How Gainsharing Can Work in the Public Sector

By Rodney K. Plan
American Compensation Association
ACA News, February 1997

Despite a declining economic environment, Baltimore County has experienced early success with its gainsharing program for two of its departments. Often, the keys to successful gainsharing in the public sector are positive employee attitudes and effective management training.

American Compensation Association.
With few exceptions, implementing variable pay plans in the public sector has been an uncertain venture. Employees and unions have been ensconced in traditional pay plans for years.

Changing management and employee attitudes has been the largest obstacle for those public entities willing to take a chance on variable pay.

However, there are occasional success stories.

One of those comes from Baltimore County, Md., a 610-square-mile demo-graphic location that surrounds, but does not include, the city of Baltimore. The county consists of a combination of urban, suburban and rural areas and includes 175 miles of shoreline.

At the recent International Personnel Management Association (IPMA) International Trading Conference in Las Vegas, Tony Sharbaugh, Baltimore County's Director of Personnel, detailed the county's successful attempt to set up gainsharing in two departments.

Area: 610 square miles
Location: Surrounds, but does not include, the city of Baltimore
Type of area: Urban/suburban/rural and includes 175 miles of shoreline
Population: 800,000
Types of service: Police, fire, health, sanitation, highway - all encompassing
Work force: 7,000 employees with five bargaining units
Work locations: 500

With a population of 800,000 people, the county has been a traditional government entity and provides the usual services of police, fire, health, public work, sanitation and highway. There are 7,000 employees with five bargaining units.

Sharbaugh said Baltimore County has had a narrowing revenue stream, an aging infrastructure and an increasing demand for service. During the past five years, the county work force has declined by 17 percent to its current 7,000 employees.

Another problem, Sharbaugh said, is the ever changing political environment. He said local politicians cannot hold office for more than one four-year term due to voter and employee dissatisfaction.

The county's economic environment has been declining during the past few years. The has been a job freeze and attrition cuts over a four-year period, the first employee layoffs in county history occurred in 1993 (more than 300 positions), there were two early retirement programs enacted in 1992 and 1996, and there has been only one cost of living adjustment (COLA) in the past six years.

"Needless to say, county employee morale has been very, very low," said Sharbaugh.

However, a new county manager arrived on the scene who believed gain-sharing could be done to

• improve employee morale
• enhance/improve the quality of service
• offer a cost saving/cost reduction.

"We wanted a program that involved the employees, something that was almost entirely designed by the employees that they would share in," said Sharbaugh. "Money was not the primary motivator here. This wasn't being sold as a way to save money, but to improve service and morale."

The county employed the services of Fox, Lawson and Associates LLC to help carry out the gainsharing plan.

One of the first things the county did in putting together a gainsharing plan was to define gainsharing and what it would do for the county.

"We made it very clear that gainsharing wouldn't substitute for any other pay programs. No employee pay was at risk. It involved an opportunity for employees to make money and Improve the quality of their own job," said Sharbaugh.

Process Begins
Once the definition was established, county officials proceeded with the gainsharing process and the organizational development. Pilot agencies were identified, design teams were named and a gainsharing committee and external "blue ribbon" review panel set the final parameters of the experimental program.

Sharbaugh said a readiness assessment was taken throughout the county departments to gauge employee perceptions of gainsharing. There were employee focus groups, an employee opinion survey and department briefings so employees and management would understand gainsharing and the program's intent.

Each department had the opportunity to submit proposals from its own employee groups. There were two pilot departments chosen from the 23 proposals submitted. The criteria for the department selection included the following:

• gainsharing was viewed as possible
• opportunities for improvements in productivity, quality and costs of services could be made
• productivity and quality could be measured
• high scores were achieved in
  • morale and trust
  • management support
  • performance feedback
  • communication
  • understanding goals and leadership
  • teamwork
  • quality of work
  • empowerment.

When all the results were in, the Parks Maintenance branch of the Parks Department and the Dietary Department of the Bureau of Corrections were chosen. (See Figures 1 and 2.) Parks Maintenance had 120 people in four locations while the Dietary Department had 17 people in one location.

During the next four months, each pilot department had design team meetings to arrive at a final gainsharing plan. Once their plans were approved by the design team, they then went to a county panel review. The panel included the county CFO, budget officer, county chief negotiator, personnel director, director of pilot programs and respective unions.

Once modifications were made, the plans underwent another outside panel review before final approval and implementation on July 1, 1996.

Early Success Thus this far, Sharbaugh said the program has been very successful. The first- year payout for Dietary employees was projected at $3,500 per employee and $700 per employee the Parks Department.

"The Parks Department employees now feel like they are part of the Parks Department. For example, now they have a voice in what type of equipment is chased," said Sharbaugh.

Eligibility

• All employees in the dietary department
• Three-month evaluation period for new employees
• In a one-month period, one "x" payroll marking results in nonaward for that employee for that month
• Dietary staff has the option to vote out an employee by two-thirds vote (after a series of steps if employee is not working toward common goals) in monthly review meeting said Sharbaugh.
• Awards to employees are prorated based on number of months worked during the payout period

Summary Of Proposals and Projected Cost Savings

Reduced Foods and Small Wares Costs

• Switched to Armed Forces Recipes Index $28,791
• Portion control $9,479
• Accurate accounting $14,000
• Alternative products $29,840
• Reduced small wares $6,500

Potential Incentive Opportunity
Proposed split for Fiscal Year (FY) 1997 and FY 1998:

• 50 percent to Baltimore County
• 50 percent to be divided evenly among dietary department employees

Payout Schedule

• February 1997 - Two-thirds of employees' share of savings generated from July 1, 1996, to Dec. 31, 1996
• September 1997 - Employees' share of savings generated from Jan. 1, 1997, to June 30, 1997, plus balance from February distribution
• FY 1998 - Same formula as FY 1997

Performance Measurement/Reduced Food Costs

• The savings generated will be monitored using the change in the per day meal cost between the baseline year and the measurement year
• The cost per meal in Fy 1996 will be the baseline measure for savings generated in FY 1997
• The cost per meal in FY 1997 will be the baseline measure for savings generated in FY 1998
• Cost per meal plus food and beverage expenditures divided by number of meals served

"We now can show them that if the employees can work with management, it can be a successful program to put money in their pocket."

Sharbaugh said the white-collar union fought the program because it believed the financial gains should have been shared with all the employees.

"But once these pilots come forward and show their success, other people will see it as a means to put money in their pocket," said Sharbaugh.

There has been talk about pushing gainsharing out to all employees, but Sharbaugh said it is not technically feasible and it might not work in all areas. The Public Works Department will be the next department to implement gainsharing next year. Sharbaugh said it has more employees, it is more complex and has more hostile employees.

Lessons Learned

Sharbaugh said there have been lessons learned putting together a public sector variable pay plan. "Get a well-formed plan together first and lean heavily on experts in the field to put together a design. When you select an area/or areas, gauge the potential on the attitude of the employers and managers rather than on the money. It is very important to look at the attitude of the employees," he said.

"Training is another key to success. Management must learn not to be threatened by employees coming up with ideas. It helped us when the front-line employees came forward to make suggestions. It's a huge cultural change. It's also important to guide but not lead employees. Reinforce it as a collaborative effort. It's important for employees to know it's their program."

Reprinted from ACA NEWS February 1997 with permission from the American Compensation Association (ACA), 14040 N Northsight Blvd., Scottsdale, AZ U.S.A. 85260; telephone (612) 922-2008, fax: (612) 483-8352 Copyright ACA.

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