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Gainsharing Links Performance Management Processes

Why is gainsharing so successful? Because it directly links five key performance management processes: planning, monitoring, developing, appraising, and rewarding. When these processes are integrated through a program like gainsharing, employee performance improves significantly!

Gainsharing in the Federal Government is a reward program that distributes cash payments to employees usually on a quarterly or annual basis. The amount of the payments is based on a quantitative formula that measures specific performance levels in such areas as customer service, efficiency, and productivity and compares actual performance to the pre-established performance goals of the agency. But gainsharing is more than part of an awards program. It can be a far-reaching performance management tool because it links performance management processes as described below.

• Planning
• Monitoring
• Developing
• Rating
• Rewarding

Planning. Planning gainsharing programs requires agencies to set organizational performance goals. Since goal achievement triggers payout of award monies, the goal becomes the performance target with which all group and individual performance expectations can be aligned. Thus, gainsharing goals must be measurable and easy for all employees to understand.

It might also be wise to plan gainsharing programs that provide payouts for various levels of goal achievement. For example, if a single goal was set at a seemingly impossible level, employee incentive to achieve that goal would be low. The program would be more successful if it added at least one intermediate goal that rewarded an improved level of performance.

Monitoring. The formulaic nature of calculating gainsharing payouts requires precise measurement systems that are based on the goals established in the planning process. A good feedback process should be linked to the measurement process. The gainsharing payout measures will be ineffective if the data are not given to employees and managers in a timely manner in order to enable them to improve. An example of an agency that links its measurement and feedback processes is the Defense Logistics Agency (DLA). DLA has a gainsharing program called Success Share in which monthly organizational performance results are posted in work areas and announced in bulletins to inform employees about the organization's performance and where DLA stands on reaching its goals.

Developing. Once goals are set, measurements are in place, and feedback is given to employees and managers, action steps may be needed if performance isn't approaching desired levels. In addition to redesigning or reengineering the work processes, it may also be necessary to develop employee skills and knowledge. Developing and cross training employees gives managers additional flexibility in assigning work. Training also impresses upon employees the importance the agency places on improved performance.

Rating. At the end of a gainsharing cycle, the tough question must be asked: Has the threshold been met for making payouts? This summary judgment is important. If the goal hasn't been reached, the integrity and credibility of the program require this honest appraisal. The savings that may have been achieved but not shared could be used to invest in developing performance further.

Rewarding. Gainsharing provides monetary rewards for goal attainment. In addition to monetary awards, some gainsharing programs also provide improvements to the quality of worklife. One agency program used part of the money saved for better lighting in a warehouse. Other programs have used part of the gains to upgrade computer equipment or software.

In sum, gainsharing is a good example of an effective incentive tool that links key performance management processes for effective results.

Originally published on February 1995.