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Gainsharing: Dancing with the Bear
By Anne Selcer

The instigation of a gainsharing program is an idea that many companies play with from time to time. After investigating what it takes, they ask, with good reason: Is it worth the time and resources that it takes to implement and maintain such a program? Are there real tangible successes - or just anecdotal ones?

The concept of paying employees a bonus based upon company improvements or profits is nothing new or unusual. Especially popular are stock options, profit sharing, and ESOPs. The difference that gainsharing brings to the table is that it is an "employee involvement" program. To reach that level, it must be specifically designed to be consistent, with an overall effort in management, organization, development, and communication.

Implementing Gainsharing

Step 1: Assess the Possibilities

First and most importantly, you must decide whether or not a company or organization is ready to enter into gainsharing. Here are some of the issues that should be considered by the management team:

  • Foremost, what is the business goal for this program? Is it to be a motivator, culture reinforcer (i.e., entrepreneurial spirit, ownership, teamwork, continuous improvement, etc.), or is it to tie a greater portion of the employee's compensation to performance?

  • Does this fit with the company's overall management style? Will the leadership, including front-line supervision, consistently support it - especially the employee involvement aspects?

  • Will the program be supported by the corporation?

  • Is the company willing to open internal data to employees and be questioned on it?

  • Is the company committed to devoting the necessary time and resources, not only to the design of the plan, but also to its ongoing maintenance and improvement?

  • How much involvement will employees have in plan development? (The more involvement, the more trust in and commitment to the plan.)

  • Is the company willing to (perhaps) be high payer in its market, if the plant increases in success? Can the reasons for payouts be communicated to critics such as shareholders? (Remember large payouts are dependent on productivity improvements and may not correlate with company profits.)

  • Are you all willing to "dance with the bear"? *
Step 2: Assemble the Team

Assuming you have withstood the rigors of Step 1, and have determined that you are ready, you must then develop and educate a cross-functional employee design team. The makeup of this team and the credibility of its members are critical to the trust that the other employees will have in the program and process.

Step 3: Develop the Program

Over an extended period of time (depending upon the complexity of the issues and the amount of time dedicated to the meetings), the design team develops a gainsharing plan, with continuous communication among all levels of the organization to ensure that concerns are at least addressed, if not resolved. Two of the key issues that must be decided upon by the team are a) how to measure the success to be included in the formulas and b) how to involve all employees in the continuous process of improvement.

Step 4: Implement the Program

The plan kickoff is a combination of Training and Communication (with a capital T and a capital C), wrapped up in a celebratory atmosphere. The success of the gainsharing program will depend upon how well the employees understand the formulas, and how they can make a positive impact on them. If employees can quickly see success, the interest (and the business improvements) will grow rapidly.

Step 5: Monitor Success

Continuous monitoring, follow-up, and annual upgrades to the program are not as glamorous as the implementation, but are just as essential. Communication can never be neglected. A business will only be throwing money down the drain if the employees don't understand and play a major part in how their performance impacts their compensation.

Is It Worth It?

Of course there are many advantages to gainsharing; advantages that would be considered intangible asset growth. For example:

  • Cross-departmental cooperation and culture of teamwork required to receive the common reward

  • Employee ownership and accountability for results

  • Peer pressure on coworkers to contribute to team goals

  • Incentives for those closest to the process to understand and continuously improve the program

  • Payouts are not a cost because only "real" money is paid out to employees for surpassing
    challenging goals - the largest share of the payout goes to the company. Goals are constantly heightened, so continuous improvement becomes part of company culture

Rewarding employees for their direct impact on business performance is an extremely powerful method of communication, motivation, and workforce focus. If the competitive edge of the business depends on the performance of its employees, then a properly administered gainsharing program will provide that edge. Lastly, gainsharing is more than "just another compensation program". It is a concrete symbol that demonstrates a company's belief in its people.

(* The decision to begin dancing with a bear must be made very carefully. You can't just quit when you get tired.)

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