George Tuthill

1
Bucharest Conference Gain Sharing

• George Tuthill
• Senior Business Development Manager
• Computershare Investor Services (Ireland) Limited
• Executive Member Irish ProShare Association
• george.tuthill_at_computershare.ie

2
INTRODUCTION

• What is Gainsharing
• Objectives for Gainsharing
• Potential Advantages of Gainsharing
• Potential Disadvantages of Gainsharing
• Some Problems with Gainsharing
• Key Steps in Introducing Gainsharing

3
What is Gainsharing?

• A Means of Rewarding Employees for Exceptional
  Performance Above a Pre-determined Target Based
  on Sharing Financial Gains.
• Single Measurement
• or
• Separate Targets in Areas Such as Quality,
  Productivity, Cost and Customer Service
• Key Words
• Exceptional Performance
• Pre-determined Target

4
Objectives of Gainsharing

• Specific Objectives May Vary from Company to
  Company
• Identify Communicate Key Performance Targets
  Ensure Ongoing Measurement tracking of These
  Targest
• Enable All Employees to Identify How They May be
  Involved
• Encourage All Employees to Work with Management
  to Continuously Improve These Targets
• Provide a Method Whereby Employees May Share in
  The Savings Generated

5
Potential Advantages of Gainsharing

• Improves The Performance of The Organisation
• Provides a Focus For Key Performance Targets
• Will Help to Promote a Continuous Improvement
  Culture
• Rewards Employees Involvement
• Encourages Employees to Become Effective
  Problem-Solvers
• Can Help to Improve Relationships Between
  Employees Managers
• May Assist in Breaking Down Restrictive Work
  Practices

6
Potential Disadvantages of Gainsharing

• Prone to FREE-RIDING. An Individuals
  Contributions May Not be Reflected in the bonus
• Difficult for Employers to Administer
• Difficult for Employees to Understand
• Targets - Too Low (Difficult to Amend Scheme)
• Targets - Too High (Unattainable)
• Honeymoon Period
• Ongoing Management
• Periodically Reviewed

7
Some Problems with Gainsharing

• Unrealistic Targets
• Must be Realistic Achievable
• Lack of Support from Management
• Need to Spend time Seeking Ideas
• Respond Positively to Suggestions
• Training
• Freedom to Employees to Realise Improvement

8
Some Problems with Gainsharing Contd/

• Administrative Burden
• Costs of Measuring Accurately Success of Scheme
• Good Systems Required
• Maintaining Momentum
• Up Front Gains May Not be Maintained Year on Year
• Necessary to Raise the Performance Bar
• Review The Way Gains are Split
• Increases Percentage of Employee Share

9
Key Steps in Introducing Gainsharing

• Who will Participate
• What Performance Measures will be Used
• Against what Baseline will Performance be
  Compared
• How will Gain be Determined Implemented
• How will the Scheme be Implemented
• When will the Arrangements be Reviewed

10
Who Will Participate?

• Team-Based
• Departmental
• Organisation Wide
• Minimum Service
• Absent / Special Leave (Pro-Rata Payment)

11
What Performance Measures Will Be Used

• Quality
• On-time Delivery
• Sales
• Waste
• Machine Down Time
• Absenteeism
• Overtime Reduction
• Labour Productivity
• Labour Costs

12
Against What Baseline Will Performance Be
Compared

• Reference to Historical Performance Data
• Targets Should be Capable of Review by Management
• Companies may Re-establish the Benchmarks Each
  Year Based on the Previous Years Performance or
  Average of Previous 2-3 Years
• Targets Expressed in Money Should be Reviewed
• Review For
• New Equipment
• Service Processes
• Other Changes

13
How Will Gain Be Determined Implemented

• Split of Savings to Employees (25)
• or
• Different Splits Across Different Measures
• Equal Shares for ALL
• Earnings Base Shares
• Hours Worked
• Employment on Relevant Payment Date
• Freeze if Company is not Profitable or Runs into
  Difficulties

14
How Will The Scheme Be Implemented

• Joint Management / Union Sponsored Team
• Commitment of Senior Management
• Resource Project
• Communicate to Employees Receive Feedback
• Training
• Constant Review by Joint Monitoring Group
• Measurement System in Place

15
When Will The Arrangements Be Reviewed

• Original Objectives Still Relevant
• Continuing to Meet its Stated Objectives
• All Target Areas Still Important for Organisation
• Targets Thresholds are Being Maintained at
  Economic Levels