1/23/2017 GainsharingConsulting:GainsharingVersusProfitSharingMasternak&Associates

PerformanceImprovementthroughPartnershipandCommitment
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Background Sigma
Home>GainsharingBackground<GainsharingVersusProfitSharing

TheDifferencesinthe
GainsharingBackground
PerformancePie
WhatisGainsharing? TheDifferenceBetween TheProfitSharingPie
Gainsharingvs.Profit
Sharing
Gainsharing&ProfitSharing
GainsharingDefined ManypeoplewhoconfuseProfitSharingandGainsharing
GainsharingPhilosophy viewthemasbeingoneinthesame.Employeeshavean
opportunitytoearnabonusunderbothapproaches,but
GainsharingQ&A thatiswherethesimilarityends.Therearealways
exceptions,butthefollowingprovidesageneraloutlineof
themajordifferences. Basedonyearend
profit
Gainsharing ProfitSharing Paidannually
Noemployee
Purpose Todrive Tosharethe
involvement
performanceof financialsuccess
anorganization ofthetotal
bypromoting organizationand
awareness, encourage
alignment, employee TheGainsharingPie
teamwork, identitywith
communication company
andinvolvement. success.
Application Theplan Theplan
commonly typicallyapplies
appliestoa organization
Basedonoperational
singlefacility, widecompanies
performance
site,orstand withmultiple
Paidmorefrequently
alone sitestypically
thanannually
organization. measure Employeeinvolvement
organization critical
wide
profitability
ratherthanthe
performanceofa
singlesite.
Measurement Payoutisbased Payoutisbased
onoperational onabroad
measures financial
(productivity, measureofthe
quality,spending, organizations
service), profitability.
measuresthat
improvetheline
ofsiteinterms
ofwhat
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1/23/2017 GainsharingConsulting:GainsharingVersusProfitSharingMasternak&Associates

employeesdo
andhowtheyare
compensated.
Funding Gainsand Payoutsare
resultingpayouts fundedthrough
areselffunded companyprofits.
basedonsavings
generatedby
improved
performance.
Payment Payoutsaremade Payoutsare
Target onlywhen typicallymade
performancehas whenthereare
improvedovera profits
historical performance
standardor doesnt
target. necessaryhave
toshowan
improvement.
Employee Typicallyall Someemployee
Eligibility employeesata groupsmaybe
siteareeligible excluded,such
forplan ashourlyor
payments. union
employees.
Payout Payoutisoften Payoutis
Frequency monthlyor typicallyannual.
quarterly.Many
planshavea
yearendreserve
fundtoaccount
fordeficit
periods.
Formof Paymentiscash Historically
Payment ratherthan profitplanswere
deferred primarily
compensation. deferred
Many compensation
organizationspay plans
viaseparate organization
checktoincrease usedprofit
visibility. sharingasa
pensionplan.
Todaywesee
manymorecash
plans.
Methodof Typically Thebonusmay
Distribution employees bealarger%of
receivethesame compensation
%payoutor forhigherlevel
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centsperhour employees.The
bonus. %bonusmaybe
lessforlower
levelemployees.
PlanDesign& Employeesoften Thereisno
Development areinvolvedwith employee
thedesignand involvementin
implementation thedesign
process. process.
Communication Asupporting Sincethereis
employee littlelinkage
involvementand betweenwhat
communication employeesdo
systemisan andthebonus,
integralelement thereisan
ofGainsharing absenceof
andhelpsdrive accompanying
improvement employee
initiatives. involvement
initiatives.
Payfor Gainsare Profitsharing
Performance generatedonly oftenisviewed
Planversus
byimproved asaentitlement
Entitlement
performanceover oremployee
apredetermined benefit.
baselevelof
performance.
Therefore,
Gainsharingis
viewedasapay
forperformance
initiative.
Impacton Gainsharing Littleimpacton
Behaviors reinforces behaviorssince
behaviorsthat employeeshave
promote difficultylinking
improved whattheydo
performance. andtheir
Usedasatoolto bonus.Many
driveculturaland variablesoutside
organization ofthetypical
change. employees
control
determine
profitabilityand
thebonus
amount.
Impacton Heightensthe Influencesthe
Attitudes levelof senseof
employee employee
awareness,helps identitytothe
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developthe organization,
feelingofself particularlyfor
worth,buildsa smaller
sensesof organizations.
ownershipand
identitytothe
organization.

IfyouwouldliketolearnmoreaboutGainsharingorour
Masternak&Associates consultingservices,pleasecontactus.
LibertyTreePlaza
1114NorthCourt,Suite195
Medina,Ohio44256
Phone:(330)7258970
robert@masternak.com

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