Productivity gainsharing plans have existed for nearly 50 years. They're all based on a mathematical formula that compares a baseline of performance with actual productivity during a given period. It's usually calculated as a ratio of outputs to inputs.
A measurable increase in productivity is usually due to one of the following scenarios:
- Greater production output with equal or less input.
- Equal production output with less input.
Types of productivity gainsharing systems.
There are four types of gainsharing programs: the Scanlon Plan, the Rucker Plan, Improshare and custom plans. The plans are similar except for the way the bonus is calculated and the level of employee involvement required to support the plan.
1. The Scanlon Plan is based on the historical ratio of labor cost to sales value of production.
2. The Rucker Plan is based on the premise that the ratio of labor costs to production value. The Rucker Plantracks the value added to a product as a measure of productivity
3. Custom plans are used to customize components of a gainsharing plan to support a unique aspect of an organization's environment. Typically, these plans modify either the "textbook descriptions" of the bonus formula or the employee- involvement system
4. Improshare is “Improved Productivity through Sharing” and was coined by Mitchell Fien.
Improshare is a type of group bonus that is gained depending on the productivity of the team. Productivity is measured through amount of output produced in a given time period. The bonus amount depends on both employees who contribute directly and indirectly to the output.
The bonus is calculated by finding the difference between standard working hours and actual hours to produce the required output and divided by the actual hours. The employers and the employees share 50-50% of the bonus. The employees 50% is split between all the members in the team that contributed towards productivity improvement.
An advantage of this method of bonus is that it promotes team work and collaboration, resulting in positive group dynamics as well as increased productivity for the organization. Furthermore the employees are aware that they will receive the bonus if they finished their work quicker, hence improving efficiency as well as reducing the cost of production.
However the drawback is that it only focuses on the reduction of cost of production and does not consider reduction in other types of cost. Hence those employees involved in other cost savings will not be benefited by the Improshare system.
Have a great HR Day ! :)
Reference & Further Reading:
1. Is Gainsharing for You?. by Ronald J. Recardo and Diane Pricone
Image Credits: pixabay.com
Shared by - Maneesh MS, +Maneesh Muralidharanpillai Sr. Executive HR, Appollo Tyres Limited
