September 5, 2006
Volume 2 Issue 77

Motivating Workers Though Gain-sharing

    Companies today are under a lot of stress and are continually looking to find creative ways to grow their business and at the same time cut costs. Many companies have decided to go offshore with production or try and build better relationships with carriers, although these are possibilities what is being realized by companies today is that the real key to saving money is in their employees. As we have said in the past two issues and we can not stress enough motivated and efficient workers save you money!! Companies are starting to realized that they have all but lost control of transportation costs and are now turning to a more productive and efficient warehouse to help save money. Last week’s issue focused on the general idea of an incentive plan but in this week’s issue we are going to explain the specific incentive plan method called Gain-sharing. If you were to look for a definition of gain-sharing a sole one does not exist, but a basic definition is that gain-sharing is: part of an incentive system that combines productivity with paychecks and it connects cost savings with cash. What it basically does is that it targets individual performance and helps workers become more enthusiastic about their work and ultimately turns them into mini entrepreneurs. It gets your workers to take more responsibility for their work and rewards them for going above and beyond what they need to do.

Starting a gain-sharing incentive plan is very easy. All you have to do is compare actual performance of work at the individual level against predetermined expectations, for example historical averages. If the worker is above the predetermined expectations then he/she deserves an increase in their hourly pay rate. If the worker continues to overachieve then their hourly pay will continue to increase but if the worker begins to slack off then their pay will be docked for that period. Studies have shown that employees would rather have an increase in hourly pay then a lump sum and also like to see their bonus’s closer to when performance is reached. Let’s say that in any particular month an employee saved you $500. 1/3 of that savings would go back to the employee while you keep the other 2/3.

            1/3 x $500 = $165 goes to the employee

            2/3 x $500 = $330 is the money you save from that                                     employee

Now lets image that you do this with just 10 employees.

$330 from each employee x 10 employees = $3300 worth of saving in the month.     

   The potential return on investment in creating a personalized Gain-sharing program that engages and motivates employees is very considerable. It is said that Gain-sharing programs often pay for themselves with in four months of installment and potential savings can exceed $2,500 per full-time employee.

   You may be asking yourself how your employees will save you money. Well, with a gain-sharing program installed, employees strive to make their bonus. So, if they see a machine that may have something wrong with it or a process that is not being done correctly they will bring it to management more quickly because they know if something goes wrong they won’t get their bonus and lets be honest who is going to turn down an opportunity for extra money. Gain-sharing creates an added level of accountability for the workers. With this extra level of accountability your will see accuracy rate and efficiency rate increase and as we have said in past issues, the more accurate and efficient your warehouse is the more $$$ you save.    

   This plan seems pretty easy and it is pretty much, but there are 2 aspects of this method that need to be mastered to fully see all the savings. First businesses MUST have control of all standards, this goes back to our discussions about activity based costing, for each task and be able to monitor them. For example, you need to know the average time it takes to pick a 20 line order. If you do not know these numbers then their will be no way to gauge if an employee is being more efficient. The second aspect that needs to be mastered is a way to visibility measure and examine these standards in real-time. This is where technology plays a big part in helping to you run your business. In next week issue will be discussing how a food oriented software package can help track employees productivity and at the same time create an environment where the employee “owns” the inventory       

Gain-sharing Makes Workers Want To Save You Money

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