Gain Sharing vs. Profit Sharing - 3606 Words

Gainsharing MLR601 April 5, 2007 Gainsharing and Profit-sharing are incentive plans that are designed to pay employees incentives based upon good company performance. By using these plans, companies found that employees are motivated to stay with the company longer. Because employees can directly affect the output of a company they will also work harder to achieve selected goals when incentives are attached. However, incentive plans are not appropriate for every company and business must find a way to put the plan to good use in a fair and productive way. Gainsharing Vs. Profit Sharing Gainsharing and profit-sharing are incentive plans that are both designed to pay employees beyond their normal wages upon good company performance.†¦show more content†¦Another attribute of gainsharing is that employees understand that if they help meet organizational goals, they will reap the rewards in the form of a gainsharing payout. When only profit-sharing is present, employees are often under the mindset that even if they do the necessary things to improve productivity and cut costs, management will only spend that money from those gains on new equipment or other expenditures. Furthermore, gainsharing fosters an increased focus and make it happen attitude7, regardless of current business levels. If business levels are relatively low, then the focus will be on cutting costs. In profit-sharing, this attitude may lack, especially when business conditions are unfavorable for yielding high profits and a resulting payout. Design between gainsharing and profit sharing differ regarding where the savings are derived. In gainsharing, the focus is on the most important costs in a companys financials. For example, if a manufacturing company has high touch labor costs, then baselines and metrics will be based on improving labor efficiency8. In profit-sharing, all line items in a companys financials are used in calculating year-end profits. In gainsharing, operational measures can usually be narrow and defined. Some examples of operational measures would be parts manufactured per hour or poundsShow MoreRelatedHaier Case Study1160 Words   |  5 Pagesunrelated diversification strategies. A. Describe how Haier uses activity sharing and the transfer of core competencies to create value. (related diversification strategy) Haier catapulted in the last two decades producing consumer products that are sold in similar fashion. They all shared distribution channels, outbound logistics, and sales forces. Haier was able to develop core competencies through effective activity sharing of primary activities resulting in a superb competitive advantage, ultimatelyRead MoreHaier Case Study1295 Words   |  6 Pages2. A.Describe how Haier uses activity sharing and the transfer of core competencies to create value. (related diversification strategy) Haier uses both related and unrelated diversification strategies. Haier catapulted in the last two decades producing consumer products that are sold in similar fashion. They all shared distribution channels, outbound logistics, and sales forces. Haier was able to develop core competencies through effective activity sharing of primary activities resulting in a superbRead MoreThe Importance Of Information Sharing Across Learning Organizations Essay1453 Words   |  6 Pagesinformation so important in a learning organization in comparison to an efficient performance organization? Discuss how an organization’s approach to sharing information may be related to other elements of organization design such as: structure, tasks, strategy, and culture. An understanding of the importance of information sharing across learning organizations (LO) vs. efficient performance organizations (EPO) first requires a definition of the two organization types. 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