New Owners Cut Workers’ Pay and Get Union (continued from page 2)

110-worker facility approved representation by the United Food and Commercial Workers by a two-to-one margin. Shortly after management of the St. Anne Hospice in Winona cut work hours, employees contacted a UFCW steward a t a nearby health center. The steward assisted the hospice employees, who waged a concerted campaign for union representation.

Speed- Ups Spur Body Piercers To Unionize

Body piercers at the Gauntlet boutique of San Fran- cisco were unhappy with a management demand to boost the number of piercings they perform in a day. Therefore, they sought and obtained representation by the United Food and Commercial Workers. The UFCW then initi- ated contract talks with the piercers’ employer. A union official contended that the company’s quota of 15 to 20 piercing operations a day was unrealistic. Work speed- ups by employers in numerous other industries have also triggered union organizing efforts.

I Preventive Tactics I Keeping Employees Happy through Gainsharing

Employers can increase worker satisfaction and reap other substantial benefits through gainsharing, a compen- sation method that rewards employees based on improve- ments in their measured productivity. The incentive pay strategy helps keep workers happy and motivated-and therefore less likely to seek union representation.

“Raising Productivity and Real Wages Through Gainsharing,” a policy paper published by the Washing- ton, D.C.-based Employment Policy Foundation, con- cludes that firms can achieve significant and sustained productivity increases, raise the real wages of workers, and improve company performance through gainsharing. In addition, gainsharing can lead to reduced employee turnover, higher morale, and improved labor-manage- ment relations. Firms using gainsharing have also expe- rienced reduction in scrap, rework, and waste; better

use of materials; improved processes or procedures; and better product quality.

When used in combination with programs that em- phasize increased involvement by employees, benefits from gainsharing can be further enhanced. Kenneth Deavers, chief economist for the education foundation, said, “Productivity increases resulting from employee involvement alone range from 18 to 25 percent, with an additional 3 to 26 percent boost when used in combination with an incentive reward system such as gainsharing.”

Foundation President Edward Potter notes that gainsharing has straightforward-and dramatic-effects on employees. “When workers know that a portion oftheir compensation is based on their contribution to firm pro- ductivity at the work unit level, they have an incentive to work more efficiently and effectively,” said Potter. As gains are distributed, he added, employees’ compensa- tion and their standard ofliving rise. Conversely, workers who are paid solely on the basis of their tenure at the firm or the time spent at work-and not on the basis of their contribution to the company--often have little motiva- tion to help improve the company’s performance.

How Gainsharing Works Gainsharing plans compensate employees based on

performance improvement at the unit level, rather than on overall company performance. Incentives are not tied to profits, but instead are based on productivity, costs, or other factors that are more directly under an employee’s control. A predetermined formula is used to measure gains, and workers who contribute to the gain receive bonuses. The payments reflect a division of the gain between the employer and the workers. A typical split may be 50-50, or 75 percent for the workers and 25 percent for the company, depending on the type of gainsharing plan in place. Payments to the employees do not add to the company’s costs because they are made only when performance gains are realized.

Some companies base their performance measures on physical productivity-how efficiently inputs are used to produce outputs. The Improved Productivity through Sharing (Improshare) Plan, for example, bases bonuses on the number ofwork hours saved in producing a particular number of units. One pitfall of Improshare is that, because it is based on physical productivity, payments may be due to employees even though profits may fall.

A gainsharing plan based on financial data also may be used. First, a baseline measure of labor costs com- pared to sales is established by tracking data for two to five years. Then bonuses are paid when the labor costs- to-sales ratio for a given period is more favorable when compared against the baseline ratio.

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A third, more flexible type ofgainsharing is the family- of-measures approach, which combines multiple mea- sures to determine the overall bonus. For example, the company might measure the number of units produced, the number of accidents, and the value of scrap-and then aggregate the individual gains (or losses) to estab- lish the actual payout amount. This form of gainsharing is popular among managers who wish to target specific areas that are critical to a company’s performance, but which may not necessarily increase productivity.

Gainsharing Pluses and Minuses Although the chief benefits of gainsharing are in-

creased productivity and higher wages, there are also key advantages that pertain to the workforce. For ex- ample, during a business downturn, a company can use gainsharing to lower costs without cutting jobs, result- ing in increased employment security and a more stable labor force. A 1981 General Accounting Office study found that gainsharing led to improved teamwork, heightenedjob satisfaction, reduced resistance to change, and closer identification with the company. Economist Roger Kaufman, in a 1988 survey, found that gainsharing reduced absenteeism. The survey also indicated that downtime fell by 23 percent in the year following the establishment of a gainsharing plan. In still another study, the American Compensation Association found in 1992 that gainsharing resulted in moderate improve- ments in teamwork, communication, morale, workforce quality, and business performance.

Not all companies have had positive experiences with gainsharing, however. One firm’s gainsharing plan un- raveled following infighting that involved the company president, two teams of workers, and union representa- tives. The president directed that the gainsharing for- mula include factors outside the employees’ control, and approved bonuses that were less than what workers expected. As a result, employees increasingly distrusted the plan, became embittered, and ultimately ceased participating in the program. Hostilities worsened when a new anti-gainsharing union president was elected. Following an intense political struggle, the gainsharing program was suspended.

The success of a gainsharing plan can be affected by such factors as the level of worker involvement, the intensity of the company’s labor, the extent of union support, the length of time the plan has been active, attitudes of managers and executive staff, and expecta- tions regarding how well the plan will succeed.

A significant obstacle to the establishment of gainsharing plans is the Fair Labor Standards Act, which penalizes firms for providing certain types of bonuses to workers. Under the law, bonuses directly related to

productivity and efficiency must be included in the “regu- lar rate.” The employer must recalculate the pay rate to determine whether any unpaid overtime is due to work- ers receiving gainsharing bonuses. This has discouraged firms-particularly small companies that cannot absorb large administrative expenses-from implementing gainsharing plans. Unless the law is changed, many firms will continue to be reluctant to implement gainsharing. At least one congressional bill-the Re- warding Performance in Compensation Act (H.R. 2710)- has been introduced in an attempt to remove the obstacle.

Prevalence of Gainsharing Gainsharing plans have been used for more than 60

years, but have gained in popularity primarily within the past decade. The American Compensation Asso- ciation survey in 1992 found that 74 percent of the gainsharing programs then in existence had been imple- mented only within the preceding four years. The Cen- ter for Effective Organizations found, meanwhile, that 39 percent of Fortune 1000 companies had gainsharing plans in 1990, a figure that grew to 42 percent by 1993. A 1995 survey of nearly 1,400 firms found that 19 per- cent had recently launched a gainsharing plan, while 18 percent initiated profit sharing, 10 percent launched stock-option programs, and two percent started pay-for- skill systems.

Gainsharing is more commonplace among manufac- turers than service companies. Researchers attribute the greater use of gainsharing in the manufacturing sector to increased foreign competition that has forced manufacturers to improve productivity. Most experts predict that gainsharing will become increasingly more prevalent within the service sector.

Garment Workers Sue Their Union

In a case that could spur long-term troubles for the key garment industry union, employees at a New York sweater plant have sued the union, claiming that it stopped fighting for them in exchange for a multi- million dollar payment from a manufacturer. Workers at Mademoiselle Knitwear contend that UNITE settled a potential $30 million arbitration claim against cloth- ing maker Liz Claiborne for just $750,000. The workers

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