Describe gain-sharing, and list its major characteristics.

Question

What will be an ideal response?

Answer 1

Gain-sharing is a results-based program that generally links pay to performance at the facility level. It focuses on achieving savings in areas over which employees do have control-for example, reduced scrap or lower labor or utility costs. As the name suggests, employees share in the gains achieved. Gain-sharing comprises three elements:

1. A philosophy of cooperation: This refers to an organizational climate characterized by high levels of trust, two-way communication, participation, and harmonious industrial relations.
2. An involvement system: This refers to the structure and process for improving organizational productivity. Typically, it is a broadly based suggestion system implemented by an employee-staffed committee structure that usually reaches all areas of the organization. Sometimes this structure involves work teams, but usually it is simply an employee-based suggestion system. The employees involved develop and implement ideas related to productivity.
3. A financial bonus: This is determined by a calculation that measures the difference between expected and actual costs during a bonus period.
The three components mutually reinforce one another. High levels of cooperation lead to information sharing, which in turn leads to employee involvement, which leads to new behaviors, such as offering suggestions to improve organizational productivity. This increase in productivity then results in a financial bonus (based on the amount of the productivity increase), which rewards and reinforces the philosophy of cooperation.