THE CHALLENGE

When Gainsharing Goes Wrong

What happens when a gainsharing program goes wrong? This consumer products company learned firsthand when they implemented a program in their unionized facility's manufacturing and distribution functions. 

The problem: the machine-paced operations constrained much of the output, but that wasn’t the only issue. They also dealt with shifting order profiles and product characteristics, layout differences, and multiple vehicle types, which caused volatile improvement calculations in the distribution center. Even though the union agreed to gainsharing calculations in advance, they became so wildly disparate over time that some team members earned nothing while others exceeded the maximum.

This led to a highly charged atmosphere that pitted employees against each other without giving them the autonomy to improve their performance.

THE SOLUTION

Building a Sustainable and Performance-Driven Culture

With JTG’s guidance, management bought out the gainsharing program and replaced it with a robust and fair management program based on:

  • Lean process improvements

  • Statistically valid goals

  • Objective feedback and coaching

  • A blend of individual and team pay-for-performance incentives

At first, the program was met with resistance. The management sponsors of the gainsharing problem received accolades for the manufacturing improvements it facilitated, but union relations soured. As a result, union stewards and operating management were weary of assimilating a new program.

But slowly and steadily, the culture shifted to prioritize:

  • Individual and team accountability

  • Fair and equitable performance standards

  • Investment and commitment by the company to sustain the program

THE RESULTS

Achieving Significant Improvements in Productivity and Costs

Once the new program was agreed upon by both parties and implemented, the company saw financial and organizational benefits, including:

  • 17% reduction in labor costs via tighter time utilization and fluid staff balancing

  • 62% increase in productivity

  • 44% decrease in labor spending

  • A shift in associate and union relations with the company and management

  • Normalization of equipment and layout differences

  • Stronger buy-in and commitment to the new program as everyone had a stake in its development

By working together to implement a fair and performance-driven program, the company improved productivity, reduced costs, and fostered a more positive and collaborative workplace culture.