Variable Compensation for Groups

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Permalink Reply by Don Kelly on September 24, 2008 at 2:21pm

Several years ago, I replaced a general "profit sharing" program in three of our Mexican operations with a location-specific gainsharing plan tied to actual cost improvements in the plants. I specifically stayed away from measures like absenteeism reduction, quality, customer satisfaction and (heresy!!!) safety. The measures were tied to the operations; scrap reduction, downtime (or uptime), headcount utilization. The program worked well for the first year. Payouts were quarterly and reports were visible monthly. Nice line of sight engagement.

I found that the program worked well as long as I kept pushing it. I had difficulty passing ownership of the program over to local Plant management even though it was their workforce, their measures and even their performance.

To this day, I still believe the plans work. Given the emphasis on 6 Sigma and Continuous Improvement or Operational Excellence, these plans can be right in the wheelhouse in providing specific, directed reinforcement for moving the operational needle. They take a lot of work, not just initially but even to sustain and grow them. I'm still a believer...but I am a bit bruised...

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Permalink Reply by Steve Meckes on September 25, 2008 at 4:51pm

Thanks for the insight Don. I agree that plant leadership must be engaged and supportive in order for Gainsharing to work. The people on the shop floor are always looking and sensing the support or lack of support from the leadership team. I agree that logically Gainsharing based upon specific performance metrics (we used team cost as a ratio to value added and paid on improvement) closely supports 6 Sigma, Continuous Improvement, etc. It's like everything you must get the entire team pulling in the same direction.

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