Gainsharing in the Public Sector

Presented to NPELRAApril 15, 2002

Bruce G. Lawson, CCPFox Lawson & Associates LLC

(602) 840-1070

Strategic Compensation

• Spend dollars to achieve greatest impact

• Match productivity with results– Stimulate creativity

• Enhance "ownership" value

The Environment

Compensation program(s) should be based on

• Business environment

• Organizational environment– Employee considerations

• Market environment

Group Based Incentives

• Group based incentives encourage employees and management to work together in solving problems of cost, quality, end efficiency leading to a monetary reward for documented improvements.

• Programs include:- Small group incentives- Gainsharing/Goalsharing

Characteristics

• Emphasis is on teamwork

• Teams are rewarded for improvement

• Gainsharing rewards ($) are considered "found" money

• Formula based

• Measures of improvement can be financial, operational or a combination

Advantages

• Encourages teamwork and employee involvement

• Increases in pay are funded out of "found" money

• Supports new culture of work• Encourages higher productivity and quality• Lower staffing levels needed

Drawbacks

• Plans need to be re-adjusted every few years

• Difficulty in setting measurable objectives

• Public distrust of paying for improvements

• Productivity improvement features need to be bought back

• Rewards may not be large enough to motivate change in behavior

• Significant time needed to set up

When Will They Work

• When the culture supports teamwork• Good base line performance measures are available• Management and employees enjoy a level of mutual

trust• When all levels of employees are included• When rewards are separate from regular pay• The organization supports total quality initiatives

When Won’t They Work

• Lack of management and supervisor support

• Overly complex bonus formula

• Employee and management distrust

• Legislative meddling

• Lack of good baseline measures

• Poor communication

The Process

• Six essential steps– Organizational assessment– Define desired behavior and system

characteristics– Final design– Transition and training– Evaluation and adjustment– Further implementation

Organizational Assessment

• Review current systems• Assess readiness for change

– Organizational structure and culture– Leadership and management style– Communication practices– Political environment– Prior success/failure with organizational

change– Change agent skills and capabilities

Conceptual Design

• What can and should be rewarded• Link behavior to reward program such as

skill based pay or gainsharing• Assess existence of baseline measures• Is there room for improvement• Determine administrative requirements

– Employee participation and eligibility– Time period for payments– Calculate and verify gain– Buying back productivity gains– Impact on base pay program– Impact on job classification– Ongoing oversight and rules

Final Design

• Finalize productivity and baseline measures (formulas)

• Finalize administrative requirements including Oversight

• Conduct test• Outside/Independent review

– Academic/technical specialists– Political leaders– Business leaders– Labor leaders

Transition and Training

• Establish communication strategies• Conduct training

Evaluation & Adjustment

• Assess test• Make changes as needed• Begin implementation

Case Study

• Baltimore County, Maryland• Tony Sharbaugh. Director of Personnel