Gainsharing facts for kids

Gainsharing is a special way a business can make more money. It helps employees work better and smarter as a team. When employees improve how they work, they get to share in the extra money the company saves or earns.

The main idea of Gainsharing is to get rid of waste (like wasted time, energy, or materials). It encourages everyone to work together. This is different from profit sharing, where employees share in the company's overall profits. Gainsharing focuses on sharing the savings that come from better performance.

A Gainsharing system has two main parts:

• A way to figure out how much extra money was saved (this is the bonus).
• A clear plan for employees to get involved and share their ideas.

Because of these two parts, Gainsharing is more than just a bonus plan. It's a tool to help a whole company grow and get better.

The History of Gainsharing: How It Started

One of the first Gainsharing plans began a long time ago, in the 1930s. A smart man named Joe Scanlon, who taught at a famous school called MIT, believed that workers had more to offer than just their hands. He thought that the person closest to a problem often had the best idea to fix it. He also believed that if workers helped create a solution, they would make sure it worked.

Joe Scanlon helped a company that was having trouble. He asked employees for their ideas to reduce waste and lower costs. Many great improvements were made, and the company became successful. Joe then helped other companies that were struggling after a tough time called the Great Depression.

During World War II, Joe used his skills to create special committees. These committees brought together both workers and managers to find ways to improve things and help the war effort.

After the war, Joe Scanlon taught at MIT. He created a system for companies to improve and share gains, which became known as the Scanlon Plan.

As the Scanlon Plan grew, they found a way to measure the improvements and savings. This money was then shared with all employees. This bonus part of Gainsharing shows that it's fair to share. Everyone in a company helps it succeed. So, why should only a few people get bonuses? When a company shares its savings, it tells employees: "We all help. Your ideas are important. Let's share the money we save together!"

Gainsharing Today: How Companies Use It

Today, companies use Gainsharing to measure how well they are doing and to reward employees when things get better. They use a special math formula to share the savings with everyone.

The goals of a company's Gainsharing plan depend on what the company needs and its long-term plans. These plans are made to fit different types of businesses, like factories, service companies, or offices. Companies openly share information about how they measure things, the formula they use, and the savings they make.

Since employees share in the money, they feel more like they own their work and the company. They understand better how their actions help the company succeed.

Gainsharing and Company Culture

In a Gainsharing plan, a company's current performance is compared to how it did in the past. The savings above that past level are the "gain." This is important because it means employees and the company must improve to earn a bonus.

It can be hard for people to change how they work. But most people like money! So, Gainsharing can be a powerful tool. It encourages everyone to keep improving and helps employees feel like they are part of the company's success, not just owed something.

Employee Involvement: Sharing Ideas

A very important part of a successful Gainsharing plan is how employees get involved. To create a positive workplace, a good Gainsharing plan needs a clear system for employees to share their ideas. Often, Gainsharing plans use a "team-based" suggestion system.

How does a team-based suggestion system work?

• Teams are formed: Groups of employees are created to gather ideas on how to work smarter.
• Managers lead: Managers or supervisors often lead these teams. Their goals match the company's overall Gainsharing goals.
• Regular meetings: Teams meet often to talk about ideas and suggestions.
• Decisions and spending: Teams decide whether to approve or decline ideas. They can also approve and put into action ideas that cost a small amount of money.
• Higher approval: If an idea costs more money than the team can approve, it goes to a higher level in the company for a final decision.

Unlike old-fashioned suggestion systems, a team-based system doesn't give individual rewards. This is because everyone works together and shares in the gain as a team. Remember, Gainsharing is not about individual bonuses.

Bonus Calculation: How Savings Are Shared

When it comes to calculating the bonus, a Gainsharing plan might focus on one to six main goals. The best plans have only a few goals so employees can easily understand them. Examples of goals include:

• How much work gets done (productivity)
• How good the work is (quality)
• How much is wasted
• How much money is spent
• How happy customers are

These are all things employees can help control. The savings from each goal are figured out separately. Then, all the savings and losses are added up to find the total gain.

A part of this total gain goes to the company, and a part is shared with all employees. Usually, 10% to 50% of the savings are shared with employees. The amount shared depends on how much employees can control that goal and how important it is to the company. The money is then given to all employees, usually every month or every three months. How often payouts happen depends on how easily employees can see how their daily work leads to a bonus. For example, companies with less skilled workers might give payouts more often.

Setting Up Gainsharing: A Team Effort

It's very important that employees are involved in creating and setting up a Gainsharing plan. An employee group called the "Design Team" helps make decisions. They decide things like:

• What goals to measure
• Which employees can get the bonus
• How often to pay out
• How to share information about the plan

The Design Team gets approval from top managers before the plan starts. After approval, the team tells all employees about the plan in meetings. They also make sure everyone gets follow-up training.

Here's a quick summary of what makes a Gainsharing plan work:

• The bonuses are paid from the savings made by better work.
• The plan usually applies to one factory, office, or location.
• Performance is measured across different departments or teams.
• The measurements are usually about daily operations (like productivity or quality), which employees can control.
• Payouts are often monthly or every three months.
• Many plans keep some money aside for times when there might be a loss.
• Employees often help design the plan.
• All employees can get the bonus.
• The bonus is often the same percentage of pay for everyone, not based on individual performance.
• There's a system for employees to get involved and share ideas to make things better.
• Plans are usually checked every year, and changes are made if needed.

The two most important things for a successful Gainsharing plan are:

• Simplicity: Employees need to understand the plan to be motivated by it.
• Involvement: The more employees help design the plan, the more they will feel like it's theirs and work to make it succeed.

Summary of Gainsharing

Companies with successful Gainsharing plans see it as much more than just a bonus system. They see it as a key part of their business plan and a way to help the company change and grow. When a Gainsharing plan is set up and managed well, it becomes a core part of how a company talks to its employees and pays them. Gainsharing can be a very powerful tool if a company truly believes in its people.

Gainsharing Summary Table

Books to Learn More

• Robert Masternak: Gainsharing-A Team-Based Approach to Driving Organizational Change, WorldatWork, 2003
• Brian Graham-Moore and Timothy L. Ross: Gainsharing and Employee Involvement, BNA Books, Second Printing November 1996
• John G. Belcher: Results-Oriented Variable Pay System, American Management Association, 1996

See also

In Spanish: Participación en los beneficios para niños