It would be advisable to take a fresh look at the gainsharing option to enhance productivity.
We review the arguments and the debate affecting how organisations decide to achieve ’employee involvement’ in SA – learning some lessons from recent success stories both in SA and abroad.
Hardly anyone will disagree with the argument that employers need to secure a greater measure of involvement by their employees in what they and their co-workers are doing and trying to achieve. Sporting analogies are often used here to explain that teams achieve far more than individuals in this kind of situation.
Economic sharing (in short, profit-sharing in some form) is acknowledged to be the solution – found in the earliest of times in all societies worldwide. It brings people together, and it builds teamwork.
The Japanese were arguably the first (in the 1970s) to use broadly-based bottom-line profit-sharing in their manufacturing enterprises to achieve this collective spirit, and to use that to boost productivity. It was with hindsight extremely effective in establishing self-managed teams on the production line.
Several team-based solutions were developed in the US in the 1980s to compete – ‘green areas’, ‘world-class manufacturing’, and others.
The point we are raising now is: what are the solutions for SA-based mining and manufacturing enterprises or, for that matter, for service-providing organisations? International competition is more and more intense, and organisations can no longer shelter behind the barrier of apartheid isolation. What can we learn from recent successes that fit with our own culture and style of doing business? Importantly, how are we going to compete with the Chinese and other Eastern manufacturers in the future?
The solutions that can be considered remain either:
– a broadly-based share scheme (called an ESOP, standing for an Employee Share Option Plan), or
– gainsharing (a form of profit-sharing which involves the sharing of profits in excess of a defined base level of profitability).
Let us revisit the debate as to which of these is likely to provide the optimum solution here.
There have been spectacular successes in the mining sector in SA in recent years (Exxaro, Kumba, Amplats and others) in terms of the scale of the pay-outs. But, have these really achieved ‘total employee involvement’ on the production line of the type defined by Japanese and US manufacturers? Our view is that they have not. They have been successful in achieving a redistribution of wealth – nothing more. The danger is that one successful round leads to demands for another – without any induced effort to affect productivity.
Gainsharing, as defined above, at the level of the group (where more than one business unit is operating under the umbrella of a holding company) can surely be criticised on exactly the same basis as above – a lack of team-based focus on controllable performance criteria.
However, if gainsharing is introduced at the business unit level, you are on the right track! Because the results of the team (each department) can be posted on the staff notice board on a monthly basis; for example, hypothetically as in the example.
It will surely become a talking point, which is what you want!
Gainsharing of this kind has however never really caught on in SA to a meaningful extent. We have come across some success stories, but usually applying to small production or service units; this, despite the fact that Cosatu put out a paper in 2000 indicating that unions should be open to accept such proposals.
Against this, a survey in the US in about 2000 found that no less than 40% were using gainsharing and a further 40% ESOPS to reinforce the drive towards increased productivity.
Lesson in this for us?
The urgent need for productivity enhancement warrants we would suggest a fresh look at the gainsharing option in SA today to reward programmes of ‘continuous improvement’ (which are common in our economy currently). The staff costs to value added ratio can and should be brought on to the balanced scorecard of every team as its primary performance criterion.
Deon Thomson is the head of the financial research division of reward and consulting firm P-E Corporate Services SA, www.pecs.co.za. He is the editor of the HR Professional Library.
This article appeared in the June 2015 issue of HR Future magazine.