Which incentive plan is designed to increase productivity and generate additional profits for a company?

Gainsharing is an incentive plan that specifically focuses on improving productivity and efficiency within a company. It involves a system where employees are rewarded for meeting or exceeding performance targets that lead to increased company profits. In essence, gainsharing fosters a collaborative environment in which all employees are encouraged to contribute to the organization’s financial success, as they directly benefit from the improvements they help implement. This aligns their interests with company objectives, motivating them to work together to identify and reduce waste or optimize processes. The structure of gainsharing typically involves a pre-agreed formula for distributing the financial gains that result from enhanced performance, making it a powerful tool for companies looking to drive both productivity and profitability.

In contrast, other options may provide incentives but do not have the same direct tie to productivity improvements across the board. For instance, profit sharing distributes a portion of the company’s profits to employees but does not necessarily incentivize specific productivity gains. Merit pay and bonuses may reward individual performance or achievements but lack the collective focus that characterizes gainsharing.