how is gainsharing an improvement on profit sharing? course hero

by Talia Hirthe 6 min read

Gainsharing is a powerful motivator because (1) people know what they need to do to drive the gains, and (2) they see the “gains” varying with how well they actually do what they need to do to drive the gains. They see the cause-effect connection. This connection is what makes Gainsharing work better than profit sharing in driving performance.

Full Answer

How is gainsharing an improvement on profit sharing?

While gainsharing and profit sharing programs both provide employees with bonuses, profit-sharing programs offer rewards based on company profitability, while gainsharing plans reward employees for achieving specific performance metrics they can control.

What category is profit sharing and gainsharing?

Gainsharing (GS) and profit sharing (PS) are two pay-for-performance systems used by organizations to reward workers for increased performance at the group, unit, or organization level (Rynes, Gerhart, & Parks, 2005).

What are the pros and cons of gainsharing?

Profit-Sharing Pros & ConsIncrease Employee Loyalty. ... Lower Recruitment and Salary Costs. ... Improve Efficiency and Productivity. ... Negative Focus on Profits. ... Issues With Entitlement and Inequality. ... Additional Profit-Sharing Costs.

What is the fundamental difference between profit sharing and gainsharing?

Gainsharing systems typically have a (potential) payout on a monthly basis. Profit Sharing systems typically payout (potentially) on an annual basis. Of course, the more closely we tie the rewards to the performance, the greater the motivational impact of the rewards paid out.

What is a gainsharing example?

As an example of how gainsharing works, consider a company producing rigid and steering differential axles for tractors. From its records, the company determined that every $1,000,000 of good product output required 10,000 worker hours.

What is the definition of gainsharing?

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.

Why is gainsharing good?

Gainsharing plans provide an effectual alternative to conventional pay structures which are often perceived as uninspiring forms of remuneration. A gainsharing plan directly equates employee earnings with performance and as such, is an effective instrument in boosting performance and motivation levels.

What are the benefits of profit sharing?

A well-designed profit sharing plan can help attract and keep talented employees. A profit sharing plan benefits a mix of rank-and-file employees and owners/managers. The money contributed may grow through investments in stocks, bonds, mutual funds, money market funds, savings accounts, and other investment vehicles.

What are the benefits and challenges of flextime?

The main advantages of flexitime for employees are:A better work environment with greater satisfaction and motivation.Reduced stress and fatigue.Easier and faster commuting, rush hours can be avoided.Easier planning of quiet time in the office.Full pay and benefits are kept.Extended office hours.More items...•

Which of the following is a gainsharing plan that provides a financial reward to employees for labor cost savings resulting from their suggestions?

The Scanlon plan is a gainsharing plan that provides a financial reward to employees for savings in labor costs resulting from their suggestions.

What are some factors that will influence the success of a gain sharing plan in improving employee involvement and productivity?

These include more competition; more push for quality and cost reduction; more knowledge and resources to help; more flexible formulas; more employee involvement; more responsive managers; and a fairly high success rate of those organizations that have installed Gainsharing.

What's the overarching philosophy of gainsharing plans?

Gainsharing plans are designed to improve productivity through more effective use of organizational resources. The idea behind the Scanlon Plan is that employees should not only offer ideas to improve productivity, but should also be rewarded for those ideas.