Gainsharing
In terms of the calculation, a Gainsharing plan may have from one to six key performance measures. The most effective Gainsharing plans have relatively few performance goals because employee understanding of them is necessary for success. Examples of measures include productivity, quality, waste, spending, and customer service which are all factors employees can control. The gains (savings) from each measure are calculated separately. Then gains and losses from each measure are added to determine the total gain. A portion of the total gain goes to the company and a portion is shared with all employees. Generally, from 10% to 50% of the gain is shared with employees. The percent of the gain shared with employees depends on employee controllability and importance of the measure to the organization. The pool is distributed to all participants, typically on a monthly or quarterly frequency. The frequency of payouts depends on the employee line-of-sight (employees’ ability to identify what they do today to earn a payout at the end of the Gainsharing period). Companies with unskilled and semi-skilled employees typically have plans calling for payouts at shorter intervals than those with highly skilled workers.