Gain sharing Schemes which use Financial Measures like costs saved : Scanlan and Ruccar Plans Schemes which use a single factor of Productivity or Improshare.

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Presentation transcript:

Gain sharing Schemes which use Financial Measures like costs saved : Scanlan and Ruccar Plans Schemes which use a single factor of Productivity or Improshare Schemes using multi-factor approach of cost reduction and client loyalty

One Factor Scanlon Plan Average monthly sales of the previous 12 or 18 months ( Say Rs. 10 Lakhs) Average monthly wage cost of the same period (say 2 Lakhs) Ratio of wage cost to sales ( 20%) If sales of the first month of gainsharing programme is 12 Lakhs the wage cost should be 2.4 lakhs being 20%. If actual wage cost is 2.1 Lakh the saving is 0.3Lakhs. This saving to be shared between employees and the company.

One Factor Ruccar Plan Average of 12 or 18 month Normal Monthly : Sales:10 Lakh Cost of Materials and services:5 Lakh Added Value5 Lakhs Wages2 Lakhs Ratio of Wages and value added40% In first month of the scheme: If sales are 12 Lakh and cost of material and services is 6 Lakh the added value is 6 Lakhs. This is an improvement of 1 lakh on the normal added value of 5 Lakh This improvement would be shared with 40%

Success criteria for for gain Sharing Extensive Consultation Mix of short and long term measures Mix of financial and non financial measures Design ensures some payment if measurable improvement Periodic joint review of performance Strong support of the top management

Problems with these systems One factor approach does not take into account: Change in prices Revenue volume Client satisfaction Client loyalty and such other factors.

Impro-share plan Improved productivity through sharing plan Number of working hours saved for a given number of units produced. The value of saving is shared between company and the employees.

Considerations of policy Issues Objectives of the scheme Which employees to be included How frequently payment should be made Whether gain-sharing to be part of the employment contract Basis of calculating share: equal for all or percentage of salary. Share of organisation and employees How to ensure commitment to the programme

Gain share should be large enough to generate enthusiasm Develop a formula of sharing if achievement is less than targeted performance level How the improvement in the areas would be measured and what kind of database to be built Have achievable targets