Concept of Gain-sharing | Main Features of Gain Sharing | Benefits of Gain Sharing

Gain sharing are a formula-based company or factory wide bonus plan, which provides for employees to share in the financial gains made by a company as a result of its improved performance.

The formula determines the share by reference to a performance indicator such as added value or another measure of productivity. In some schemes, the formula also incorporates performance measure relating to quality, customer service, and delivery or cost reduction.

Gain sharing differs from profit sharing in that the later is based on more than improved productivity. A number of factors outside the individual employees control, such as depreciation procedure, bad debt expenses, taxation and economic changes, contribute to profit. Gain sharing aims to relate its payouts more specifically to productivity and performance improvements within the control of employees. Fundamentally the aim of gain sharing is to improve organizational performance by creating a motivated and committed work force who wants to be part of a successful company.

More specifically, the aims of gain sharing are to:

• Establish and communicate clear performance and productivity targets. Encourage more objective and effective means of measuring organizational or factory performance.
• Increase focus on performance improvements in the area of productions, quality, costumes service, delivery and costs.
• Encourage employees to participate with managements in the improvement of operating methods.
• Share a significant proportion of performance gain with the employees who have collectively contributed to improvements.

Main features of gain sharing are as following:

1. Ownership: The success of a gain sharing plan depends on creating a feeling of ownership that first applies to the plan and then extends to the operation. 
2. Involvement: The involvement aspect of gain sharing means that the information generated on company results is used as basis for giving employees the opportunity to make suggestions on ways to improve performance and by empowering them to make decisions concerning this implication.
3. Communications: Gain sharing plans all always based on key performance measures such as added value. The company has therefore to ensure that everyone involved knows exactly what are happening in these performances areas. Why it is happening and what can be done about it.
4. Formula: The traditional forms of gain sharing are the station plan (measures employment costs as a proportion of total sales) the Ruckus plan (similar but a proportion of sales use the costs of materials and supplies) and impression can establish standard). There all however may be variations on these plans based on added value and other performance measure. There is no such thing as a standard formula - there is at all plenty of choices.

Benefits of Gain Sharing:

The potential benefits of gain sharing are that it:

• Forces the attention of all employees on the key issues affecting performance. 
• Enlists the support of all employees to proposals, poor improving performance, not just a selected group.
• Supports programmes for empowering employees – decision taking can be pushed down the organization hierarchy and employees can be given more control over their work.
• Engage team work and cooperation’s at all levels.
• Promote better communication about issues concerning work and productivity.
• Encourages trust between employees and the company.
• Creates a win - win environment in which everyone gains as productivity rises.

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• Techniques for Improving Decision Making

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• Methods of Performance Evaluation

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Project Control Process

Project Control Process

1. Setting Project Standards: Targets are set for each project activity in terms of time, cost, quality etc. They serve ads standards for control. Project planning is used to set such standards.
2. Performance Monitoring: Actual performance of each project activity is measured to provide feedback. Project reporting system is the source of such information.
3. Find Performance Deviations: The actual performance is compared with the standards to find out deviation for each activity. The causes and incidence of deviatiions are analyzed.
4. Corrective Actions: Corrective actions are taken to improve performance in future period. This is the crux of project control. It remedies the deviations to keep the system stable.
1. Project control system should focus on critical points in which performance deviatiions cause  the greatest damage to the project. It should find and resolve problems to get the project back on track.

Areas for Project Control

1. Time Control: Time control can be of two types:
• Normal Time Control: It is the estimated time for completion of an activity. Increase beyond this time is not likely to result in cost reduction.
• Crash Time Control: It is the estimated time of completion of an activity which cannot be reduced further irrespective  of cost considerations.
• Every project has an optimal time schedule which is effectively controlled to check overruns. Time delays result in cost overruns.
2. Cost Control: It involves the following:

• Setting up standard costing and budgetary control systems for the project. Project accounts capture costs as they are committed.
• Allocating responsibilities for cost control at task level.
• Ensuring proper allocation of costs to project codes; ensuring that costs are properly authorized.
• Measuring actual costs and comparing them with standard costs to prepare cost reports.
• Identifying deviations to take corrective actions to control cost overruns and maintain financial discipline.
• Value engineering can be used for Cost Reduction.

Types of Project Costs can be:

1. Budgeted Cost: Estimated during project planning.
2. Contracted Cost: Cost provided in the contract.
3. Committed Cost: Cost of purchase orders issued.
4. Earned Value: Cost of work in progress.
5. Invoiced Cost: Accrued Cost/ Invoice by contractor.
6. Incurred Cost: Payment authorized.