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Gain-sharing first took hold in manufacturing companies, where it was used to reward employees for increased
productivity. However, it has proved effective in service firms as well, ranging from restaurants and doctors' offices to electrical contractors
and advertising agencies-any company that can accurately measure its costs of production.
According to Bill Jackson, a Marion, Ind., gain-sharing consultant, service companies generally base their
gain-sharing programs on labor costs as percentage of sales. Whenever employees bring labor costs in below a target percentage, the savings
are divided among them at predetermined time intervals, usually monthly.
Jackson's son Clif, for example, put in a gain-sharing plan at his Marion restaurant. Eighteen months later,
the company was operating with fewer employees, yet showing increased sales.
In that year the plan paid out $8,435 in bonus money to its 18 employees - the equivalent in some cases of a 10.6%
pay raise. "We have a high school girl who wants to come in part-time and bus tables. I've asked my employees to tell me when to hire
her." Jackson says. So far, he hasn't gotten the go-ahead.
At Creative Professional Services Inc. (CPS) in Woburn, Mass., a $4-million direct-mail advertising service
fir, CPS paid out $40,000 to its 75 full-and part-time staff in the first nine months of its program. "Our employees were skeptical because the
plan didn't pay for the first few months," says president John Bell. "But now our people are intimately involved. They give us feedback that
helps us provide more service more profitably. And if we screw something up, they want to know why."
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