If your company does not have
a Gainsharing System, you’re
missing out on opportunities to:

Increase productive capacity or throughput 10 to 30%, in 30 to 90 days.

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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.

Get employees to think about their business as though they owned it themselves.

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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.

Put “teeth” into quality efforts.

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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.

Answer the question “what’s in it for me” for all improvement efforts.

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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.

Make more money (both profits and traditional compensation)

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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.

Focus all employees on the basics of the business.

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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 a success. 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)

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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.

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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.

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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.

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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.