The impact of gainsharing in the automotive parts manufacturing industry of South Africa

Abstract

The majority of South Africans expect greater prosperity that can be accomplished through greater employment, high productivity and wage increases. Increased productivity can finance higher wages without burdening the customer with higher selling prices. Consequently, there should be strong co-operation between management and labour to improve productivity, thereby ensuring the survival of South African companies. To achieve this objective, organisations find themselves turning to their employees for creative suggestions and ideas on better ways of doing things. This sentiment underpins the concept of gainsharing. Gainsharing is a formula-based company-wide programme that offers employees a share in the financial gains of a company as a result of its improved performance. This motivation boosts a company’s productivity and radically reduces the cost of waste, spoilage, rejects and rework. This study examined the impact of a gainsharing programme on the improvement of labour productivity in the automotive parts manufacturing sector. The study investigated the production and related experience of two automotive parts manufacturing companies (referred to as A and B in this study) that have adopted a gainsharing strategy. The two companies operate in the eThekwini District Municipality in KwaZulu-Natal. It assessed if gainsharing is responsible for company labour productivity improvements. The investigation was achieved by collecting pre- and post-gainsharing quarterly data for spoilage, absenteeism, capital investment and labour productivity. Gainsharing improves labour productivity and reduces spoilage and absenteeism rates. In order to maximise performance, a comprehensive performance policy must be developed, which aligns pay (and other incentives) to performance. The study uncovered the strengths and weaknesses of gainsharing for labour productivity improvement in South Africa.

Exploring the interdependence between gainsharing and performance evaluation in a credit union,

“…As one of the types of financial reward systems, the Profit Sharing Plan (PSP), or Gainsharing, is considered a mechanism that integrates performance and rewards with organizational goals and objectives, in addition to being able to encourage group actions of employees to achieve the desired performance (Gomez-Mejia, Welbourne & Wiseman, 2000;Zondo, 2018). Thus, the emphasis on gainsharing is more focused on team goals than on individual results (Masternak & Ross, 1992).…”

“…Also, Pizzini (2010) considers that group reward determinants may be linked to the interdependence between tasks, mutual monitoring of company members, and the organization's size. In this context, as an empirical contribution, Zondo (2018) points out that gainsharing becomes effective when aligned with the performance evaluation process.…”

“…However, this effect occurred more intensely in union organizations in economies in emerging countries. Thus, organizations that aim to increase employee motivation and engagement and align behaviors with organizational objectives have an alternative in implementing gainsharing to achieve this goal (Zondo, 2018). Within the control system's logic, the reward system, such as gainsharing, tends to provide more effective use of other management control practices, such as performance evaluation.…”

“…On the other hand, in addition to the mandatory indicators, each service station is free to suggest indicators that are not in the portfolio for the next semester, making the PSP an influencer of behaviors and a facilitator in the face of improvement decisions and new ideas presented by employees at service stations (Van Veen-Dirks, 2010;Zondo, 2018). Coordinator 2 says: "For the same semester, we are unable to change the indicators, because it must have an entire historical basis, we must check if it is an opportunity to have this as an indicator [...]"…”

“…In other words, gainsharing and objective performance evaluation are based mainly on the same performance indicators, which tend to increase the effectiveness of both management control practices, as well as assist in guiding and assisting the union's employees towards achieving superior results, from the administrative headquarters to the "lower-end," i.e., the service stations. On the other hand, informal face-to-face conversations tend to facilitate the creation of ideas to achieve the organization's objective (Van Veen-Dirks, 2010;Zondo, 2018). Figure 1 shows how gainsharing complements the objective performance evaluation, particularly by reinforcing its role of influencing behaviors and promoting the direction to achieve the objectives.…”