Workers in the Bosses' Shoes
This factory gives its workers the right to hire, fire and promote themselves. It may sound crazy, but it's paid off
AT 3.25 every Thursday afternoon eight rankand-file factory workers at the Scott and McHale Shoe Co. plant in London, Ont., leave their work benches or stitching machines and walk through the throbbing, pungent factory to a quiet room next to the first vice-president's office. By 3.30 they are seated around a long table in the carpeted office and Harold Bottom, a stocky and ruddy-faced bachelor who has been working for Scott-McHale for 20 years, calls the other seven to order. He is chairman of this committee of six
men and two women who administer the labor end of Scott-McHale’s remarkable labor-management plan, with the power to cut or raise their fellow employees’ pay, to hire and fire, to order promotions, demotionsor bonuses.
Ever since Aug. 1, 1937, Scott-McHale’s factory help (present number: 342) have been running their own show through this annually elected committee of eight. In those 10 years successive committees have cut the factory work week from 493^ hours to 40 and from five and a half days to five; have increased holidays with pay from none to three weeks a year; and while doing all this have increased their own pay steadily.
An attraction possibly greater than any of those, however, is that in normal times two workers out of every three in the plant can depend on an assured annual wage -something for the wife to count on when she’s trying totdecide whether she can afford that new spring coat, or refrigerator. For workers and wives brought up on the uncertainties of piecework, this final advantage would give the plan some measure of success even if it provided nothing else.
Ten Years of Labor Peace
THE firm—a private one—has prospered, too.
Profit figures aren’t available, but its gross income for 1945 (last available figure) was just over $lj^ millions, compared with about $1 million for 1937. That’s an increase of 50%.
Most astonishing of all is that in 10 years this labor government in the Scott-McHale plant hasn’t had a single argument with management— John J. McHale, Sr., president; and his sons, Jack McHale, vice-president in charge of sales, design and personnel, and Jim McHale, vice-president in charge of production. The tall, fair-haired president of the firm, who started part-time work in the shoe business 55 years ago, when he was eight years old, says he wouldn’t run a business any other way, now.
Here’s how it started: In the mid-thirties
Scott-McHale signed a union contract with the International Shoe and Leather Workers Union (CCL) and during 1936 and the early part of 1937 there was considerable labor-management friction. Workers were being paid piecework rates—no pay for statutory holidays, layoffs in slack periods. They weren’t happy, and neither were the McHales.
The company had known for some time of a successful income-sharing plan at the Nunn-Bush Shoe Co. in Milwaukee, Wis. In the spring of 1937, Jack McHale—then finding his feet in his father’s business after graduating from the University of Western Ontario—visited the Nunn-Bush offices and obtained a booklet describing the plan. When he got home he gave it to his father. Half an hour later McHale, Sr., decided to offer a similar plan to everyone in his plant except his office workers, salesmen and foremen.
Among the men called away from their work that day to the boss’ office was Cecil Dodson, secretary of the union local which represented workers at Scott-McHale and another London shoe plant. McHale, Sr., explained what he knew about the plan and offered to send a group of workers to Nunn-Bush to investigate it for themselves. Dodson went along.
Early in June the delegation returned and talked it over with other employees. A week later a mass meeting of factory workers decided to try to work out an income-sharing plan. For the next five weeks, every night, the McHales and the leaders of the factory hands threshed out details. During this time labor and management conducted separate studies to determine how much the workers should get out of every sales dollar.
Dodson and other senior workers canvassed every man and woman in the plant, asking what each thought would be a fair weekly wage for his or her job. They added it all up, found that it worked out to 22.2% of the company’s income in the year which ended
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April 30, 1937—the company’s best year since the twenties. Meanwhile, company accountants figured out that labor costs in the plant had averaged 21.7% of sales income during the previous 15 years, and decided that would be a fair figure to work on in future.
When the two groups compared findings the company decided to waive the odd decimal points and accept the workers’ figure. The money, $22.20 out of every $100 worth of shoes the company sold, would be paid into a fund to be administered entirely by the elected representatives of the workers —a chairman elected by everyone in the plant and one committeeman from each of the seven departments. Elections would be held every December.
Other details were worked out, then Dodson and two other union men took the completed plan to a provincial meeting of their union. They asked that the London local be split, with Scott-McHale workers to have a local of their own with a contract based on the income-sharing plan. The union ruled against the split, saying that there should not be two locals in the same industry in a single city.
How It Works
Most of the workers in Scott-McHale had been unionists for years. But they decided, regretfully, to break with the union and run their own show\ Most of them, including Dodson—a longtime labor official—handed in their union cards. A few didn’t, and still hold them, although there has been no organized union activity in the plant since the income-sharing plan went into force.
Dodson, who was elected the com-
mittee’s first chairman and served four consecutive terms, is a stocky man of 45, with two children and his own home. He works now at a waist-high bench near a bank of windows on the factory’s third floor as a cutter, one of the most skilled jobs in the plant. Although he hasn’t served on the committee since his last term as chairman, he is still a firm supporter of the system, with only one regret. “I’m still sorry the union didn’t take our plan as the basis for a new contract,” he said. “I was in the labor movement so long that it was a wrench to turn in my card.”
The plan he helped to pioneer hasn’t changed in principle through the 10 renewals of the contract signed each December by the committee and the management.
Under it the 342 workers in the factory are divided into three categories—A, B and C. In A class there are 141 workers, enough to produce 800
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pairs of shoes a day, which is well below the daily production of about 1,000 pairs a day when the plan was introduced, and 1,069 at present. No A worker can be laid off as long as the plant operates, unless he is dismissed for incompetence. For instance, suppose plant production fell to 800 pairs a day and all but A workers were laid off. Suppose that, at the 800-pair rate, two workers on a certain job handled 400 pairs a day each. If the plant’s production fell further to only 400 a day, the number of pairs handled by each A worker would be cut to 200. Neither would be laid off, but their pay would drop since sales and income would, of course, be lower.
The next category, B, contains 103 men and women who do the same work and get as much money as A workers, but may belaid off during slack periods. If an A worker dies, or is fired, or retires, the B workers who know his job may apply to the committee for advancement to A category. If ability is equal the applicant who is senior in service will get the nod.
The C class mainly covers beginners. The committee pays them hourly rates, and, at the end of six months, a C worker may apply for advancement to B class and admission to the incomesharing plan. If a C worker’s application is rejected he usually is dismissed, although occasionally he may get another six months of trial.
Charlie Brereton, a round-faced young man in his late thirties who is committeeman for the cutting room, is a fairly typical A class worker. He has been with Scott-McHale for 20 years, is married, owns his own home, and gets $46 a week—about $20 more than he was getting when the plan went in 10 years ago. We’ll use him as a basis for explanation of how the committee’s pay plan works in the A and B classes.
That $46 of Charlie’s is called a “drawing account,” not a salary, and here is why. Suppose, dealing in round figures for the sake of simplicity, that the drawing accounts of Charlie and all the other A and B workers total $5,000. That, over a period of six months (26 weeks), will mean that the committee pays out $130,000 to A and B workers. Suppose it also pays $30,000 to C workers, on hourly rates. That totals $160,000. But the workers’ share of sales for that period was $167,500, so there is $7,500 still be be distributed.
The committee sets aside two thirds of it, $5,000, as a bonus. Since $5,000 happens to be equal to the total of the weekly drawing accounts, each A and B worker gets a bonus of one week’s pay.
That leaves $2,500. This is placed in a special account called the reserve fund, administered by the committee and by a three-person trusteeship of veteran workers, and kept mainly in government bonds. Each A and B worker has a reserve fund credit card, kept something like a bankbook. Since the $2,500 placed in the reserve fund in this case is equal to half a week’s pay for each A and B worker, that amount is entered on each individual card. Charlie, for instance, gets $23. Since he already has a reserve totalling more than 10 weeks pay, (required by the committee as a shock absorber against layoffs) he can draw out the $23 and spend it if he wishes. But Charlie, like most other ScottMcHale employees, likes to let his reserve fund account accumulate. Some workers have between $900 and $1,000 saved that way as provision against any business slowdown or shutdown in the future.
This reserve—one third of the surplus after each six months—is a source of considerable satisfaction to everyone concerned, particularly veteran employees who remember back to piecework and hourly rate days when bank accounts built up during good months were wiped out during slack months, and the net saving for a year was little or nothing.
If a worker leaves Scott-McHale he may close his reserve fund account in cash. At present the reserve totals about $90,000. It drew $3,400 interest last year, which the committee split up again between Charlie and all the other A and B workers—and left in the fund.
W ork 52 W eeks, Paid for 58 b¿
The bookkeeping for this system is done by the company, but is checked once a year by committee-appointed auditors. For the last complete year the records show that Scott-McHale’s A and B workers were paid a total of 58 Yi weeks’ pay—the regular 52, and 6 42 in bonuses. And in that year the average wage paid to Scott-McHale factory workers was $31.09 compared with the Canadian average for the trade of $23.32.
Since every dollar spent unnecessarily takes money out of the pocket of every worker, the committee watches its bank roll with a concentration that most people associate only with millionaire misers or mothers of large families.
An example of this came up at a committee meeting a few weeks ago when Miss Tessie Comber, a greyhaired lady in her forties who repre-
sents the packing room, informed the committee that the boy who feels for I nails in every shoe before it is packed | couldn’t keep up with his work. In j short there was an opening for an assistant nail feeler.
George Sanderson, a dark and alert young man in shirt sleeves, representing j the bed-lasting room, figured aloud: I “If we have to hire another nail feeler that job will cost another $20 a week. That’s too much.”
The others agreed.
“I think there are more nails coming through to him than there should be,” said Harold Bottom, the chairman. “I’ve watched him work. He’s efficient enough.”
From the other end of the table, Stan Say, committee secretary and representative of the sole leather room, and Abie Drake, from the bottoming room, suggested simultaneously that the committee find out why so many nails were coming through. On a show of hands, Len Knightley from edgemaking and finishing; Myrtle Stevens from fitting; Charlie Brereton, Drake, Say, Sanderson and Miss Comber agreed to defer action until an investigation was made.
A day or so later they found that a man up the line, whose machine was supposed to look after stray nails, was letting more get by him than he should —mainly because postwar nails are still of wartime quality. The matter was drawn to his attention, he watches closer, and the committee had saved its constituents another $20 a week.
A representative of management sat in during most of the meeting to answer questions. One arose from the minutes of the previous meeting, when Miss Comber had asked for some window and floor repairs in her department. John Rose, superintendent of first and second floors in the threestory, 52,000 square-foot factory, said that the floor had been fixed but that he’d been unable, so far, to get glass for the window.
After the meeting had been going for half an hour, Mr. McHale, Sr., dropped in wearing a cloth office coat torn at one elbow. He shook hands around the table, then listened to a discussion of a certain worker who wasn’t producing his quota. McHale, Sr., had known the ! man under discussion for 25 years. | After a couple of committeemen reported that they’d talked to this man without being able to improve the situation, Mr. McHale said that if the committee wished he’d talk to him and see if he could find out what was wrong. “If I think of any solution, I’ll make a recommendation to you,” he said. The committee agreed to try that course.
Then the committee discussed what rate should be paid to a new man with some experience, and eventually settled for 70 cents an hour.
There was no other new hiring to be done, so the committee then considered applications from within the plant for a ! good job open in the edgemaking and ; finishing room. Notices that applications would be taken for this job had been posted on the time clocks for several days.
Three men had applied. The man with the most seniority, Frank Smith, was chosen by a show of hands. The committee then decided that Smith should train an hour a day at the new job for a month or so until he was good enough to take it over full time. While this decision was being made Len Knightley, the committeeman from that department, leaned over to me and pointed out that every man in the plant has the right to apply for any job open. Frank Smith was good where he was, and in the old days when foremen had all the say on whether a man could move or not, he wouldn’t have had a
chance of getting this better-paid job.
In addition to shepherding their fellow workers up the wage scale, the committee had a certain amount of shepherding downward to do. When a worker gets to an age where he can’t do a heavy job, he is moved to a lighter job. There are several men in the plant now who have been moved that way with their pay maintained. As they slip further down in productivity their pay will follow slowly. At present the committee and the management are considering a pension plan to take over where the committee leaves off.
The committee sometimes makes decisions which even the toughest employer would hesitate to make. For instance, part of the original plan 10 years ago was provision of a smoking room with comfortable chairs for the factory hands. Until the first of this year it was open from 7.30 a.m. to 4.30 p.m.—the whole working day. But a few months ago the committee decided too much time was being spent there. So they talked it over and ordered the smoking room to remain open only from 9.30 to 11 a.m., all through the 70-minute lunch hour, and again from 2 to 3.30 p.m. There have been strikes I in other plants over things like that. In Scott-McHale the beefs are unlikely to take any form more serious than loss of votes for the committee members in I the elections next December.
Most of the senior men in the factory j have known John and Jim McHale, the I vice-presidents, since before they were I old enough to budge the heavy, eight| tiered shoe racks on which shoes in j various stages of completion are moved ¡ from one department to another. The McHale sons (John is 35, three years ; older than Jim) always worked in the j factory during the summer holidays while they were in school. Each has a good working knowledge of the 260 separate operations which go into making an ordinary, unfrilled shoe. This was valuable early in the war when help was hard to find and sometimes I McHale, Sr., and both sons would help out in the factory during rush periods.
! Practically all the factory workers call j the sons by their first names, and call ! McHale, Sr., “Mister Mac.”
This type of familiarity, allied with j the income-sharing plan, has led to 1 criticism of the McHale management I as paternalistic—-a word detested by j the labor movement. John, Jr., contests this hotly. He says his idea of patemali ism is a management which distributes hampers at Christmas time, insists that j each employee have a certain amount of insurance, and generally “runs a busij ness as if it were a charity.”
How to Win Contracts
“We don’t do that. The men earn I their own money, and we give it to I them, and don’t interfere with how they spend it. The committee itself sometimes is more paternalistic than we’d ever dare, or care, to be. One time when there was $30,000 to be divided between bonuses and the reserve fund, the committee up and j decided that it would put two thirds, instead of one third, in the reserve. It said $20,000 was too much to go out in bonuses all at once. And nobody complained. Men don’t thank you for telling them how to spend their money if you’re their employer. From people they elected it seems to be different.” McHale gave another instance: Early in the war, when other shoe companies were picking up contracts for service boots, Scott-McHale wasn’t getting any. Before making each bid the McHales figured out how much their workers would get at 22.2%, then set their price, and invariably it would be too high. The committee heard about this, and came voluntarily to the
McHales with an offer to waive the 22.2% on Government orders and take whatever lower split could be arranged. Scott-McHale got the next contract.
Allied to the paternalism criticism of the McHales is one by organized labor that, since the plant is not unionized, the income-sharing plan could be cancelled anytime and the worker, with no support from organized labor, couldn’t afford to strike for long. The McHales say that if they were out to keep labor weak they’d try to get their men to spend all they make, instead of piling up savings.
Another criticism is that the plan depends on the integrity of the present management, and the worker would have no assurance of security if the plant should change hands.
John, Jr., agrees in principle, but with this rebuttal:
“Every man we’ve taken on in the last 10 years has been brought up on this plan. Many of them, the younger ones who’ll be our executives of the future, know no other way to work. This plan is in this plant to stay.”
Firms in many parts of this country and the United States have written Scott-McHale asking particulars of the plan, but the three enquiries John, Jr., savors most were made personally by curious manufacturers.
One visitor was the head of the Humberstone Shoe Co. at Humberstone, Ont., who put a similar incomesharing plan into his plant about six years ago after watching the McHale plan operate.
Another man prowled around the plant, poked into the books, looked baffled, and then took John, Jr., into a corner and said: “Now, look, Jack.
What’s the catch? What is it the working stiffs have missed about this plan? What’s the gimmick?”
John, Jr., still feels the man didn’t believe him when he was told there was no gimmick—that it was on the level.
Another manufacturer studied the plan carefully, then got quite excited. “Hey, Jack,” he said. “I get it now. Don’t these guys realize that every time you cut a price their pay is cut?”
John, Jr., pointed out to him that for every dollar knocked off the sales price, the workers fund would lose 22 cents but the management’s operating account would be out 78 cents. That stopped Sceptic Number Two.
About a year ago a union organizer dropped in.
“Of course,” he told John, Jr., “if it hadn’t been for the union you never would have put this plan in. The pressure we put on you forced you to do it.”
John, Jr., who did much of the organizing for the plan himself, argued. “If you made us do it, why can’t you get anyone else to sign a contract giving labor power to hire, fire and set pay rates?” he asked. The discussion ended in a deadlock.
One time the University of Western Ontario asked John, Jr., to speak to a class on industrial relations. He arranged for a conducted tour of students through the plant, allowing them to stop anywhere and ask questions. When they got back into class one boy stood up and said: “Mr.
McHale. I found a woman there who is absolutely against the whole plan. How do you explain that?”
McHale answered: “We have never pretended that everyone is satisfied. Some aren’t. I wouldn’t worry if one man out of 10 was opposed to the plan. Any time you can get 90% of any group of people to agree on anything, it’s remarkable enough without trying to please everyone. We’re doing the best we can—and if we think of anything better we’ll do that, too. But after all, we’re just shoe manufacturers, j We’re not God Almighty.” ★