Pay and Incentive Programs

Gainsharing Program

Inspires Pride, Creativity And Productivity Among Baltimore County Employees

IPMA News, August 1997

When Maryland's Baltimore County Executive C.A. "Dutch" Ruppersberger took office in January 1995, replacing the incumbent, he knew there was dissension in the ranks. County employees had not received pay raises in four of the previous five years, breeding bitterness and a "Why should I?" attitude toward performance improvement. Moreover, layoffs across several departments had further diminished morale, while demand for services had increased.

At the polls in November, Baltimore County residents had expressed their concerns about the declining quality and availability of service, and their fears that such a pattern would continue without new leadership. Indeed, while state mandated agencies, along with the County's public safety and education departments, had seen their head counts increase by a modest 12 to 14 percent over the last 10 years, there had been a marked 21 percent decline in personnel allocated to the County's health and human services, recreation and community services, public works and administrative departments. Meanwhile the County's resident population during the same 10 years had increased by more than 40,000.

Ruppersberger's solution-and the platform upon which he campaigned and won-could be summed up in a word: gainsharing.

More commonly practiced by private sector companies than by government organizations, gainsharing rewards employees for making improvements that increase revenues or reduce costs without compromising quality and service objectives. It's a concept based on teamwork, which effectively blurs the lines between employees responsibilities and allows every project participant to share in the triumphs.

While serving for nine years on the County Council prior to his election, Ruppersberger observed that a gradual decline in employee morale was affecting service quality. He became convinced that if the County wanted quality and productivity improvements, its administrators would have to put their money where their mouth is. Department heads would have to establish achievable goals for employees, and then pay them appropriately for meeting or exceeding those goals. They would have to find the funds to keep their best employees on board. And they would have to make working for the County more fun. After researching the issue, Ruppersberger concluded that a gainsharing program would meet all of those criteria at no added cost to taxpayers.

One of Ruppersberger's first executive ads was the recruitment of two expert resources to facilitate the design and implementation of the gainsharing program our firm, Fox Lawson & Associates, a Minnesota-based compensation and human resources consulting firm highly reputed for innovative work with government agencies, and a local consultant from the Regional Economics Studies Institute at Townson State University in Baltimore.

In a nutshell, the process involved asking the employees how their own productivity could improve, selecting departments to pilot the program, asking those departments to identify specific areas for cost savings or added revenues, and establishing a formula for pay-out as goals were achieved.

The first 10 months of the program involved working out a process for gathering employees input and for structuring employee teams to handle the program design. We also worked with the County to establish an internal oversight committee and to recruit a blue-ribbon panel representing private business, non-affiliated unions, government and the university community. The primary focus of our efforts was to structure a gainsharing program not only for County employees, but by County employees, as well.

Development of the gainsharing program began in November 1995, when we surveyed employees across all departments to determine their readiness to participate. The most positive feedback came from the Dietary Division of the Bureau of Corrections and from the Recreation and Parks Department Maintenance Division, in terms of the potential for cost savings and a willingness on the part of employees to work together at designing the program.

Based on the survey results, the 14-employee Dietary Division and the 87-employee Maintenance Division were selected to field the pilot program. From January 1996 through the spring months, the two employee groups received training in teamwork and conflict resolution. At the same time, they worked in teams to draft program objectives and strategies.

The Bureau of Corrections Dietary Division, for example, proposed ways to save $88,000 on meals for inmates through better portion control, improved recipes and alternative products, and by reducing the loss and destruction of utensils. Recreation and Parks Maintenance employees said that they could save $126,000 by taking back some of the work performed by outside contractors and through improved grass mowing, ball diamond maintenance and refuse removal operations, as well as through natural attrition.

In May the employee design teams submitted their draft plans to the six-member internal oversight committee of department leaders, which made only minor modifications. Further revisions were suggested by the outside blue-ribbon panel, and the final plans were reviewed with the County Council.

Formal implementation of Battimore County's gainsharing pilot program began July 1, with anticipated savings to the County of more than $200,000 in the first year. Half of the savings will flow to the County general fund, while the remaining funds will be divided equally among participating employees up to a predetermined maximum distribution the full amount of anticipated savings is realized, it will mean cash bonuses of $3,146 for each employee in the Dietary Division and $724 per employee in the Maintenance Division. After the initial payouts to participating employees long-term savings from current efforts will fully accrue to the County while new savings goals will be achieved as more departments are added to the program.

If there is a downside to gainsharing within government organizations, it is fear of the unknown on the part of both employees and taxpayers. This is understandable, given that gainsharing is relatively new to the public sector. In fact, according to a nationwide survey by Fox Lawson & Associates, fewer than six percent of public sector organizations in the United States, from school districts up through state level organization have implemented gainsharing programs. That makes the Baltimore County initiative unique - and, as such, a convenient target for criticism by those who would call government efficiency an oxymoron.

Naturally, grumbling was heard early on from some employees in departments not selected to participate in the pilot program, particularly among those who had asked for salary increases instead, and among union members who contended that the monetary gains from the program should be shared among all employees, not just the program participants. Nevertheless, fiscal prudence dictate that the waters be tested before diving in. Baltimore County had to start somewhere, which is why the initial employee survey was conducted. From the beginning, though, the County was committed to a gainsharing program that eventually will included all departments.

Results in dollars saved are not yet in, but anecdotal evidence suggests that the gainsharing program is working. According to Ruppersberger, employee morale has improved dramatically; no quality problems have been cited where complaints were abundant before, and other departments are taking a positive interest in the progress of the pilot program.

While the term "gainsharing" may not create quite the buzz that "the internet" does over libations at after-work gatherings, gain-sharing certainly is, likewise, the way of the future-not just in business, but also in the public sector. The concept is exciting, and its benefit began to appear in Baltimore County even before July 1, as participating employees reported that their managers were "listening better than they ever have."

Gainsharing allows employees to be shareholders in government, with cash bonuses only a part of the incentive for doing good work. The monetary savings that Baltimore County can expect to achieve, while significant, represent only a part of the benefit that will be derived from gain-sharing. Equally important is that enhanced employee morale and improved service quality are likely to resulting a better quantity of life for County residents. Further, Ruppersberger has stated his belief that any bonuses paid to the employees who effect those improvements will be savings well spent. And as gainsharing makes its way into all departments, unleashing the latent creative and productive energy of employees at every level, working for Baltimore County promises to be a lot more fun.

James C Fox and Bruce G. Lawson are partners in the firm at Fox Lawson & Associates, LLC helping organizations to align their compensation, benefits and human resource systems with organizational strategies. Each partner has over 20 years of experience in performance-based compensation and human resources consulting. Fox Lawson & Associates has offices in Roseville, MN., and in Phoenix, AZ.

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