Project Gainshare

Gainsharing – it’s like profit-sharing in the private sector -- is a system whereby units of government (e.g., a collections division or a jury management unit of a court) share in the gains teams of employees make in their bottom line or that of the state, county or city, without losses in quality of services and programs. Employees receive bonuses or payments based upon the improved productivity or efficiency as reflected in "gains" in cost savings or revenue increases. Gainsharing is based on widely accepted management principles that encourage employee initiative in continuous improvement of program and services to meet the needs of customers and citizens.

In my January 21, 2007 posting I discussed the prospects of gainsharing in courts. The promise for courts, I argued, is that gainsharing may help courts achieve sustained increases in productivity and efficiency, that employees may become more involved in the gains made by the court as they share in the benefits of employee-initiated improvements, that it enhances commitment to organizational goals, and that it leads to improvements in other measures of court performance.

But Will Gainsharing Actually Work in Courts?

Gainsharing has been shown to be successful in local government. But will it work in courts? Have any courts attempted gainsharing?

A search of Google and the National Center for State Courts website yielded no evidence of gainsharing arrangements in state and local courts. An informal survey of courts that included a query of the Court2Court network did uncover one court that has tried gainsharing. It turns out to be quite a success (albeit temporary) story.

The Successful Gainsharing Experiment in California

The United States Bankruptcy Court for the Eastern District of California demonstrated “over a period of five years that gainsharing could work, and work well, in a court environment,” said Richard Heltzel, Chief Executive Officer, when I spoke to him about Project Gainshare, as the pilot project was called. The project returned “over $2.5 million in unspent funds in five short years, an ability to operate to operate in a very lean, but effective fashion, and with enthusiastic staff support at the grass roots level,” said Heltzel.

How did Project Gainshare work? The Federal Bankruptcy Court’s staff of 120 to 150 employees were organized into seven teams across three divisions who managed the project at the grass root level. All but one team fully supported the program at the outset, and the one dissenting team (one of the team’s members said that the effort wasn’t worth “a couple of hundred bucks”) came around later before the effort started. Each team sought “gains” in cost savings in its portion of the Court’s budget.

The teams were wildly successful, making gains over $7 million over a period of five years in the late 1990’s and early 2000’s. Cost savings were distributed in thirds with one third returned to the Administrative Office of the U.S. Courts (AOUSC) as unspent funds, one third plowed back into to the Court for business improvements, and the remaining third distributed to team members in the form of cash payments or “productivity dividends.” (Heltzel wisely exempted himself from receipt of the dividends.) The amounts of cash payments were calculated based on a formula that provided an incentive to the teams. The more the team made in gains, the bigger the dividends received by the team members.

“We deliberately stayed away from the word ‘bonus’ and used instead ‘productivity dividend’ to refer to the cash distribution to employees,” said Heltzel, obviously sensitive to the bureaucratic chaffing that occurs at the mention of “profits” or “bonuses.” (One objection to gainsharing is that salaried government workers should be doing their best every day and do not need incentives like bonuses to do so.)

Heltzel is careful to point out that the Bankruptcy Court had some advantages going into the Gainshare Project that most state and local courts do not currently enjoy, including a non-union, non-civil service employment environment, a relatively clear budget based on predictable annual allotments, and the flexibility to spend them, at least on a pilot basis. He also had a team-based organization, and a relatively sophisticated performance measurement system to back up the gainsharing arrangements – both necessary requirements for gainsharing success. Nonetheless, Heltzel is optimistic about the likely success of gainsharing in court environments. “I am here to tell you,” he said, “that a gainsharing program can work in a court environment when coupled with an organizational performance management system that relies on statistically based measures and customer satisfaction surveys to ensure that the job is getting done in timely and quality fashion.”

Gainshare Meets Untimely Demise

Heltzel’s enthusiasm for gainsharing is surprising, and heartening, given how his bold experiment ended in disappointment for him. Apparently, the savings Hetzel and his colleagues were able to achieve through Project Gainshare were cut from the Bankruptcy Court’s budget as part of a measure by the AOUSC to achieve some kind of parity of base salaries in federal bankruptcy courts. Uniformity fights and beats innovation far too often, I say!

If nothing else, the fate of Project Gainshare, which seems to have had nothing to do with the merits or results achieved by Heltzel and his colleagues, shows us that we need to do a lot of work to prepare and to sustain a receptive environment for any kind of change to stick. As a matter fact, double that work.

Gainsharing, Workplace Health and Organizational Performance

Wherever we look, in the private sector and, increasingly, in the public sector, successful employer practices are empowering employees by involving them in decision-making and giving them more autonomy; providing them opportunities for leadership development; and rewarding employees both monetarily and non-monetarily through performance-based bonuses and pay increases (or, if you prefer, “productivity dividends”) and simple but genuine expressions of thanks. Research has shown that these practices – which are all part of a well-designed gainsharing arrangement -- can combine to produce better employee satisfaction, organizational engagement, and improved organizational performance.

Maybe it’s time to give gainsharing a try in state and local courts willing to innovate. And maybe it’s time for management consultants like me to put our money where our mouths are. Our incentive for participating in a gainsharing program can be the same as those of court staff, i.e., a contingency whereby we work for deeply discounted fees with the incentive that we get a share of the gains.

Any takers?

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