on all manufacturing costs compared to sales. Any improvement in this ratio determines the gain to be shared. The Gallway Plan gives employee incentives. The incentives under this plan are based solely on reduction in labor costs. The labor value of each product is determined and becomes a basis for determining the gain in productivity that is shared with employees. The first step in designing a gain sharing program is to determine what is to be accomplished by instituting a gain sharing plan. Is the objective to improve productivity? To reduce costs? To maintain or increase market share? Is the objective to improve organizational communication, employee relations or to promote employee participation in the organization? Is the objective to replace a compensation structure that no longer reinforces organizational goals such as improved product quality or customer service? The next stage is to determine how employees will be grouped under the program. Will employees be grouped by geographic location, product or service line, organizational group, payroll category or other employee characteristics? However the group is defined, it is important that it be self-contained and able to function as a "team." The third step in developing a gain sharing plan is to determine what measures of performance are necessary to meet the stated objectives of the gain sharing plan. Measurements may be financial, operational or a combination of financial and operational. The fourth step in developing a gain sharing plan is to design the key elements of the program. Key issues at this stage include how do you measure productivity measures and award bonuses, handling variations in performance, and allocating or sharing the gains. After the plan has been developed and administrative issues addressed, the next step is to implement the plan and get employees actively involved in a team approach to performance improvement. This step might be accomplished by using...
