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Compensation:

Incentive Plans:
Gainsharing
Definition

Employees in a gainsharing program earn bonuses but those


bonuses are linked to specific improvements in performance, such
as increased productivity, higher sales or reduced expenses. On
gainsharing, bonuses can be more closely tied to the performance
of specific employees or groups of employees.
Gainsharing programs can be applied company-wide, but more often they're
targeted toward specific facilities or units of a business. If a company has, five
production plants, the workers at each individual plant might earn gainsharing
bonuses based on the performance improvements at their particular facility.
This allows workers to be judged, and rewarded, based on things they can
control.

Entity Production
Psychology
Encourage employees to view the company's success as benefiting
them personally. But the psychology behind the incentives is
somewhat different.
Gainsharing is more about challenging workers to take charge of
improving their own performance. Employees aren't just endorsing
a management strategy; rather, they're asked to be partners in
formulating and carrying out the strategy.
Administration

An attractive feature of gainsharing programs is that they "pay for


themselves." Employees get bonuses only if their own actions have
saved enough money -- or produced enough extra money -- to
allow them.
Gainsharing bonuses tend to be paid more frequently than profit-
sharing bonuses -- typically monthly rather than annually or
quarterly. This allows for employees and managers to better
monitor progress toward goals and, if necessary, adjust their
performance.
When does Gainsharing work best?
How does Gainsharing work?
The typical Gainsharing organization measures performance and through a
pre-determined formula shares the savings with all employees. The
organization's actual performance is compared to baseline performance
(often a historical standard) to determine the amount of the gain.
Employees have an opportunity to earn a Gainsharing bonus (if there is a
gain) generally on a monthly or quarterly basis.
Gainsharing measures are typically based on operational measures
(productivity, spending, quality, customer service) which are more
controllable by employees rather than organization-wide profits.
Gainsharing applies to all types of business that require employee
collaboration and is found in manufacturing, health care, distribution, and
service, as well as the public sector and non-profit organizations. T
Companies that uses Gain Sharing

The Super Sack Manufacturing Corporation in Fannin County, Texas, which has improved productivity by
88.5 percent over five years, according to manufacturing vice president David Kellenberger.
General Tire's 1,950-employee plant in Mount Vernon, Illinois, where the plan has generated $30 million in
savings over a five-year period$20 million of which was paid out to workers in the form of bonuses, while
the company profited by $10 million, said Floyd Brookman, coordinator of the program
Timken's Faircrest Steel Plant, where gainsharing targeted plantwide improvements and replaced old
incentive systems that paid only for individual piece-work operations, said Tim Chapin, senior human
resources executive.

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