Management tips about the positive impact of participative management on productivity and profitability from the Scanlon Leadership Network, the pioneering leader and innovator in employee involvement, Gainsharing and Goalsharing.
Wednesday, May 25, 2005
Maintaining Internal Equity
The Scanlon Equity Principle is often depicted as an equilateral triangle with multiple stakeholders of investors, employees and customers on each side. The triangle represents the idea that all major stakeholders must be satisfied for an organization to succeed.
Equity, however, also includes the idea of fairness. In this view of Equity, each stakeholder group must also experience fairness within the group. In other words, customers must feel like they are treated fairly compared to other customers; investors must feel they are treated fairly; and employees must feel they are treated fairly in comparison to other employees in the organization.
"...if employees' equitable rights are not established and realized, the organization will simply not be able to satisfy its customers and investors." -Dr. Carl Frost
Ten Ways To Maintain Internal Equity
1. Leaders must lead by example. If sacrifice and risk are required for the rank and file, leaders should be the first to demonstrate they are ready to participate.
2. Demonstrate that "we are all in this together." No group is less important than another.
3. Eliminate the "Status Perks" that do not add value.
4. Leaders should spend time with the troops where the work is being done. During a crisis it is especially important that they be seen.
5. Set up a mechanism or system to monitor and adjudicate issue of internal Equity. This prevents small problem from becoming big problems.
6. Be careful about creating internal competition. Focus factories, contests, quotas, team bonuses, recognition programs, etc. can easily spin out of control and create internal Equity problems if they are not carefully handled. Remember: you do not want internal competition - you want the focus to be on competing externally.
7. Practice Identity. Make sure that people understand the different roles and responsibilities in your organization.
8. If possible, eliminate different uniforms. Company logo wear, which makes everyone look the same, helps build internal Equity.
9. Job security, healthcare, good working conditions and pension protection are issues for everyone, not just executives. Make sure everyone shares the risk and enjoys a safety net.
10. Refocus on external Equity. If you are spending too much time talking about internal Equity, you may not be focused enough on customers and investors.
Questions to ponder:
Who is responsible for internal Equity in your organization? What do you do to maintain fairness in your organization?
This Scanlon tip is taken from a Mandate Development Seminar for Chief Executives conducted by Dr. Carl Frost in 1976.
Dr. Frost, a pioneer in the theory and practice of participatory management and founder of the Scanlon Leadership Network, is famous for the tough questions he asks. A Professor Emeritus at Michigan State University, Dr. Frost is an expert in the field of Organizational Development and is known for his research and consulting with organizations nationwide. Dr. Frost also created the Frost/Scanlon Principles and the Scanlon Roadmap for organizational change.
If you would like even more tough Frost questions designed to help you assess your company, the entire seminar handout is now available as a PDF at www.scanlonleader.org in the Educational Resources section. If you can answer the following questions, you and your company are well on your way to understanding and implementing radical innovation: 1. Do we manage the need, assurance and cost of innovation?
2. Should our organization be committed to innovation? Why? If so, in what areas do we need to innovate?
3. For which innovative directions do markets already exist? What markets can be developed?
4. Can we innovate in areas other than product line? (e.g., new approaches to marketing, financial resources, productivity or use of human resources)
5. What is our schedule for abandoning obsolete or marginal products?
6. Are we oriented toward providing more and better versions of our products, to developing new and different products and services or to both?
7. What are the costs and risks of innovating, both in financial and human resources? Can we afford to innovate, given current production costs and the high failure rate of product innovations? Can we afford not to innovate – in other words, can we survive internal stagnation and increased market vulnerability?
8. How can we reward employees for innovation while keeping development costs low?
9. Who pays for innovative efforts? Are the extra costs absorbed, or are some products abandoned to release resources for innovation?
10. Is innovation an organizational policy?
11. How is the need for innovation incorporated into the organizational structure?
12. What review procedures exist to identify and evaluate development efforts at the various critical stages?
13. Who decides when and how to innovate? Who implements this decision?
14. Is responsibility for innovation owned by all members of the organization?
15. What procedures are used to assess developmental failure? What have we learned from our failures about our skill and knowledge needs? Are failures carefully analyzed for possible spin-off products and processes?
"Where the Best Ideas Come Together." Founded by Joseph Scanlon in the 1940s, the Scanlon Leadership Network is a nonprofit association committed to helping each member, from small company to multinational corporation, become the world-class leader in its industry. Joe's experiences as a steelworker during the Depression prompted his belief that a company's health, indeed its very survival, requires a climate of cooperation rather than competition between employees and management. The Scanlon Leadership Network is a promoter of the Scanlon Principles to advance their application among organizations, a provider of networking opportunities for our members, a clearinghouse of Scanlon information, and a supplier of unique Scanlon related products and services.
