Date of Award

Spring 1969

Degree Type

Master's Essay - Restricted

Degree Name

Master of Arts (MA)

Department

Business Administration

Abstract

The employee suggestion plan is a company sponsored program that encourages employees to submit ideas or suggestions that promote the good of the company. The primary objective of the program is profit maximization through cost reduction or efficiency improvement. Announced cost savings attributed to suggestion plans have been estimated to exceed $500 million annually. Despite these impressive statistics, there are many companies that do not have suggestion plans or have discarded them. Many critics claim that the savings are illusory, being largely devoured by administrative costs. Studies have shown that many firms have not made sufficiently detailed cost studies to be certain whether or not their suggestion plans are actually money savers. Since some doubt exists as to the legitimacy of the cost savings involved, management may well consider taking positive steps to assure the authenticity of the financial benefits to their firm. This approach would entail the formulation of guidelines for cost improvements that reflect valid profit input; the provision for monitoring transactions to insure adherence to these rules; and the establishment of responsibility for the accumulation of all related expenses and savings in a summary financial report. The important consideration is that management must be correctly informed of the economic results of the suggestion plan in order to properly evaluate its performance in context with the over-all company objectives.

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