect of PDM on morale, (3) effect of PDM on performance; and, applicability of PDM to: (4) rank and file level, (5) manager's own level, and (6) supervisor's level. However, the intercorrelations among these scales were extremely high, ranging from .71 to .91 with a as «a 1‘! 103 median of .87. Therefore, it appears that in fact the subscales did not tap the different dimensions, and for this reason, 311 twenty-seven items were combined into a single index of general attitude toward participative management policies which yielded an alpha reliability of .94. 'CEO attitudes toward participative managementgpolicies. Same as above. Perceived extent to which participatory behavior is reinforced. This was also measured by the Miles instrument. For each of the three broad statements regarding participation discussed previously there were two yes/no questions regarding the extent to which the respondents thought they would be (1) recognized, and (2) not criticized, for fol- lowing each of the three policies. The six items had an alpha reliability of .75. Background characteristics of the workforce. The development of this scale is the substance of hypothesis 8 and is discussed in the next section under hypotheses testing. However, the nature of the variables is such that the reliability and validity of the individual items is undoubtedly very high. Hypotheses Testing (see pp. 84-92 for the hypotheses) Interrelationships Among Success Measures. H.l To measure the relationship between PDM and PSPS a Pearson r was calculated for the employees in the one company (come pany #7 in Table 5) where both measures were obtained. H.2 A rank order correlation was computed between ranks based on mean company PDM and the RSPS measure using seven com—. panies (#s l, 2, 3, 4, S, 6, & 7). H.3 H04 H.5 104 To investigate this hypothesis mean PDM of five companies where the SP was subsequently retained (#s 2, 3, 4, 6, & 7) was compared with mean PDM of two companies where the Plan was subsequently abandoned (#s l & 5). To investigate this hypothesis mean PDM of 5 active SP com- panies (#s 2, 3, 4, 6, 8 7) was compared with the mean PDM of two other companies,--one (#9) where the PDM measure was col- lected prior to the implementation of the Plan (but after the decision had been made to go with the Plan) and the other (#10) where the Plan has never been considered. To investigate this hypothesis the RSPS ranks of nine con— tinued SP companies (#s 2, 3, 4, 6, 7, 12, 13, 15, & 23) were compared with that of four companies where the SP was, abandoned (#s 1, 8, l4, & l6). INTRACOMPANY SPS H.6 H.7 H.8 The purpose of this hypothesis was to determine the extent to which there is a relationship between MA and subordinate PDM at the intracompany level. Therefore, it was necessary to eliminate intercompany sources of variance. This was done (for both measures) by calculating a grand mean and a company mean and subtracting the company mean from the grand mean to get a "company effect" score (+ or -) for each company. Each score used in the analysis was adjusted by adding the appropriate‘ "company effect." Before making these adjustments to correct for company mean differences, an F ratio was computed to deter- mdne if there were significant company differences in variance on either of the variables. The relationship was investigated by calculating a Pearson r between the two sets of adjusted measures. Data from 32 managers/work groups from 6 companies (#s l, 2, 3, 4, 5, & 6) were used in the analyses. A Pearson r was calculated between EXSPS and PDM measured four years later for the employees in one continued SP company (#7). A multiple R was calculated between PDM and the background factors for all the employees of the one large company (#1 in Table 5). ‘H.9 Two procedures were used to investigate this relationship using data from companies 1-6. A Pearson r was calculated between adjusted W-SIZE and adjusted mean PDM reported by the work group using the procedure described for H.6. The second procedure was to compute the correlation between the unadjusted variables separately for each of the companies and then calculate the average of these correlations. 105 H.10 A Pearson r was calculated between PDM and seniority separately for the employees in each of the companies 1-6, and the average, of these correlations was computed. H.11 Two procedures were used to investigate this relationship using data from companies 1-6 & ll-22. (l) A Pearson r was calculated between adjusted MA and adjusted W—SIZE, and (2) an average of the correlations, calculated separately for each of the companies, was computed. H.12 Two procedures were used to investigate this relationship using data from companies 1-6 & 11-22. (1) A Pearson r was calculated between adjusted MA and adjusted tenure, and (2) an average of the correlations, calculated separately for each of the companies, was computed. H.13 Two procedures were used to investigate this relationship using data from companies 1-6 & 11-22. (1) A Pearson r was calculated between adjusted MA and adjusted R, and (2) an average of the correlations, calculated separately for each of the companies, was computed. INTERCOMPANY SCANLON PLAN SUCCESS H.14hH.21 Rank order correlations were calculated for all the hypothesized relationships involving SIZE or RSPS (H.14-l9)--the other two (H.20, 21) were investigated with the Pearson r. Hypotheses Companies Used in the Analyses (Table 5) 14 1, 2, 3, 4, 6, 7, 8, 12, 13, 14, 15, 16, & 23 15 1, 2, 3, 4, 6, 7, 8, 12, 13, 14, 15, 16, & 23 16 1, 2, 3, 4, 6, 12, 13, 14, 15, 16 17 1, 2, 3, 4, 6, 12, 13, 14, 15, 16 18 1, 2, 3, 4, 5, 6 19 1, 2, 3, 4, 6, 12, 13, 14, 15, 16 20 1, 2, 3, 4, 6, 12, 13, 14, 15, 16 21 1, 2, 3, 4, 6, 12, 13, 14, 15, 16 The measure for background characteristics (BACK - H.18) was developed on the basis of the beta weights derived in testing H.8. By applying these weights to the means for each company for each of the background factors that were significantly 106 weighted, a predicted score for each company was determined. These scores (ranks) were then correlated with RSPS. H.22 Mean EXSPS of company 7 (subsequently successful SP) was compared with mean EXSPS of company 8 (subsequent failure). H.23 Average size of nine retained SP companies (#2, 3, 4, 6, 7, 12, 13, 15, & 23) was compared with that of twelve abandoned SP companies (#1, 5, 8, ll, 14, 16, 17, 18, 19, 20, 21, 8 22). H.24 Average MA of three companies where the SP was subsequently abandoned (#s 1, 14, & 16) was compared with average MA of seven companies where the SP was subsequently retained (#2, 3, 4, 6, 12, 13, & 15). ' H.25 Same as above except using CEOHMA instead of average_MA. Further analyses were conducted where results of the planned analyses were confounded by highly correlated independent variables. These consisted of partial and semi-partial correlations to eliminate confounded relationships where such confounding appeared to reflect peculiarities of the sample rather than actual characteristics of the papulation of interest. No attempt was.made to do such analyses where the situations portrayed by them was.unlikely to occur in the natural setting. For example, it was expected that the number of years a company . has had the SP and managerial attitudes would be positively correlated, and therefore examining the relationship of one of them with SP8 while holding the other constant would not be a meaningful analysis. CHAPTER III RESULTS AND DISCUSSION Interrelationship Among Scanlon Plan Success Measures Intracompany, H.l Results. Hypothesis one predicted that, within a SP company there is a strong positive relationship between PDM and perceived SPS. Data for the two variables were available from only one company (#7 in Table 5). The two variables correlated .60 (N'- 95, p < .0005). Based on reliabilities (alphas) of a .91 and .89, the correction for attenuation yielded a correlation of .67. Discussion. The hypothesis was clearly supported. However, two factors limit the practical significance of the finding. (1) The variables were measured only at one company. (2) The variables were measured only at the individual level and could'not be combined to get meaningful work group or department scores. Had such group scores been available it would have increased the likelihood that the measures were tapping variance in real (as opposed to just per- ceived) PDM and SP8. As SPS was defined earlier, it clearly cannot vary across individuals within an organization and therefore the per- ceived SP8 variable would appear to be measuring only perceived differ- ences. However, as the variable was actually measured (see Appendix), it is conceivable that it taps real differences at the individual level, 107 108 but to the extent this is the case the variable is a.different con— struct than is the companywide SPS concept discussed previously. Similarly, although PDM may be measuring real differences, it too may just be reflecting perceived differences. To the extent that the obtained result reflects a correlation involving real differences on the two variables, it provides support for the hypothesis that PDM is an important part of, but not.synonomous with, SPS 22£_not SPS as the term.was used earlier. However, it is also very.likely that the result merely reflects a correlation involving only perceived differ- ences on one or both of the variables in which.case it has no real- bearing on the relationship between true PDM and true SP8.- Intercompany_ H.2 Results. Hypothesis two predicted a strong positive relationship between mean PDM and rated SPS.v The rank order correlatiOn between the two variables was .79 (N - 7, p < .05). Discussion. The result provided strong support for the hy- pothesized relationship between PDM and SP8 at the interosmpany levels Because the PDM measure was a mean for all the employees in a company, it should be a reliable and fairly valid measure of average employee influence. Similarly, the rated SPS measure is a reliable index of SPS. In developing the RSPS ratings, the judges generally were not aware of the individual companies' PDM scores and therefore the ob- tained relationship should be free of rater bias. Also, because the two measures involved very different methods of measurement, the finding provides evidence of a relationship that is free of method variance. 109 H.3 Results. Hypothesis three predicted that mean PDM is higher for companies where the SP is subsequently retained than for companies where the SP is subsequently abandoned. Of seven SP companies where PDM data were collected prior to 1970, two had abandoned the SP at the time of the present study. Table 6 shows mean PDM, sample size, year PDM data were collected, and year SP was abandoned (where appro- priate), for the seven companies. The mean PDM score of 3.28 for the five continued SP companies. and 3.03 for the two abandoned SP com-. panies provided support for the hypothesis. Only in one case was mean PDM for a continued SP company lower than the higher of the mean PDM scores for the two abandoned SP companies. The point biserial correlation between mean PDM and subsequent retention/abandonment of the SP was .66 (N - 7, n.s.). Discussion. The finding supports the hypothesis but the extremely small sample size limits drawing conclusions about the significance of the results. The data do provide some evidence that average employee PDM of a company predicts whether the company will subsequently retain or abandon the SP. H.4 Results. Hypothesis four predicted that mean PDM is higher in SP companies than in non-SP companies. As shown in Table 6, mean PDM of five (retained) SP companies was 3.28, mean PDM of the two non—SP companies was 3.35. The point biserial.correlation between mean PDM and Scanlon/non-Scsnlon was - .31 (N - 7, n.s.). The~find- ing does not support but actually contradicts the hypothesis. Discussion. This result, although not statistically sig- nificant, was surprising. Mean PDM did not discriminate (actually 110 Table 6 Mean PDM of Non-Scanlon Plan Companies, and Companies where the Scanlon Plan is Subsequently Retained or Abandoned ‘ m 1 Mean PDM Sample Size Non- . Come Retained Abandoned Scanlon Number Number Year Year pany SP SP Plan of of PDM Data SP Company Company Company Employees Respondents Collected Abandoned l 2.83 3000 1753 1968 1973 2 3.37 520 244 1968 -- 3 3.23 240 156 1968 -- 4 3.28 160 158 1968 -- 5 3.22 147 99 1968 1968 6 3.37 600 320 1968 -- 7 3.13 145 98 1973 -- 9 3.22 50 42 1972 N.A. 10 3.48 1500 385 1973 N.A. Mean 3.28 3.03 3.35 Note. - Company numbers correspond to those used in Table 5. discriminated in the "wrong" direction) Scanlon from non-Scanlon companies. This finding is particularly perplexing in light of the results of the two prior hypotheses. (1) Mean PDM was shown to.significantly correlate with rated SPS (H.2), and (2) mean PDM predicted subsequent retention/ abandonment of the SP (H.3). One would certainly expect that mean PDM would discriminate Scanlon from non-Scanlon companies.9 Regarding the 9Of course there are many approaches other than the SP to achieve high levels of PDM. However, the author is not aware of any programs at either of the two non-SP companies that one would expect to contribute to above average levels of PDM. 111 two non-SP companies, inspection of Table 6 shows that mean PDM was- moderately high for company 9, and extremely high for company 10. There are several factors that may have served to inflate the scores for these two companies. (1) The same questionnaire was used to collect PDM data from companies 1 through 6. Three different question- naires were used in the case of companies 7, 9,'and 10. ‘In the case of companies 7 and 9 the items were exactly the same as those used for companies 1 through 6, but the questionnaires were much shorter. The ease of completing these shorter questionnaires, as well as other factors arising from the use of different questionnaires, may have affected the responses in the case of company 9 (and perhaps 7 as well). In the case of company 10 the data were collected as part of another (unrelated) study (Schuler, 1973), and in addition to it being a different questionnaire, it is possible that.the items or their response alternatives were not.worded.identically. .(The author has not been able to obtain a copy of the questionnaire.) (2) Company 9 was the smallest of the companies where PDM data were collected, and it has been suggested (H.14) that size is inversely related to PDM. This size effect.may have increased the PDM score for company 9. (3) Again in the case of company 9, although the company did not have a SP, the decision had been made to implement one. The employees were aware of this decision and their awareness may have influenced their responses to the PDM items. (4) In the case of company 10, unlike all the other companies, the respondents were required to identify themselves on the questionnaire and this factor may have influenced them to report more favorable responses than they would have reported 112 had the data been collected anonymously. (5) Lastly, both companies 9 and 10 were located in a different geographic area (Ohio) from the rest of the companies which were all located in western Michigan with the exception of one in Illinois. H.5 Results. Hypothesis five predicted that rated SP8 is higher for companies where the SP is subsequently retained than where it is subsequently abandoned. The results support this hypothesis. Thirteen companies were ranked on SP8 (1 - highest SP8). The ranks of the four companies that subsequently abandoned the SP were 9,.10, 12 and 13. The median rank for these four abandoned SP companies was 10/12; the median rank for nine retained SP companies was 5. The correlation between the ranks and subsequent retention/abandonment of the SP was .71 (N - 13, p < .01). Discussion. .The result does support the hypothesis. Only one of the retained SP companies had a ranking lower than that of an abandoned SP company. Furthermore, this company was the newest of the SP companies and it has been suggested (H.15) that time with the SP is positively related to SP8. However, one limitation should be kept in mind regarding the finding. The judges were asked to rate the companies according to the SPS that had been achieved at an earlier point in time. Some of the judges knew, at the time they did the rating, that some of the companies had subsequently abandoned the SP, and this knowledge may have contaminated their ratings.- 113 Causes of Scanlon Plan Success Intracompany The largest company in this study had, at one time, twelve distinct SP units operating in different plants. When this study was planned it was hoped that this situation would allow for meaning- ful variance in SPS among SP units that had a very similar external environment. Such factors as size, managerial attitudes, and work- force characteristics could be examined as they affect distinct SP units operating within a similar environment (geography, technology, market forces, etc.). However, events did not have it this way. In developing the RSPS measure three judges were asked to rate the twelve SP units within the company. However, two of the raters de- clined indicating that they did not have any basis for making the comparisons and therefore ratings from only one judge were available. The RSPS rating from this one judge correlated -.10 with the PDM measure collected from the twelve SP units. This is in marked con- trast to the intercompany correlation of .79. This situation was. not due to restriction in range on PDM in the multiunit company where the variance in mean interunit PDM was actually greater than was the variance in mean intercompany.PDM. Because.just one rater completed the task and therefore no reliability estimate was available, and because his ratings correlated negatively with the PDM.criterion, it was decided that these SP units did not provide a valid sample for examining intracompany variance in PDM. Therefore, this entire com- pany was considered as just one SP company and intracompany analyses 114 were subsequently limited to examining SPS at the individual and work team levels. H.6 Results. Hypothesis six predicted.a positive relationship between a manager's attitude toward participative management policies and the mean level of PDM reported by his immediate subordinates. A sample of thirty-one managers from six companies,.for which cor- responding subordinate group PDM data were available, were used to test the hypothesis. An F ratio of the companies with the largest and smallest variances indicated that the companies did not have significant (p - .10) variance differences on either of the measures. After the scores for both variables had been adjusted to eliminate intercompany mean differences, the two variables correlated .10 (N - 31, n.s.). Discussion. The correlation was surprisingly low. Because the PDM variable was measured at the group level it should be reliable, and should tap a large proportion of variance in real, as Opposed to just perceived, PDM. The MA variable was based on questions focusing specifically on the advantages of employee participation, and one would expect that it would account for more than one percent of the variance in subordinate PDM. There are two factors that might explain such a low relationship. (1) There may be little true variance in one or both of the measures at the intracompany level,--eliminating the intercompany variance may have eliminated most of the true variance. At the intercompany level of analysis the two variables were highly correlated (rho - .60, N - 6, n.s.). (2) There was a time lag of two and one half years between the collection of the two measures. 115 During this period there may have been substantial personnel changes. such that work group PDM data may have been collected from a quite different group of subordinates than who worked for the manager at the time he completed the MA questionnaire. Also, either subordinate PDM or managers'attitudes may have undergone significant changes during this-timeaperiod. H.7 Results. Hypothesis seven predicted a positive relationship between level of expected SPS measured prior to implementation of the SP and subsequent PDM measured four years later. Data were available from.on1y one company (#7 in Table 5). The two variables correlated..32 (N - 55, p.< .02). Based on reliabilities (alphas) of .89 and .91 the correction for attenuation yielded a correlation of .36. Discussion. The finding did support the hypothesis. How- ever, because the variables were measured at the individual level, and only at one company, some of the same limitations that apply to the results of H.l are applicable here. The expected SPS variable is an individual.difference attitude measure that was not a.function of any systematic treatment condition. Therefore, even if the obtained result reflects a relationship between.these.expectations and differ- ences in real PDM, it does not have any direct implication as to what would happen if you could igdggg_high expectations (although it might have some implications for selecting individuals who subsequently would achieve high levels of PDM). With this limitation in mind, the finding does indicate that prior expectations do account for a small but significant proportion of the variance in self reported PDM at 116 the intracompany level. However, it is very plausible that the correlation merely reflects a relationship between expectations. and only perceived differences in PDM in which case it has no bearing on the relationship between expectations and actual PDM. H.8 Results. Hypothesis eight predicted a significant multiple correlation between PDM and sixteen background factors related to sex, education, religiosity,and geographic background. The obtained R was .247 (R2 - .061, N - 931, p < .0005). Because of the large sample size the correlations were only slightly biased. The_cor- responding unbiased estimates for R and R2 were .241 and .058 re- spectively. Only three variables contributed significantly (p < .05) to the multiple correlation: (1) sex, (2) church activity during youth, and (3) education. Respondents who were male, who were more active in church activities during youth, and who had more education, reported higher PDM. Discussion.. The finding provided only very marginal support for the hypothesis. The sixteen background factors accounted for only six percent of the total intracompany variance in PDM. Further- more, two of the three factors that contributed significantly to the correlation, sex and education, are variables that are likely associated with hierarchical level. It has been shown elsewhere. (White, 1972) that hierarchical level is positively related to PDM and even the relatively small correlation obtained here may in part just be an artifact of the relationship between PDM and hierarchical level. In conclusion it seems that, at least as far as the variables examined in the present study are concerned, background characteristics are not a major determinant of intracompany variance in PDM. 117 H.9 Results. Hypothesis nine predicted a negative relationship between mean level of PDM reported by a work group and the number of employees in a work group. The number of employees in a work group had to be inferred from the number who returned questionnaires. Using data from a total of 180 work groups, the correlations ranged, from .01 to - .56 with an average correlation of - .32. An F ratio of the companies with the largest and smallest variances did not yield any significant differences in variance on either of the measures. The correlation for the total group, after adjusting both scores to eliminate intercompany mean differences, was - .34 (p < .01). Discussion. The result provided substantial support for the hypothesis. Because the variables were measured at the group level, the correlation should reflect a relationship involving actual PDM. Because the size variable had to be inferred from the number of employees who returned questionnaires, its reliability was lowered and therefore the true relationship would be higher than that indi- cated by the above correlations. This finding is particularly interesting because this work group size issue has not received much emphasis in the literature; however, in this study it actually accounted for more variance in PDM than did managerial attitudes which have frequently been emphasized as a major determinant of subordinate PDM. H.1O Results. Hypothesis ten predicted a positive relationship between employee seniority and PDM. Based on a total of 2,638 employees the correlations for the six companies ranged from .10 to .39 with an average correlation of .22 (p < .01). 118 Discussion. The finding did provide modest, but significant, support for the hypothesis. At the individual level of analysis employee length of service is positively related to self reported PDM. However, as in the case of H.8, the relationship may in part be an artifact of the fact that both PDM and seniority are correlated with hierarchical level. H.ll Results. Hypothesis eleven predicted a negative relationship between the number of employees in a manager's work group and his attitude toward participative management policies. Based on data from 194 managers, the correlations for the eighteen companies ranged from - .13 to .73 with an average of .27. An F ratio indi- cated no significant company difference (p - .10) in variance of MA, but for the W;SIZE variable one small company (N - 3) did show significantly less variance than the others. When this company was dropped, the correlation for the total group, after adjusting both scores to eliminate intercompany mean differences, was .21 (N - 191, p < .01). Discussion. The finding did not support the hypothesis. At the intracompany level managers' attitudes towards participation appear to be slightly, but positively, related to the size of his work group but with a great deal of variability across companies. The result did not parallel that of H.9 which found a negative rela- tionship between work group size and work group mean PDM. However, since managerial attitudes were only slightly correlated with work group PDM (H.6) there is no reason why the result here should necessarily follow that found for H.9. 119 H.12 Results. Hypothesis twelve predicted a positive relation- ship between a manager's length of service and his attitude toward participative management policies. Based on data from 195 managers, the correlations for the eighteen companies ranged from - .61 to .85 with an average of .12. For the TENURE measure, the F ratio indicated that two small companies (No - 3 & 6) had significantly (p < .10) more variance than the others. When these companies were dropped, the correlation for the total group, after adjusting.both variables to eliminate intercompany mean differences, was .00 (N - 186). Discussion. The result provided no support for the hypothesis. At the intracompany level, the relationship between managers' attitudes toward participation and his length of service with the organization was highly variable, but overall the variables appear to be independent of each other. The finding did not parallel that of H.10 which found a small but significant correlation between'PDM and employee length of service. H.13 Results. Hypothesis thirteen predicted a positive relation- ship between a manager's attitude toward participative management policies and the extent to which he believed he would be reinforced for engaging in such activities. Based on data from 194 managers, the correlations for the eighteen companies ranged from - .65 to 1.0 with an average of .22. F ratios indicated no significant (p - .10) company differences on variance for either of the measures. The correlation for the total group, after adjusting both scores to eliminate intercompany mean differences, was .16 (N - 194, p < .05). 120 Discussion. The result provided only very marginal support for the hypothesis. The overall relationship was small and highly variable across companies. Furthermore, the significance of the finding is limited by the fact that the variables were measured at the individual level of analysis. Therefore, it is quite possible that even the small relationship obtained was an artifact of method variance or at least could have been substantially inflated by a response bias. Also, even if in fact the variables are not related, one would expect the respondents to report a relationship to avoid cognitive dissonance,--it would be hard to report favorable attitudes toward participative management policies and at the same time report that such behavior is not rewarded or vice versa. Intercompany H.14-H.21p Results. Table 7 shows the hypothesized relationships and obtained correlatiOns for H.l4 through H.21. . Discussion. Most of the findings supported the hypothesis although some of the relationships are confounded by high inter- correlations among some of the independent variables. There were some noticeable exceptions. Contrary to the hypotheses (H.14, H.19), C-SIZE correlated pgsitively with rated SP8 and managerial attitudes. Also particularly surprising was the strong positive relationship between C-SIZE and TIME,--there is no logical reasons why the number 70f employees in an organization should correlate highly with the number of years the organization has had a SP, and it appears that this relationship may be reflecting a peculiarity of the sample. 121 Table 7 Hypothesized Relationships and Obtained Correlations for the Independent Variables and Rated Scanlon Plan Success Item C-SIZE TIME MA R CEOéMA BACK TIME rho-.56* N-l3 low neg -- MA rho-.51 r-.83** Nhlo N-lO (H.19) -- -- very rho-.38 r-.59* high pos R N-lO N-lO r-.70* N-lO (H.20) -- -- -- very rho-.51 r-.56* r-.66* high pos CEO-MA N-lO N-lO N-lO r-.l6 N-lO (H.21) low neg moderate high -- high low rho-.43 pos pos rho-.51 pos rho-.54 RSPS Ni13 rho-.77** rho-.78** Nilo rho-.48 N-6 (H.14) N-l3 N-lO N-lO (H.18) (H.15) (H.16) (H.17) Note. - The number in parentheses refers to the hypothesis number as used in the text. *p < .05 **p < .01 122 rather than a meaningful relationship between the two variables. It was felt that this relationship between C-SIZE and TIME might be the cause of the positive correlations of C-SIZE with RSPS and MA. To investigate this possibility, a series of semdpartial correlations were computed. With TIME partialed out of C-SIZE (but not out of RSPS), the correlation of C-SIZE with RSPS dropped from .43 to .01. Similarly, with the effect of TIME partialed out of C-SIZE (but not out of MA) the correlation between C-SIZE and MA dropped from .51 to .05. Therefore, it seems that the surprisingly high correlation be- tween C-SIZE and TIME explains the positive correlations of C-SIZE with MA and RSPS. Going the other way, with the effect of C-SIZE partialed out of TIME (but not out of RSPS), the correlation between TIME and RSPS only dropped from .75 to .61. However, while the cor- relations involving C-SIZE did drop to zero, they were not negative as hypothesized and the net result seems to be that both MA and RSPS are independent of company size. There are two issues that should be kept in mind in interpreting the relationships involving C-SIZE. (1) As can readily be seen from inspection of Table 5, the distribution of C-SIZE was extremely skewed and therefore for purposes of analysis the variable was reduced to the ordinal level of measurement. (2) There was restriction in range such that there was only one organiza- tion that would not be considered a "small" company. Therefore, the ‘present findings did not really provide an adequate test of the general 'hypothesis that the SP will not succeed in large organizations. As predicted (H.15), TIME was positively related to RSPS and as noted above this relationship was not just an artifact of the 123 correlation between C-SIZE and TIME. However, TIME was highly cor- related with the other independent variables MA, R, and CEO-MA. Unlike the correlation between C-SIZE and TIME, these correlations likely represent meaningful relationships rather than sample pe- culiarities. It seems plausible that one of the ways TIME influences SP8 is through its effect on managerial attitudes which in turn may be influenced by the extent to which they are rewarded. For this reason it did not seem appropriate to compute partial correlations among these variables. As predicted (H.16), MA was positively and strongly related to SP8 and its relationship closely paralleled that of TIME. As predicted (H.17), CEO-MA was positively correlated with RSPS but the relationship was not as strong as was expected. It is likely that the relationship was limited by the unreliability of the CEOeMA measure. Unlike the MA variable which was based on the average of all of the managers in an organization, the CEO-MA measure was based on the questionnaire responses of one (or in two cases, two) managers and therefore its reliability is lower. Also, the measure evidenced severe ceiling effects. Four of the ten scores were at the extreme (favorable) end of the scale and this limited the extent to which the variable could correlate with the SPS criterion. As predicted (H.20), managerial attitudes were strongly cor- related with the extent to which managers believed they would be rewarded for following participative management policies. Contrary to the prediction (H.21), the extent to which managers believed they would be rewarded for following participative 124 management policies was only slightly correlated with CEO-MA. There are two factors that may have served to lower the obtained relation- ship: (1) the lack of reliability and ceiling effects of the CEO-MA variable as discussed previously, and (2) use of an inappropriate sub- ject for the CEO-MA measure. The respondent whose score was used to index this variable was identified by a hierarchical code. However, in practice the apprOpriate key executive officer, the one who has the most influence on the managers, may not be the one with the highest formal position in the organization. Also, in some cases data were not available from the manager at the very top level and the CEO-MA measure had to be indexed by the average responses of two high level executives. Therefore, the obtained result did not pro- vide an adequate test of the general hypothesis concerning the critical role of the chief executive officer. Hypothesis eighteen was supported,--background characteristics correlated with RSPS although the relationship was not significant with the sample of six. However, the manner in which the background characteristics measure was developed limits the meaningfulness of this relationship. The sample size precluded the possibility of doing a regression of workforce characteristics on companywide RSPS. Had this approach been possible it would have provided the most adequate test of the general hypothesis that an organization's work- force characteristics influence the orgsnization's SP8. To overcome this problem, employee characteristics.were regressed on PDM at the individual level within one large company.(H.8). .Means for each organization, for each of the three significantly weighted background 125 characteristics, were computed. By applying the beta weights from the multiple regression to company mean background characteristics, a predicted score for each company was obtained. The correlation reported in Table 7 was computed from ranks based on these predicted scores. The problem with this approach is that it tests the extent to which the same background characteristics that account for intra- company variance in PDM also account for intercompany variance in SPS. It is very possible that workforce characteristics account for intercompany variance in SPS but it is very likely that they are different characteristics, behaving in a different fashion, than those that explain intracompany variance in PDM. Two of the three factors that contributed the most to intracompany variance in PDM were ones that are likely associated with hierarchical level. How- ever, factors associated with hierarchical level are not the ones that would be expected to predict intercompany variance in SPS although it is interesting to note that the predicted scores based on background characteristics also correlated with company mean PDM (rho - .43, N - 6, n.s.). The specific relationship examined in this study did not really provide an adequate test of the general hypothesis regarding the type of workforce characteristics that may account for variance in intercompany SP8 and the nature of the rela- tionships involved. An analysis of variance using company as the independent variable and each of the background characteristics as dependent variables found a significant (p < .05) company effect for thirteen of the sixteen background characteristics. Therefore, it seems very plausible that workforce characteristics may influence 126 companywide SPS but in a quite different fashion to that investigated here. H.22 Results. Hypothesis twenty-two predicted that mean level of expected SPS (EXSPS), measured prior to the implementation of the SP, is higher for a company where the SP succeeds than for a company where the SP subsequently fails. Data were available from only one com- pany in each of the conditions. Mean EXSPS for the subsequently suc- cessful SP company was 3.77 and 3.65 for the subsequently abandoned SP company. The difference between the two groups of individuals, considering sampling from finite populations, was significant (Ns - 108 and 52, p < .05). However, the appropriate unit of analysis for this hypothesis is the company, but with zero degrees of freedom it is impossible to estimate the significance of the finding at the intercompany level. H.23 Results. Hypothesis twenty-three predicted that the average size of companies where the SP is abandoned is higher than that of companies where the SP has been retained. Data from nine continued and twelve abandoned SP companies were used to test the hypothesis. The mean number of employees for the abandoned SP companies was 403 as opposed to 232 for the retained SP companies. The point biserial correlation was - .17. However, these figures are deceptive because the abandoned SP company mean was inflated by one very large company (3000 employees); with this company eliminated the mean drOpped from 403 to 166, and the correlation changed from - .17 to .13. The range for the twelve abandoned SP companies was 48 to 3000 127 with a median of 105/147; for the nine retained SP companies the range was 23 to 600 with a median of 160. Discussion. The finding did not support the hypothesis but did parallel the finding for H.14 (after the effects of TIME had been partialed out). That is, for the sample of companies used in this study, SPS seems to be independent of company size. H.24 Results. Hypothesis twenty-four predicted that managers in companies where the SP is subsequently abandoned have less favorable attitudes toward participative management policies than do managers in companies where the SP is subsequently continued. Data were available from three companies (#8 l, 4, 16) where the SP was subsequently abandoned, and seven companies where the SP was subsequently retained (#s 2, 3, 4, 6, 12, 13, 15). For the three subsequently abandoned SP companies mean MA ranged from 3.74 to 4.18 with a mean of 3.90; for the seven subsequently retained SP companies MA ranged from 4.00 to 4.76 with a mean of 4.32 The point biserial correlation was .65 (N - 10, p < .05). Discussion. The finding parallels that of H.16 except with a longitudinal rather than a cross-sectional design. The MA measure did predict subsequent retention/abandonment of the SP. None of the subsequently abandoned SP companies exceeded the mean of the subsequently retained SP companies, and conversely none of the re- tained companies was lower than the mean of the abandoned companies. However, prediction was less than perfect. Mean MA of one of the abandoned SP companies exceeded that of two companies where the SP was subsequently retained. Nevertheless, the finding did support 128 the hypothesis and extends the wallace (1971) findings to show that the MA variable is predictive, as well as just descriptive, of sub- sequent retention/abandonment of the SP. H.25 Results. Hypothesis twenty-five predicted that the CEO's attitude toward participative management policies is lower for com- panies where the SP is subsequently abandoned than for companies where it is subsequently retained. Data from the same companies as used in the previous hypothesis were used to test this hypothesis. In eight of the ten cases the data were from a single executive at or near the top level of the organization. In the two other cases scores were based on the average responses of two executives at equally high levels in the organization. For the three abandoned SP companies CEO-MA ranged from 3.04 to 5.00 with a mean of 4.33; for the seven subsequently retained SP companies CEOeMA ranged from 3.22 to 5.00 with a mean of 4.49. The point biserial correla— tion was .13 (N - 10, n.s.). Discussion. Although the relationship was in the predicted direction, it was small and insignificant. Furthermore, the CEOJMA measure is questionable because of its low reliability, ceiling effects, and in some cases use of inappropriate respondents on which the measure was based. It will take considerably more data, and more reliable/valid data, before it can be determined whether or not the role of the CEO is as critical as Argyris (1973) claimed. CHAPTER IV SUMMARY AND CONCLUSIONS The Scanlon Plan As has been pointed out, there is no such thing as thg_Scanlon Plan. The Plan does not exist as an abstract concept and to discuss it independently of its actual applications is not a viable approach. The SP is just a tool to help an organization achieve its goals and there are as many SPs as there are organizations using it. This should be kept in mind in interpreting the findings of this study which per- tain to the experience of a specific group of companies, ng£_to some pure model of the SP. The organizations used in this study were not a representative sample of any meaningful population of organizations. In relation to a hypothetical population of organizations where the SP might be con- sidered, the present sample differs in many significant ways: geog- raphy, technology, ownership, size, product line, manufacturing ' orientation, etc. Similarly, the SP systems that operate in these companies are not representative of SPs in general. The natural reaction of the reader trained in the social sciences is to view the SP as a "treatment condition" that, depending on the level of analysis, is applied to individuals or organizations of individuals. However, the only "treatment" that was common to all of the SP companies in 129 130 this sample was some degree of exposure to Dr. Frost and his associates. The actual treatment that the organizations and their members received' was greatly influenced by the particular nature of the organization and the key individuals involved. Therefore, the findings can only legitimately be viewed as descriptive of the experiences of the par- ticular companies and particular SPs that made up the present sample. Inferences to other companies or to the "SP in general," based on the results of this study, must be considered as speculations. Scanlon Plan Scucess Scanlon Plan Success was examined at both the inter and intra- company level. When the study was first planned, it was hOped that the independent SP units within the one large organization would pro- vide a strong basis for examining intracompany variance in SPS. Un- fortunately, this approach did not turn out to be viable and therefore intracompany variance in SPS could only be examined at the individual and work group level. However, the individual or work group level may not be the appropriate one at which to examine SP8 and therefore the most valuable findings of the present study probably are those that pertain to the intercompany level of analysis. Intracompany, Only one hypothesis specifically dealt with SP3 at the intra- company level. It was found that PDM was highly correlated with per- ceived SPS. However, the importance of this finding was limited by the fact that the data were available from only one company and the 131 variables were measured only at the individual level which limited the meaningfulness of the SPS measure. Intercompany Four hypotheses examined SPS at the intercompany level. They all dealt with the interrelationships between rated SPS, mean PDM, Scanlon versus non-Scanlon, and subsequent retention/abandonment of the SP. A strong relationship was found among all these measures of SPS except for the one relationship comparing Scanlon and non-Scanlon companies. It was suggested that this one negative finding might have been due to the unusual circumstances surrounding the two non- Scanlon Plan companies. Causes of Scanlon Plan Success The major focus of this study was relating personnel and situational characteristics to Scanlon Plan Success at both the inter and intracompany level. Intracompany, As was mentioned previously, intracompany analyses were done at the individual and work group level and therefore the importance of these findings is limited by the extent to which this is not an appropriate level at which to examine SPS. Two relationships involving SPS were investigated at the work group.level. It was found that (l) the size of the work group was significantly, negatively, correlated with the mean level of PDM reported by the work group, and (2) the mean level of PDM reported by a work group was essentially unrelated 132 to the leader's attitudes toward participative management policies. Three hypotheses examined relationships involving PDM at the individual level. It was found that there was (1) a slight but significant, positive, relationship between PDM and length of service, (2) a significant, positive, correlation between PDM and expected level of SPS measured four years earlier, and (3) a small but significant multiple correlation between PDM and background characteristics. Three other relationships, all investigated at the individual level, involved correlates of managerial attitudes toward participative management policies. It was found that these attitudes were essentially independent of length of service but were positively related to work group size and the extent to which managers believed they would be re- warded for following participative policies. Intercompany To examine relationships at.the intercompany level two SPS criterion measures were used--rated SP8, and subsequent retention/ abandonment of the SP. However, regardless of which criterion was *ueed the findings were quite comparable. Number of years with the SP, managerial attitudes, and CEO.attitudes, were all positively related to SP8. Company size was unrelated to subsequent retention/ abandonment of the SP and was unrelated to rated SPS when the effects of time were partialed out of company size. Background characteristics of the workforce were related to SP8 but the nature of the relation- ship was not adequately determined. However, two factors pose limitations on the findings. (1) There was a high degree of 133 intercorrelation among the independent variables; with one exception all of the intercorrelations that were computed were substantial although not always significant given the extremely small sample size. (2) Many of the relationships investigated were cross-sectional and therefore assumptions of causality are not justified. However, the nature of three of the variables, company size, number of years with the SP, and background characteristics of the workforce, is such that it is unlikely that they are caused by SPS, although of course this does not mean that they in turn cause SPS. In the case of expected level of SP8 and managerial attitudes, a longitudinal design was used and therefore we can eliminate the possibility that they were caused by SPS. Because of measurement problems no conclusion could be reached regarding the possible effects of the CEO's attitude toward participative management policies. In summary, it is encouraging to note that those characteristics over which we can exert no control (company size, work- force characteristics) were not significantly related to SP8, and con- versely, those variables that were related to SP8 (managerial attitudes, time) are ones that can be dealt with. Implications for Theory and Practice Theory The study was not designed as a test of any existing theory or model and therefore it does not provide any major implications for current theories in organizational behavior. However, in con- nection with PDM the study does point out some issues that have not been adequately dealt with in the professional literature. 134 Almost all of the research and theory concerning PDM has focused on (1) characteristics, particularly leadership, that "cause" PDM, and (2) situational and personnel factors that interact with these causal variables in determining PDM. However, in this study, although there were some methodological problems, subordinate group PDM did not cor- relate significantly with the leader's attitude toward participation. Work group size, length of service, and background characteristics, all explained more variance in employee PDM than did managerial atti- tudes. Future research concerning PDM might well benefit if a more multidimensional approach is used to examine the potential causes of employee participation. Practice The nature of this study is such that its findings are perhaps more relevant in terms of implications for practice than for theory. Of course all such implications are limited by the sample characteristics as emphasized previously. However, it appears that: 1. Although it may be rather obvious, it was shown by the study that employee participation, at least as perceived by the employees, is highly correlated with SP8. Therefore, high success of the SP is unlikely unless a high amount of employee participation can be achieved. In striving to achieve this PDM, size of the work groups may be one factor that should be considered. Also appropriate would be at- tempts to reduce turnover as length of service was shown to be positively related to PDM. f 2. Within the range of size represented by the companies in ‘ the present sample, company size does not seem to be a major factor in determining SPS. It appears that, at least up to six hundred employees (the actual figure may be higher), the SP can be implemented without size imposing a limiting factor on the degree of SPS that can be achieved. 135 Managerial attitudes are strongly related to SP8 and, although not perfectly, they predict whether a SP will subsequently succeed or fail. However, although both PDM and managerial attitudes are highly related to SP8, at least at the individual manager/work group level, they are not that highly related to each other. Therefore, in striving for high levels of SPS it may not be sufficient just to achieve favorable managerial attitudes (or just high levels of PDM) but rather efforts should be focused on both factors. Success of the SP is highly related to the number of years a company has had a SP and therefore patience seems to be in order for achieving high levels of SPS. Expectations of instant changes will likely be met with disappointment. Although the evidence is weak, it appears that expectations may play a part in subsequent SPS. If this is the case, then, depending on the causes of these expectations, the implication would be that (1) care should be taken when the Plan is first considered so that the employees may develop favorable (but realistic) expectations or, (2) we should select persons/ organizations with initially high expectations. Although this study did not provide adequate data, prior .studies have provided fairly strong evidence that a high level executive must take a leading role if the SP is to succeed. This study did show that managerial attitudes, which are highly related to SP3, are also correlated with the extent to which managers believe they will be rewarded for following participative management policies. The implication of this is that top management must provide the necessary rewards so that lower levels of management will adopt participative manage- ment policies. General background characteristics of the workforce were related to SP8. However, given the somewhat inappropriate manner in which the relationship was investigated, and the unclear nature of the relationship, no clear conclusions can be drawn regarding the nature or extent of the effects that general workforce characteristics have on SPS. Although not formally part of this study, technology, does not seem to be related to SP8. The variable was not included be- cause an appropriate manner in which to measure it was not available. However, a cursory comparison of the companies on the extremes 6f the rated SPS.criterion,.and on the abandoned/ retained criterion, provided no notable differences in tech- nology.” Therefore, at least within the-range‘of~technologies represented by the present sample, technology does not seem to be a limiting factor in connection with SP8. 136 Directions for Future Research As was thought before this study was begun, and as was borne out by this study, examination of the SP and the causes of its success are most meaningfully examined at the companywide level. Therefore, future studies concerning the Scanlon Plan and Scanlon Plan success will probably be most beneficial if they incorporate an intercompany approach. However, the implication of this is that the possibility of using the experimental model is virtually precluded. It would be nice if we could randomly select sixty organizations and assign half of them to implement the SP while the remainder served as con- trols. Obviously we can't. The alternative therefore is to do cross- sectional (and perhaps longitudinal) examinations of existing Scanlon and non-Scanlon companies. This was the approach taken here and follows the research model suggested by Goodman (1973). However, the present study was severely handicapped by the small sample size and the sub- sequent restriction in range. To overcome this deficiency, perhaps the best starting point for future research would be to conduct a survey of all the SP companies, collecting the kinds of information that are most readily available (size, time, geographic location, manu- facturing versus service, capital investment, type of bonus, bonus history, consultant(s) used, ownership, etc.). Such an approach would overcome the problems associated with the present study and allow for more conclusive, and more widely applicable, findings than those of the present study. REFERENCES REFERENCES Argyris, C. The CEO's behavior: Key to organizational development. 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A comparative study of attitude scores of managers toward employees and toward selected leadership policies in groups of firms which either discontinued or retained cost reduction sharing plans. Unpublished doctoral dissertation, Michigan State University, 1971. White, J. K. Effects of individual differences on the relationship between participation and job attitudes. Unpublished master's thesis, Michigaantate University, 1972. White, J. K., & Ruh, R. A. Effects of personal values on the rela- tionship between participation and job attitudes. Administra- tive Science Quarterly, 1973, 29, 506-514. “I “h. ‘»- rash 1 T 143 Whyte, W. Money and motivation: An analysis of incentives in ‘industry. New York: Harper, 1955. ’ Woodward, J. Industrial organization. Oxford: University Press, 1965. Yukl, G. Toward a behavioral theory of leadership, Organizational Behavior and Human Performance, 1971, 9, 414-440. APPENDIX W) used to index the seven attitudinal variables used in the study. , I. Participation in decision making (PDM). 1. APPENDIX Questionnaire Items This appendix contains the items and response alternatives To what extent are you able to decide how you do your job? u a b c d e to a very to a great to some to a little to a very great extent extent extent extent little extent In general, how much say or influence do you have on what goes on in your work group? a b c d e little some quite a a great a very or no influence bit of deal of great deal influence influence influence of influence . In general, how much influence do you have on decisions which affect your job? a b c d e very much a moderate little very much amount little In general, how much say or influence do you have on how you perform your job? a b c d e little some quite a a great a very or no influence bit of deal of great deal influence influence influence of influence 144 II. III. IV. 145 5. My superiors are receptive and listen to my ideas and suggestions. a b c d e always often occasionally seldom never Managerial attitudes toward participgtive management polices (MA). Chief executive officer attitudes toward participative mansggment policies (CEO-MA). Perceived extent to which participatogy behavior is reinforced (R). These three variables were indexed with the same set of items. The items were based on three.basic policy statements. For each of the three basic policy statements there were nine, five point Likert-type items to which the subject responded from "strongly agree" to "strongly disagree." These.twenty-seven items were used to index MA and CEOPMA. Following the Likertrtype items, for each of the three policy statements, there were two "yes/no" items. These six items were used to index R. Policy Statement SUBORDINATES SHOULD BE ENCOURAGED TO PARTICIPATE IN DECISION-MAKING WITHIN THEIR OWN DEPARTMENTS. Likert-type items (Used to index MA & CEO-MA). 1. This is a good policy for the supervisors to follow at the lowest levels within an organization.- 2. This is a good policy for supervisors at my own level to follow with their subordinates. 3. This is a good policy for supervisors at the level of my superior to follow. 146 Will the actual quality of decisions.made be likely to improve if a supervisor allows subordinates to participate in decisiondmaking within his department? a 4. Decisions would be likely to improve if supervisors at the lowest level followed this policy. 5. Decisions would be likely to improve if supervisors at my level followed this policy. 6. Decisions would be likely to improve if supervisors at the level of my superior followed this policy. Will the morale of his subordinates be likely to improve if a super— visor allows them to participate in decision making within his depart- ment? 7. Morale would be likely to improve if supervisors at the lowest level followed this policy. 8. Morale would be likely to improve if supervisors at my own level followed this policy. 9. Morale would be likely to improve if supervisors at the level of my superior followed this policy. Yes/No items (Used to index R). 1. Would a supervisor at your level receive favorable recognition from his superiors if he followed this policy? 2. WOuld a supervisor at your level be criticized by his superiors for not following this policy? Policy Statement EACH SUBORDINATE SHOULD BE ALLOWED TO PARTICIPATE IN THE SETTING OF HIS OWN PERFORMANCE GOALS. Likert-type items (Used to index MA & CEOAMA). 1. This is a good policy for supervisors to follow at the lowest levels within an organization. 147 2. This is a good policy for supervisors at my own level to follow with their subordinates. 3. This is a good policy for supervisors at the level of my superior to follow. Will subordinates be more likely to accept reasonable standards and goals if they have an opportunity to discuss them? 4. 5. 6. Subordinates will be more likely to accept reasonable goals if supervisors at the lowest level in the organization follow this policy. Subordinates will be more likely to accept reasonable goals if supervisors at my own level follow this policy. Subordinates will be more likely to accept reasonable goals if supervisors at the level of my superior follow this policy. Will subordinates be likely to set reasonable and satisfactory per- formance goals for themselves if given the opportunity? 7. Yes/No 1. 2. Subordinates will be likely to set satisfactory performance goals for themselves if supervisors at the lowest level fol— low this policy. Subordinates will be likely to set satisfactory performance goals for themselves if supervisors at my own level follow this policy. Subordinates will be likely to set satisfactory performance goals for themselves if supervisors at the level of my superior follow this policy. items (used to index R). Would a supervisor at your level receive favorable recog- nition from his supervisors if he followed this policy? WOuld a supervisor at your level be criticized by his superiors for not following this policy? 148 Policy Statement SUBORDINATES SHOULD BE ALLOWED TO USE THEIR OWN INGENUITY IN MODIFYING AND ADAPTING THE TECHNIQUES AND PROCEDURES REQUIRED IN THEIR JOBS. Likert-Type items (Used to index MA &.CEO—MA). 1. This is a good policy for supervisors to follow at the lowest levels within an organization. 2. This is a good policy for supervisors at my own level to follow with their subordinates. 3. This is a good policy for supervisors at the level of my superior to follow. Will his subordinates' feelings of importance beylikely to increase if a supervisor allows them to shape and modify their own jobs? 4. Feelings of importance will be likely to increase if super- visors at the lowest levels follow this policy. 5. Feelings of importance will be likely to increase if super- visors at my own level follow this policy. 6. Feelings of importance will be likely to increase if super- visors at the level of my superior follow this policy. Will the actual quality of the subordinates' work be likely to rise if the supervisor allows them to shape and modify their own jobs? 7. The quality of work will be likely to rise if supervisors at the lowest levels follow this policy. 8. The quality of work will be likely to rise if supervisors at my own level follow this policy.u 9. The quality of work will be likely to rise if supervisors at the level of my superior follow this policy. 149 Yes/No items (Used to index R). 1. WOuld a supervisor at your level receive favorable recognition from his superiors if he followed this policy? 2. would a supervisor at your level be criticized by his superiors for not following this policy? Expgcted level of Scanlon Plan success (EXSPS). . l. I feel the SCANLON PLAN will do much for me on my job. I agree I agree I am strongly undecided I feel the SCANLON PLAN will be good. I agree I agree I am strongly undecided I think the SCANLON PLAN will change I agree I agree I am strongly undecided.. I think the SCANLON PLAN will change. I agree I agree I am strongly- . undecided. I feel the SCANLON PLAN will make it about company policy.. I agree I agree I am strongly undecided I feel the SCANLON PLAN will make it to be heard. I agree I agree I am strongly undecided I feel the SCANLON PLAN will make it to work as a team. I agree I agree I am strongly undecided I disagree I disagree strongly for the company. I disagree I disagree strongly many things in this company. I disagree I disagree strongly. things quickly here at I disagree I disagree . strongly easier to ask questions. I disagree I disagree strongly easier for my suggestions I disagree I disagree strongly easier for the employees I disagree I disagree strongly 150 8. I feel the SCANLON PLAN will make it easier for me to get my fair share. I agree I agree I am I disagree I disagree strongly undecided. strongly 9. Under the SCANLON PLAN decisions will be more honest. I agree I agree I am I disagree I disagree strongly undecided strongly Perceived level of Scanlon Plan success (PSPS). l. I feel the SCANLON PLAN does much for me on my job. I agree I agree I am I disagree I disagree strongly undecided strongly 2. I feel the SCANLON PLAN is good for the company. . I agree I agree I am I disagree I disagree strongly undecided strongly 3. I think the SCANLON PLAN has changed many things in this company. I agree I agree I am I disagree I disagree strongly . . undecided strongly 4. I think the SCANLON PLAN has changed things quickly here at I agree I agree I am I disagree I disagree strongly .undecided - strongly 5. I feel the SCANLON PLAN makes it easier to ask questions about company policy. . I agree I agree I am I disagree I disagree strongly undecided . strongly 6. I feel the SCANLON PLAN makes it easier for my suggestions to be heard. I agree I agree I am I disagree I disagree strongly undecided strongly 7. I feel the SCANLON PLAN makes it easier for the employees to work as a team. I agree I agree I am I disagree I disagree strongly undecided strongly 151 8. I feel the SCANLON PLAN makes it easier for me to get my fair share. I agree I agree I am I disagree I disagree strongly undecided strongly 9. Under the SCANLON PLAN decisions are more honest. I agree I agree I am I disagree I disagree strongly undecided strongly VII. Background characteristics of the workforce (BACK). 1. In what part of the country did you live most of the time before you were 18? a. The Northeast b. The South c. The Middle West d. The Pacific Coast e. Outside the United States 2. The place in which you spent the most time during your early life was a: a. Farm ‘ b. Town of less than 2,000 c. Town of 2,000 or more but less than 10,000 d. City of 10,000 to 100,000 e. City larger than 100,000. 3. In what type of community are you now living? a. In the country b. Town of less than 2,000 c. Town of 2,000 or more but less than 10,000- d. City of 10,000 to 100,000 e. City larger than 100,000 4. In what section of town did your family live longest while you were growing.up?. a. Lived in one of the most exclusive sections of town b. Lived in a good but not the best section c. Lived in an average section of town d. Lived in one of the poorer sections of town e. Lived in a rural area 5. In your home town what was the main source of income? a. Agriculture, dairy, etc. b. Industry or manufacturing c. Wholesale, retail, or tourist trade d. Petroleum or mining e. Diversified 10. 11. 12. 152 What kind of school did you attend between the ages of 12 to 18? a. Military b. Private or Parochial c. Public d. Vocational and trade e. Did not attend school When you were growing up, about how many books were around the house? a. A large library b. Several bookcases full c. One bookcase full d. A few books e. Only a few children's books How many years of school have you completed? (circle the highest grade completed) 6 or less 7 8 9 10 ll 12 Some College College Graduate WOrk How many years of school did your father complete? (circle highest grade) [response format as above] How many years of school did your mother complete? '(circle highest grade) [response format as.above]_ In how many different cities, towns, or townships have you lived? a. 1 to 3 b. 4 to 6 c. 7 to 9 d. 10 to 12 e. 13 or more What was your father's chief occupation? a. Unskilled worker b. Semi—skilled or skilled worker c. Sales or office work. d. Supervisory work . e. Sub-professional (bookkeeper, pharmacist, draftsman, etc.) f. Scientist (geologist,.engineer, chemist, etc.) g. Professional (lawyer, physician, teacher, etc.) h. Businessman 1. Executive of large business or industry 13. 14. 15. 16. 153 Under usual conditions how often do you attend religious services? a. Twice or more a week b. Every week c. Once or twice a month d. On special occasions e. Do not attend services Religion in your home was considered as: a. An essential part of home life b. One of several factors which were-important c. A relatively unimportant factor d. Something to be left out of our family life e. One's own business. As a young man, were you any of the following? a. A church member and active in church activities b. A nominal church member c. A religious rebel d. A non-churchmen without any great religious conviction Sex (check one): Male Female These background items were coded "continuously” as they appear above with the exception of four.items that were dichotomized. .Item 1, part of country where.raised, was dichotomized between the South (b) and all other responses (a,.c, d, e). .Item.5,.industrialization of home town, was dichotomized between agriculture, dairy, etc. (a) and all other responses (b, c, d, e). .Item.6, type.of schooling was. dichotomized between military,.private or parochial,(a, b) and all other responses (c, d, e).. Item 15, church activity during youth, was dichotomized between active church member (a) and all other responses (b, c, d, e). Typed and Printed in the U.S.A. Professional Thesis Preparation Cliff and Paula Haughey 144 Maplewood Drive ‘ . , East Lansing, Michigan 48823 Telephone (51 7) 337-1 527 Typed and Printed in the U.S.A. Professional Thesis Preparation Cliff and Paula Haughey 144 Maplewood Drive ,7 East Lansing, Michigan 48823 Telephone (517) 337-1527 I U“ k] ._ ir” RRIES “momma 9