8 Tips for Implementing a Gainsharing Program

8 Tips for Implementing a Gainsharing Program


You’ve seen the signs over the last few years – employees not cooperating, resulting in efficient operations. Incentive plans like “Employee of the Month” and bonuses are given to improve employee sentiment. However, it seems like nothing has changed, and in fact things are only getting worse.

The problem may be that your incentive system may be inadvertently sabotaging your group’s performance. So how can you improve individual performance and also foster a collaborative environment?

One idea – implement a gainsharing program.

Gainsharing 101

So what is a gainsharing program? At its simplest level, it’s a group incentive plan designed to improve company performance. By designing a plan that rewards employees for developing and sharing ideas to increase company productivity, employees and management are working towards the common goal of improving the company. Typically, companies will reward employees on an individual basis, which many incentivize employees to compete with each other. When this happens the company suffers.

Gainsharing programs by design are meant to be simple and realistic in order for there to be complete understanding by all parties. Metrics used to measure performance are in step with the activities of employees, unlike financial measurements which can be complex and subject to manipulation.

For Example: A reduction in total worked hours to produce a given volume of goods or services. Employees will see the value and understand how their hard work positively impacts the goals of the organization. If employees are given unrealistic expectations, the gainsharing program will be unsuccessful.

Some Helpful Hints to Creating and Implementing a Gainsharing Program:

  1. Tackle the biggest costs first.
    If a company spends 90% of their product cost on material, then a gainsharing program designed to reduce material waste and rejects would be appropriate. If the costs are more evenly mixed than the previous example, then adjust the gainsharing program accordingly.
  2. Use the records on hand.
    If detailed records aren’t reliable, start at the base level of measurement e.g. total product cost. As the more useful information becomes available, a refinement of the gainsharing program metrics may be possible.
  3. Start small.
    Although it is not unheard of for companies to initiate a plan for the entire company, gainsharing plans are typically done for a certain set of employees within one set location. For example, sales staff are typically paid on commission, so it may not be necessary to include them unless there is evidence of overuse of company resources and time to acquire a new client.
  4. Be mindful of the current employee-management relationship environment.
    If there is a lack of credibility by the managers to their employees, there may be further prep work needed to be done before implementing a successful gainsharing program.
  5. Understand the company needs.
    Creating and implementing a gainsharing program takes significant effort by all parties and may not be necessary for small issues.
  6. It’s not an easy fix.
    Management across the board need to be active in promoting and nurturing improvements in the organization, not sit on the sidelines.
  7. Review the data.
    Ensure the data is accurate before designing a formula.
  8. Over time, “rachet” the base.
    As employees improve over time, the new base efficiency can be raised to further improvement. One way that is fair to all parties is to adjust the base e.g., add 50% of improvement from last year to this year’s base. This allows the base to grow without employees feeling like their efficiency will punish them in the future. Also, one-time improvements in new equipment or reductions from government regulations should be considered when setting the new base.

Think Collaboratively with Gainsharing

Perhaps the idea of creating a collaborative bonus structure has come up in the past, but the structure hasn’t been there to create it. There are numerous materials online that go into detail on how to create a proper gainsharing program, including “All You Ever Wanted to Know about Gainsharing but Were Afraid to Ask” by Woodruff Imberman. The key is to be diligent and patient with the program – your company will be rewarded by their efforts.

If you’re ready to see your company move in the right direction, but may not have the right systems in place, discover how icube can

How Artificial Intelligence will Help Your Company Make the World a Better Place

How Artificial Intelligence will Help Your Company Make the World a Better Place

The Fear of Increasing Automation

Computers and technology are becoming smarter and are able to do many things that we once thought impossible for them. Some of these are: driving cars and trucks, interpreting x-rays, combing through legal documents intelligently, writing news reports and briefs.

Many people are fearful that with the advancing of these technologies, many human jobs will be obsolete resulting in increased poverty and wealth disparity. However, those same fears existed within inventions such as the printing press and telephone. Instead, there can be an opportunity to change the world as we know it for the better and herein are some solutions to make this a reality.

Goodbye Jobs

The ability to make our lives easier often comes at a price to others. Since the dawn of human civilization there has been a tension between technology and manual labor. The difference this time is that technology is now striking at human cognition. Some computers can write operatic pieces, while others such as Watson can play games that are hard to master even for humans. In fact, the all-time Jeopardy champ, Ken Jennings after a drubbing from Watson proclaimed, “I, for one welcome our computer overlords”. In some industries such as financial and legal services, some tasks that previously relied on the expertise of human employees are already being automated.

The fear of jobs being made obsolete by technology is always real in the short-term and especially acute after an economic meltdown or recession. More people become job-seekers, allowing employers to have more bargaining power and keep wages stagnant or even decline. This is already becoming a reality for the newest generation of college graduates who join the workforce only to find out their degree isn’t valued as much as it once was a generation ago.

As people become disgruntled, tensions rise between the class of “Owners” and “Employees”. While businesses and consumers feel the benefits of automation with cheaper, more abundant goods and services, compromised purchasing power can tend to diminish them. Owners see some of their employees as expensive and lay them off in order to keep costs low. Also, Owners, if they are able – especially in protectionist environments sometimes react by propping up prices in order to control their supply. Owner’s justify their actions by saying they are the only ones taking risk – they have a stake in the game and believe they suffer disproportionately should the company go under.

Wealth Disparity

Driven by the first fear, Owners try to ensure that excess gains transfer back to them and not to Employees. These gains exhibit a compounding effect; owners either reinvest in the company or in their personal portfolios. Wealth for non-Owners typically remains stagnant and linear, while that of owners grows exponentially enlarging the wealth gap which also grows exponentially.

History has shown time and again that this is how a revolution starts – the disenfranchised with less to lose seek to take power back from those that control the wealth.

The New Economy

If we are to avoid the next revolution, our mindset needs to shift from an “Us vs. Them”, to a collective “We”. This doesn’t mean overhauling the economy to communist or socialist policies. Instead we need to transform our current capitalist system into “Conscious Capitalism”, one in which those who seek more wealth can do so but don’t have to do that at the expense of others.

How can this become reality?

Owners believe they take all the risk, so they believe they deserve the reward. This is the key to unlocking the potential of a more advanced society. Well, what if everyone thought and behaved as an owner?

To be sure, when we ask this question, we are also changing the paradigm of what it means to be an owner. In our view of the world, ownership doesn’t just mean a claim on assets; instead it is a responsibility to nurture those assets for the greater good. And we should be quick to add that ownership is a mindset. Many people who identify as employees today do not feel like owners and that’s understandable.

We need to invest in education and awareness to change that mindset and it might take a generation or two. If we start changing how people view ownership at an early age, may be there would be a time where there are no employees in a company, everyone would be a working owner.

If you think this is a pie-in-the-sky idea, not so fast! There are many examples of this in the real-world such as the John Lewis Partnership in the UK and SRC Holdings Corporation in Missouri. Google them. In his book, “Maverick”, Ricardo Semler describes the transformation of a traditional family business into a similar company.

Of course, this will not happen overnight and we might need some changes in laws to support changes in mindset. But who knows, future generations could very well look radically different from ours and in the words of Nobel laureate, Muhammad Yunus, poverty might indeed be seen only in a museum.

With that encouraging thought let’s visit the original topic of this article. If everyone was an owner, then we would all be aligning our interests in making our companies as prosperous as possible. And what we lose as demand for our time (jobs), we could get back in increased profits (dividends). When that happens, we no longer need to fear automation.

In fact, we now have the opportunity for robots and humans to begin working more closely. Collaboration in our minds is the key to accelerating prosperity. Instead of fearing automation, we can use our brains for higher level thinking, increasing our potential to solving the world’s greatest mysteries while our robot partners do the mundane, dangerous, and mind-numbing tasks.

Understanding Needs

The other big opportunity we have reveals itself when we look at the needs of humans and robots. Robots just need energy. When we get up in the morning, we’re reminded that we have all the energy we need from the sun. The more sustainable energy we harvest, the easier it is for robots to become self-sufficient. We can build robots that build robots that make solar panels!

As technology advances, energy from higher density areas can be transferred to less sunny areas. That energy can be used for to fill one of our other needs: food. Also, cheaper energy means cheaper shelter, and more advanced sustainable methods of sourcing water becomes economically viable.

Humans on the other hand need food, water and shelter to survive. But we are also social, thoughtful, and curious creatures that crave knowledge and meaning. The psychologist Abraham Maslow artfully described this in his seminal work, “The Hierarchy of Human Needs”. With our robot friends helping, maybe we can all elevate ourselves up this hierarchy, and education and learning doesn’t become the means, but the end of fruitful and joyous journey.

We are hardwired to be fearful of unknown; that’s what makes us successful as a species. It is this fear that drives us to create previously unimaginable solutions. But if we can recognize the potential instead of the despair of what automation can bring to us as a whole, then there is a possibility for a brighter tomorrow. There will be bumps along the road, but if we can tackle these problems now, there’s no telling what the future may hold.

Build a Company that’s a Magnet for Great Talent

Build a Company that’s a Magnet for Great Talent

Hire slowly, fire quickly?

There’s a popular piece of advice some management consultants like to give companies: “Hire slowly, fire quickly”. The general idea is that companies are often reactive and as such, when they lose an employee, the position is hastily filled with the wrong person. When that happens, the wrong person they say will damage the company’s culture and ruin things for the rest of the team!

Take Time to Make the Right Decision

Instead, the advice continues, management should take its time in hiring the right person for the company. Only after that is done should the person be offered the job. Jim Collins in his book  “Good to Great” calls this the “Right Person, Right Seat” approach. An organization is like a bus. First you get the right people on the bus and only then do you find the right seats for them. In fact, we use it in icube™ as well.

“A bad system will beat a good person every time”

Unfortunately the “hire slowly, fire quickly” advice by itself lets company owners, managers, and leadership teams off the hook. The problem is that if a company isn’t organized, it doesn’t matter how strong a candidate is; they will get frustrated if they don’t have an opportunity for autonomy, mastery, and purpose. W. Edwards Deming the father of the modern quality movement is known to have said, “A bad system will beat a good person every time”

What do We Stand For?

In Ricardo Semler’s book, “Maverick”, he describes the transformation of a company after the leadership team realized how their actions and vice-like grip was damaging the business and created a culture of distrust and lack of accountability. It was only after they realized this and let the team excel did trust and accountability thrive. Similarly, all leadership teams need to ask themselves if they have created an organization that has an effective culture. Have they defined and communicated the purpose and the vision for the team? Are there clearly articulated core values and is everyone, including themselves, held accountable for following them?

If we want the right people on the bus, then we better ensure that the wheels of the bus don’t come off every few miles. And fixing the bus is primarily the responsibility of the leadership team. By having a bus that works, we wouldn’t have to worry so much about having to be reactive because the right people would enjoy working for the company and stay on the bus longer. If the bus had empty seats, the people on the bus would attract other like-minded people to fill them and keep the culture vibrant and thriving!

Interested in making real progress? Get Started with our Free Diagnostic today!

What Can Birds Teach Us About Running a Business? Make Your Company a Profit Generation Machine by Thinking Like an Eagle and Acting Like a Hummingbird

What Can Birds Teach Us About Running a Business? Make Your Company a Profit Generation Machine by Thinking Like an Eagle and Acting Like a Hummingbird


How are an Eagle or Hummingbird Different?

An eagle, the majestic animal that serves as our national bird and a symbol we revere, can certainly invoke a lot of positive emotions. In fact, many use it as a metaphor for freedom, independence, adventure, courage, valor, and confidence. The hummingbird on the other hand is often seen as a cute little bird that pecks at flowers.

They appear to differ dramatically as it relates to their characteristics. A hummingbird is actually a marvel of creation; it can fly in tight spaces, hover in one spot, and turn on a dime. It flaps its wings 50 to 70 times a second, has a heart that can beat thousands of times per second and has the ability to generate more energy per unit of body weight than most other animals.

The eagle on the other hand, imposing as it is, needs a lot of space to fly, doesn’t have as much endurance as the hummingbird and actually has to depend on natural wind patterns called thermals to keep it flying for long periods of time.

These two serve as a good reminder that exterior appearances don’t tell the whole story.

So which one should a company emulate?

We believe that the answer is both!

While it’s vital to have the characteristics of an eagle to inspire and motivate, it’s equally important to be able to move quickly and use resources efficiently like a hummingbird. So how do you do it?

icube™ to the Rescue

The answer lies in PCS Insight’s framework of Inspiration, Intelligence, and Intensity:

At its core, a company should operate like an eagle with lofty goals, an outsized vision, and greater purpose, which will drive its Inspiration,

Looking at the surrounding layer, or the company’s Intelligence, it ought to behave as a hybrid–implementing the strategic qualities of an eagle, and the quick learning and nimbleness of a hummingbird.

Finally in its outer most layer, which we call Intensity, companies need to behave like a hummingbird with highly effective and efficient execution.

Forgive the pun (or not), but honestly looking at your organization through the 3 I’s: Inspiration, Intelligence, and Intensity will be certain to help your company soar!

Click below to learn more about icube™.