Gainsharing in the Public Sector

1. Gainsharing in the Public Sector Presented to NPELRA April 15, 2002 Bruce G. Lawson, CCP Fox Lawson & Associates LLC (602) 840-1070

2. Strategic Compensation • Spend dollars to achieve greatest impact • Match productivity with results • Stimulate creativity • Enhance "ownership" value

3. The Environment Compensation program(s) should be based on • Business environment • Organizational environment • Employee considerations • Market environment

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. The Process • Six essential steps • Organizational assessment • Define desired behavior and system characteristics • Final design • Transition and training • Evaluation and adjustment • Further implementation

11. 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

12. 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

13. 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

14. Transition and Training • Establish communication strategies • Conduct training

15. Evaluation & Adjustment • Assess test • Make changes as needed • Begin implementation

16. Case Study • Baltimore County, Maryland • Tony Sharbaugh. Director of Personnel