A third, more flexible type ofgainsharing is the familyof-measures approach, which combines multiple measures to determine the overall bonus. For example, the company might measure the number of units produced, the number of accidents, and the value of scrap-and then aggregate the individual gains (or losses) to establish the actual payout amount. This form of gainsharing is popular among managers who wish to target specific areas that are critical to a company's performance, but which may not necessarily increase productivity.
Gainsharing Pluses and Minuses
Although the chief benefits of gainsharing are increased productivity and higher wages, there are also key advantages that pertain to the workforce. For example, during a business downturn, a company can use gainsharing to lower costs without cutting jobs, resulting in increased employment security and a more stable labor force. A 1981 General Accounting Office study found that gainsharing led to improved teamwork, heightenedjob satisfaction, reduced resistance to change, and closer identification with the company. Economist Roger Kaufman, in a 1988 survey, found that gainsharing reduced absenteeism. The survey also indicated that downtime fell by 23 percent in the year following the establishment of a gainsharing plan. In still another study, the American Compensation Association found in 1992 that gainsharing resulted in moderate improvements in teamwork, communication, morale, workforce quality, and business performance.
Not all companies have had positive experiences with gainsharing, however. One firm's gainsharing plan unraveled following infighting that involved the company president, two teams of workers, and union representatives. The president directed that the gainsharing formula include factors outside the employees' control, and approved bonuses that were less than what workers expected. As a result, employees increasingly distrusted the plan, became embittered, and ultimately ceased participating in the program. Hostilities worsened when a new anti-gainsharing union president was elected. Following an intense political struggle, the gainsharing program was suspended.
The success of a gainsharing plan can be affected by such factors as the level of worker involvement, the intensity of the company's labor, the extent of union support, the length of time the plan has been active, attitudes of managers and executive staff, and expectations regarding how well the plan will succeed.
A significant obstacle t o the establishment of gainsharing plans is the Fair Labor Standards Act, which penalizes firms for providing certain types of bonuses to workers. Under the law, bonuses directly related to