Question

The typical Gainsharing organization measures performance and through a pre-determined formula shares the savings with all employees.

A. Identify FIVE (5) elements of a Gainsharing plan.

B. Explain FIVE (5) benefits/advantages and FIVE (5) drawbacks/disadvantages of gainsharing.

C. Describe any THREE (3) of the following group incentive plans: • Improshare Plan

• ESOP

• Rucker Plan

• Scanlon Plan

Answer 1

Gainsharing is a strategy where employees receive part of the profits and earnings due to company performance improvements. It involves elements such as performance measures, formula, employee involvement, communication, and supportive culture. While it can enhance productivity and job satisfaction, it also comes with potential drawbacks such as complexity and risk of short-term focus.

Step-by-step explanation:

Elements of a Gainsharing Plan

Gainsharing is a performance-based compensation strategy designed to encourage employees to improve productivity and contribute to the company's success. Here are five elements of a Gainsharing plan:

1. Performance Measures: Metrics to track progress towards organizational goals.
2. Formula: A predetermined calculation to distribute the savings or profits.
3. Employee Involvement: Active participation of employees in suggesting improvement.
4. Communication: Open sharing of information about plan mechanics and company performance.
5. Culture: A supportive workplace culture that reinforces teamwork and shared objectives.

Pros and Cons of Gainsharing

Advantages:

• Increased Productivity from employees benefiting directly from the company's success.
• Enhanced Job Satisfaction and Employee Morale.
• Improved Teamwork and Communication.
• Alignment of Employee Interests with Company Goals.
• Greater Employee Engagement and Ownership.

Drawbacks:

• Potential for Disagreement Over Performance Measures and Distribution.
• Risk of Short-Term Focus Over Long-Term Growth.
• Complexity in Understanding and Administering the Plan.
• Potential Decline in Quality if Focus is Solely on Quantity.
• May not be Suitable for All Types of Organizations.

Group Incentive Plans

The Improshare Plan: Also known as 'Improved Productivity through Sharing', this plan focuses on sharing savings from improved labor productivity directly with employees.

The ESOP (Employee Stock Ownership Plan): A plan that allows employees to become shareholders of the company, fostering a sense of ownership and alignment with company success.

The Scanlon Plan: This plan centers on employee participation in cost-saving measures, with financial rewards tied to the performance of the company as a whole.