Increase productive capacity or throughput 10 to 30%,
in 30 to 90 days. After your
company has invested in people and capital equipment,
the most effective investment they can make, to maximize
the other investments they have made, is to tie every
employees' pay to increasing throughput with a Gainsharing
System. Most companies will achieve an increase in their
productive output between 10 and 30%, within 30 to 90
days after implementing Gainsharing, because it is now
in the employees' self-interest to maximize the company's
output. If I get paid by the hour, or are on a salary,
my pay is the same whether the company is "busy"
or not. So why would I want to increase sales, throughput,
or overall business activity? It certainly will not
raise my individual pay! But once my pay increases (or
potentially increases) when throughput or sales increases,
I actively pursue methods to get more output with the
equipment and personnel that we have, because it's my
self-interest to do so. It's as simple as that.
employees to think about their business as though
they owned it themselves.
If your employees owned your business themselves,
they would have a very different perspective regarding
the business than they probably do as hourly or salaried
employees. If I owned the business, I would find the
entire process of business very personally involving
and rewarding. This is because (1) I get a great deal
of information (feedback) about how the business is
performing against its goals, (2) I have made promises
personally about what will happen (to the bank, customers,
colleagues in the company, etc.), and (3) my pay or
personal rewards will increase if we achieve these
goals that we have committed to. These three elements
make business much like a game.
"teeth" into quality efforts.
If your company is to receive the maximum results
from its investments in quality improvements, people
must personally feel the pain of quality problems.
Certainly your employees want your company's quality
to be the best it can be. But because your employees'
get paid the same amount whether quality is terrific
or is poor, there is not the emphasis on achieving
maximum quality performance that there would be if
there W2 earnings varied with quality performance.
Consider the impact of being able to have a meeting
with employees to announce a Gainsharing bonus of
an average of $200 per person. In this meeting you
also announce that because of certain specific quality
problems (that you would detail) the bonus should
have been $270 per person and the extra $70 eaten
up by the quality costs that you presented.
the question "what's in it for me" for all
improvement efforts. In
any improvement effort, the time comes when employees
want to know "What's in it for me to improve
company performance?" We saw this dynamic with
Quality Circles. When Quality Circles were first implemented
in many companies, it was a new and interesting process
to be involved with. But as time went on and the novelty
wore off, it became apparent to many participants
that the company would actually benefit from the Quality
Circle efforts, but it was not directly clear how
they, as individuals, would benefit. Also, in many
companies, not every employee participated in the
Quality Circle efforts. The pay was the same, in many
cases, for both Quality Circle participants and non-participants.
This prompted the question by many Quality Circle
participants, "Why should I continue to put in
the extra effort involved, when others do not, and
our rewards are the same." The issue is fairness.
Gainsharing provides a way to
address this fairness issue, by answering the question,
"What's in it for me?" for all of your improvement
and involvement efforts. This is a powerful benefit,
that will increase your return on investment for all
of the improvement efforts you have implemented (and
are using) thus far, and for all those that you will
implement in the future.
more money (both profits and traditional compensation).
Most companies see an increase
in their income from operations between 50 and 100%
with Gainsharing. This can be caused by both the savings
Gainsharing generates and the incremental sales volumes
that result from the operation of the Gainsharing
process. As your productivity increases, your company
will be able to handle higher sales volumes with the
people and assets you presently have. To accommodate
this increased ability to generate throughput, a need
emerges to "feed the production monster."
Profitability is, of course, higher on these incremental
sales, as the fixed costs have already been covered.
Of course, individual compensation also increases
with Gainsharing. Most Gainsharing companies pay earned
bonuses (usually monthly) equal to 5 to 25% of individual
employees pay. Some companies keep base pay low and
provide pay increases through increases in the variable
component (Gainsharing bonuses) over time. This reduces
the pressure for layoffs if brief downturns occur
and keep pressure on maintaining high performance
since such a sizable component of employees pay it
tied directly to the performance they make happen.
all employees on the basics of the business.
In general,the factors that lead to Gainsharing performance
will be the same factors that lead to company performance.
As your employees struggle to put together their strategy
to make Gainsharing happen, they will be wrestling
with the factors that it takes to make your business
Also, as Gainsharing performance varies,
company performance will vary in direct correspondence
(if your Gainsharing system is designed correctly).
Gainsharing provides an education regarding how the
different elements in your company need to work together
to achieve the performance that everyone's pay is
tied to. Employees' will see through your Gainsharing
system, how scrap problems (for example) impact the
performance numbers in terms of increased material
costs, lost process time, wasted labor and lost earnings
for everyone as the performance the all employees
pay is tied to declines. Now that their pay is tied
to these effects, they will be interested and concerned
in a way that is not possible to achieve without a
direct tie to their W2 earnings. This gives your company
true "pay for performance."
Tie a portion of every employee's pay to the same
goal(s). In most companies, employees get paid
for what they do as an individual - so - they pay
close attention to their own, individual performance.
It is an old saying, "What gets measured, gets
done." When we tie part of everyone's pay to
the overall facility or company performance, we will
get attention to their individual performance and
the overall. Employees' will now become increasingly
concerned that products are shipped on time, that
they are priced correctly, that the sales people got
the order correct, etc. And, your employees will have
this new found emphasis on overall performance because
their W2 earnings are now tied to these issues.
Also, since all your employees, and
departments, now have a portion of their pay tied
to the same performance, you can have much more productive
discussions and problem solving efforts since you
are now clearly working towards the same objective
(and everyones' self-interest is tied to its achievement).
Get all employees speaking a common language. We
all understand how different company departments can
have their own perspective on problems, and their
own language to describe the issues. Having the common
performance measurement and feedback system that Gainsharing
provides, can significantly reduce communication problems
and stimulate natural "team" efforts. We
are literally and visibly, "All in it together."
The separations and boundaries (real
and imagined) that exist between departments, the
differences in terminology, the differences in perspectives,
all create an environment that is ripe for miscommunication
and divided efforts. The one benefit that Gainsharing
can provide for your company, that it can provide
better than any other single tool, that your company
will suffer without - is to unite everyone in a common
effort; to get them working in the same direction.
Through specifying what everyone needs to do (on an
individual and overall basis) to achieve the common
goal(s), and providing performance feedback along
the way, Gainsharing can lead to greater improvements
in teamwork, common effort, and increased company
throughput than any other single improvement tool.
Stop paying employees a 50% bonus (overtime) for inefficient
work. It really is rather crazy when we stop
to think about it. If your employees do not do their
work in the most productive manner, you pay them a
50% bonus to complete the work that has already taken
longer than it should. Of course, not all overtime
is the result of ineffective work. But, it is clearly
not in your employees self-interest to complete the
work in the most effective manner, when doing so could
directly reduce their take home earnings for the week.
With an effective Gainsharing System,
pay is tied to performance. It is entirely possible
for employees to have the pay that would result from
overtime and without working the extra time. It's
the extra money that the employees want (generally),
not the extra hours.
Your employees pay attention to the
factors their pay is tied to. If you tie their pay
to performance, you get increased performance. If
you tie their pay exclusively to the time they put
in, they focus on their hours. Gainsharing is a proven
tool to focus your employees on performance. There
are many reasons to use Gainsharing, but this is one
of the best.
Replace your present bonus system with true pay for
performance. Many companies have performance
management systems that were designed with the best
of intentions, but over the years have lost their
effectiveness or just have not worked out.
Just as your company upgrades
the software that it uses over time, it may be time
for your company to upgrade your company systems to
the proven results Gainsharing provides.