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Gainsharing (sometimes referred to as Gain sharing, Gainshare, and

Gain share): Gainsharing is best described as a system of management in which an organization seeks higher levels of performance through the involvement and participation of its people. As performance improves, employees share financially in the gain. It is a team approach; generally all the employees at a site or operation are included. 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. Typical elements of a Gainsharing plan include the following:

Gains and resulting payouts are self-funded based on savings generated by improved performance. Gainsharing commonly applies to a single site, or stand-alone organization. Many plans often have a year-end reserve fund to account for deficit periods. Employees often are involved with the design process. A supporting employee involvement system is part of the plan in order to drive improvement initiatives. Advantages Helps companies achieve sustained improvement in key performance measures Rewards only performance improvement Payouts are self-funded from savings generated by the plan Aligns employees to organization goals Fosters a culture of continuous improvement

pride. Increases the level of organizational stress since everyone has more of a financial stake in the organization's success Applies best to and a work environment that requires teamwork and collaboration rather that individual entrepreneurship Paid on the basis of group performance rather than individual merit .Enhances employee focus and awareness Increases the feeling of ownership and accountability Enhances the level of involvement. Requires a participative management style Requires that management openly shares information related to performance measures Employees may question or challenge management decisions that may adversely impact a gain. teamwork and cooperation Supports other performance improvement efforts and helps promote positive change Promotes morale. and more positive attitudes toward the organization Disadvantages Measures are narrower than organization-wide profit and therefore gains may be paid even though profits may be down.