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Ties Between Performance and Reward

5770). The gain sharing concept is comprehensive because it relies on a combination of (1) management development, (2) employee participation, and (3) shared rewards to improve productivity. Management provides the leadership and the organizational structure that fosters increased employee participation in the organization's efforts to attain its goals. To the extent that the joint efforts are successful (productivity improvements exceed an agreed upon base level), the benefits are shared between employees (both production employees and management) and owners.

The profit sharing concept may be employed in several ways. Probably the most common application found in the United States is similar to the arrangement found in the automobile industry. In the automobile industry, profit sharing agreements are written into collective bargaining contracts. Under arrangements such as the one found in the automobile industry, corporations share profits with their production employees at predetermined rates, once the minimum level of profits specified in the collective bargaining agreements have been attained. In such arrangements, the production employees share in the profits; however, they are not required to share in operational losses.

A second method of profit sharing for production employees involves employee stock ownership. While any production employee is always free to go into the market


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