s p r i n g / s u m m e r 2 0 0 6 31

E mployee bonuses and other formsof rewards are standard practicein the private sector. When a com-

pany has a profitable year, employees hopeto enjoy some of the fruits of the success.If the company has a profit-sharing plan,a formula prescribes the employee’s

share. Companies without formal profit-sharing systems may distribute bonusesin hopes that employees will appreciatetheir gesture of gratitude, will respondwith loyalty, and will be motivated toexpand profits in the future. Profit-sharing plans, whether formal or infor-mal, help attract and retain talented em-ployees and provide a personal incentiveto increase the company’s net revenues.

Profit-sharing and other incentiveplans are hardly novel in the corporate

world. They are regarded simply as goodbusiness—good for employees and goodfor the company and its shareholders.

The public sector is different. Profitsharing technically is impossible in thepublic sector, for governments have noprofit to share. Nevertheless, governmentsdo have budgets and balance sheets, andactions that trim costs without reducingservice quality can improve the bottomline, even if the improvement is notcalled profit. Increasingly, governments

Gainsharing in Local GovernmentDavid N. Ammons and William C. Rivenbark

P O P U L A R G O V E R N M E N T

The authors are School faculty membersspecializing in local government adminis-tration. Contact them at ammons@sog.unc.edu and rivenbark@sog.unc.edu.

32 p o p u l a r g o v e r n m e n t

in North Carolina and across the nationare experimenting with a system called“gainsharing.”1

This article describes gainsharing anddistinguishes it from profit sharing. Thearticle examines gainsharing as a perfor-mance management strategy and high-lights examples of its use.

An Explanation of Gainsharing

Some people suggest simplistically thatgainsharing is the public sector’s versionof profit sharing, as if the public sectorexclusively owns gainsharing. Actually,gainsharing and profit sharing bothoriginated in the private sector, andboth are found there today.2 A keydistinction between the two systems isin their scope, profit sharing’s beingbroad compared with the relatively nar-row scope of gainsharing. Profit sharingfocuses on a company’s bottom line,which may seem far removed from theefforts of a singlecontributing unit. A host of factors andaccounting maneu-vers can influencethe profit line on acompany’s incomestatement and mayseem distant andunintelligible tomost employees. Yetin profit-sharing sys-tems, the employees’bonuses are tied to that line. Employees’rewards rise and fall with companyfortunes, but executive decisions andoutside forces may have a greaterinfluence on company profits in a givenyear than the performance of rank-and-file workers. Sometimes workers havedifficulty seeing how their ideas andefforts relate to their bonus checks.

Gainsharing narrows the scope fromcompany profit and loss to a target thatappears more concrete and manageableto employees of an organization, depart-ment, or program. Gainsharing chal-lenges employees to reduce costs or ex-pand revenues in their corner of theoperation while maintaining or improv-ing the quality of products and services.They must achieve these results throughtheir ideas and energy, not through priceor fee increases. If they succeed, they

receive a share of the resulting gains.Good results by the gainsharing unitshould contribute favorably to the com-pany’s bottom line, but the gainsharingbonus of a given unit does not dependon bottom-line profit. It depends insteadon results more fully within the controlof the gainsharing unit.

Model gainsharing programs exhibitthree characteristics: (1) they focus onopportunities to reduce costs or increaserevenues, and this allows them to beself-funded; (2) they feature meaningfulemployee participation, not simply insubmitting suggestions but also incollaborating with other workers andmanagement in brainstorming anddecision making; and (3) employeesreceive bonuses based on group successin securing desired gains.3

Although many gainsharing programshave included all three characteristics,others have departed from the model,typically by incorporating less employee

participation andrelying instead onsuggestion programswith managementreview, or on em-ployee implementa-tion of managementstrategies for cost re-duction. Gainshar-ing experts advocateimplementation ofthe full model, mar-shalling the motivat-

ing power of employee participation incombination with the motivating powerof pay-for-performance.4

Consistency with CurrentManagement Thinking

Profit-sharing and gainsharing plansadhere to notions of employee motiva-tion long accepted in the private sector.5

Also, they coincide with current man-agement thinking about the importanceof encouraging employee initiative asorganizations strive for continuous pro-cess improvement. Advocates of TotalQuality Management and its variantsargue that no process or pattern of ser-vice delivery is ever perfect or even goodenough. Each deserves constant scrutiny,and employees should be encouraged tofind better tools, better processes, and

better options to meet the needs of cus-tomers and citizens.6 Gainsharing is amethod of providing this encouragement.

Furthermore, gainsharing is consistentwith the management concepts associa-ted with the reinvention movement,initiated by David Osborne and TedGaebler’s Reinventing Government anddeveloped further in subsequent books onthe topic.7 The reinvention philosophyemphasizes a focus not on effort, activ-ities, or promises but on results. Bymethods embodied in a “consequencesstrategy,” public officials are encouragedto raise the stakes for success and failure.They are encouraged not only to providereal incentives for achieving the desiredresults but also to raise the prospect ofnegative consequences for departmentsor programs that consistently fall short.Greater managerial flexibility as a rewardfor high achievers, the selection of ser-vice producers through managed com-petition, and gainsharing are among thefeatured tactics in the reinventor’sarsenal.

Greater managerial flexibility maytake the form of increased discretion inoperating methods and limited freedomfrom bureaucratic rules governing bud-get procedures, hiring practices, andpurchases. In some cases it even allowsthe carryover of budget savings fromone year to the next and puts a stop tothe year-end spending spree that a“spend-it-or-lose-it” budget rule oftenspurs. This flexibility comes to managersnot as a gift but as a trade. In exchangethey must promise results and deliver onthe promise. Departments or programsagree to be accountable and to providefull documentation of the results thatthey achieve. In return, those that demon-strate the ability to achieve and sustainfavorable results are freed from a few ofthe rules that many managers regard asbureaucratic straitjackets.

Examples of North Carolina localgovernments adopting various forms ofthe greater-flexibility-for-greater-account-ability exchange include Catawba Countyand Davidson County, as featured in theWinter 2005 issue of Popular Govern-ment.8 Since 1993, Catawba County hasextended greater management flexibilitywith budget and personnel (that is, theability to shift funds, adjust positions,and carry over a portion of unspent

Employees’ rewards rise and fallwith company fortunes, butexecutive decisions and outsideforces may have a greater in-fluence on company profits in agiven year than the performanceof rank-and-file workers.

s p r i n g / s u m m e r 2 0 0 6 33

funds from one year to the next) todepartments willing to commit to, andable to achieve, ambitious objectivesand high levels of service. More re-cently, Davidson County has followedCatawba County’s lead and begunrewarding volunteering departmentswith similar managerial flexibility inexchange for results.

Another tactic in the consequencesstrategy is managed competition, whichrequires government departments to viewith private, nonprofit, and other gov-ernment competitors for the privilege ofdelivering various government services.When a given service is subjected tomanaged competition, each competitor,including the government’s own depart-ment, submits its bid for the service, andeach bid is evaluated for service quantity,quality, and cost.9 Local governmentschoosing this tactic do so not because

they favor private-sector production ofservices but because they desire the bestservices at the best price, whether pro-duced by contractors or the government’sown employees. Employees in suchgovernments recognize the importanceof focusing on service quality, costs, andresults, and they understand the con-sequences of failing to do so.

Government departments and pro-grams that find themselves engaged in managed competition enjoy some advantages relative to their privatecompetitors but also confront some dis-advantages. Chief among the advan-tages are freedom from taxes, freedomfrom the necessity of making a profit,and favorable access to capital. Privatecompetitors must build taxes, profit,and higher capital costs into their bids.On the other hand, private competitorsare widely regarded to have the advan-

tages of greater managerial flexibility,greater willingness to innovate, greaterwillingness to invest in new technology,and greater freedom to offer incentivesthat engage the creative energy, enthu-siasm, and commitment of their em-ployees. These private-sector advantagesprompt public-sector managers, especiallythose engaged in managed competition,to appeal for a level playing field.

Gainsharing is perceived to be a ma-jor leveler of the playing field. It allowsgovernment units to give their workersa personal stake in their unit’s bottom-line success, an incentive akin to whatvendors competing with a governmentunit might give their employees.

Typically, funds for gainsharingbonuses in local governments are drawnfrom savings during a given year. If adepartment just recently won with thelow bid in a managed competition, thatbid can serve as the baseline. Lower-than-expected expenditures would con-stitute savings and create a gainsharingpool. If no actual bid competition isinvolved, a local government that offersits employees a gainsharing incentiveestablishes its baseline (that is, the ex-pected expenditure) through the budgetprocess. The gainsharing award is drawnfrom the difference between the pro-jected expenditure and the actual expen-diture. The distribution to employees mayinclude the entire amount, but moreoften it is a fixed proportion such as 50percent. If, for example, total annualsavings come to $100,000 and the gain-sharing plan calls for a distribution of50 percent, then $50,000 would be ap-portioned to employees, and the other$50,000 would be returned to the fundbalance (equity in the case of enterprisefunds). Typically, gainsharing payoutsare conditioned not only on savings butalso on the achievement of specified ob-jectives or the continuation of servicesat previous levels or greater. Work unitsthat fail to meet these standards forfeittheir gainsharing payments.

Controversy over Gainsharing

In some places, gainsharing plans arecontroversial. Opponents in some stateshave challenged their legality, arguingthat they deviate from authorized formsof payment to public employees.10 Even

34 p o p u l a r g o v e r n m e n t

where they are legal, as in NorthCarolina, gainsharing plans have stirrednegative as well as positive sentiment.Generally, detractors may be dividedinto two camps: those who opposegainsharing on philosophical groundsand those who oppose it for practicalreasons. Some detractors oppose gain-sharing out of anxiety over how it willlook to the public, though they usuallyexpress their opposition on philosophi-cal or practical grounds.

Philosophical opposition often centerson the belief that the wages being paidto local government managers, super-visors, and other employees alreadyoblige them to share their most creativeideas and contribute their most diligentefforts. In the view ofthese opponents, thelocal governmentshould not have topay a bonus to re-ceive from employeeswhat they were hiredto do. Of course, thesame could be said of private-sector em-ployees with regardto profit-sharingplans.

Gainsharing pro-ponents argue simplythat the incentive works and that thestimulus for new ideas and governmentsavings creates a win-win situation fortaxpayers and employees.

People opposing gainsharing for prac-tical reasons worry that resources in-tended for other purposes will be divertedto gainsharing payments and that theemphasis on cutting costs will interferewith efforts to sustain or even improveservice quality. They also are concernedthat undeserving employees will get afree ride on the coattails of others andreceive gainsharing bonuses even whentheir contribution has been minimal.

In response, proponents point outthat gainsharing bonuses do not comefrom budgeted funds; they come fromsavings. If there are no savings, there areno payments. If there are savings and ifthe payments are tied to a predeterminedpercentage less than 100 percent, thenthe ability of the local government toprovide resources to priority programsis increased, not reduced.

Concern that service quality mightsuffer as workers cut expenditures—andcorners—in hopes of creating a substan-tial gainsharing pool is countered byarguments that mechanisms can be putin place to hold any such tendencies incheck. Chief among these mechanismsis an accountability system that ensuresachievement of key objectives and main-tenance of quality-of-service standards.

Gainsharing plans address the prob-lem of free riders in various ways. Somedisqualify employees who have unsatis-factory individual performance reports.Others tie awards to a combination ofgroup and individual performance fac-tors. An employee serving on a success-ful team receives a gainsharing bonus,

but an employeewith a mediocre in-dividual perform-ance rating receives asmaller bonus thanone making astronger contribu-tion to the team’ssuccess. Still otherlocal governments,though, base theaward entirely ongroup achievement,insisting that thegains from develop-

ing team spirit and cooperation morethan offset an occasional free-riderproblem.

Bid to Goal

Although managed competition bringsthe advantage of competitive prices forlocal services, it also carries risks. En-gaging in managed competition can bethreatening to local government em-ployees and can jeopardize morale. Whenan outside contractor wins the bid, thedisplacement of employees must be han-dled with sensitivity and care to avoidlong-term damage to the government’semployee relations. Follow-through alsois important. Contract managementmust be aggressive and thorough toensure that contract promises are kept.

Local governments wishing to enjoymany of the benefits of managed com-petition without incurring the potentialdisruption and risks associated with ithave begun to experiment with a pro-

cess called “bid to goal.” Coupled withgainsharing, this process can provide apowerful incentive for innovation andcost-effective service delivery.

The bid-to-goal process begins withthe hiring of a consultant who is an ex-pert in a given local government func-tion. The consultant prepares a costestimate for performing that function inthe client’s jurisdiction, based on his orher familiarity with companies that pro-vide this service. In essence, this estimateis the consultant’s prediction of a com-petitive contractor’s bid, if bids werebeing sought.

Once the consultant’s figure has beenreceived and the government is satisfiedas to its reasonableness, the departmentresponsible for producing the service isinvited to match or even beat the bid. Ifthe department cannot do so, the localgovernment is likely to seek outside bids.On the other hand, if the departmentstreamlines its operations and beats theconsultant’s estimate, the departmentretains responsibility for producing theservice. The department’s bid becomesits budget, and if gainsharing is author-ized, employees are encouraged to findadditional savings with the promise ofbonuses if expenditures come in belowthe budget. In fact, department mana-gers facing the prospect of privatizationoften consider gainsharing to be an es-sential device in designing and deliver-ing a competitive operation.11

Examples of Gainsharing across the Nation

Many local governments across thecountry have ventured successfully intogainsharing. For instance, in the late1990s, a gainsharing plan for the waste-water treatment operation serving theSeattle area produced savings of $2.5million over a four-year period, withouta decline in effluent quality.12 Underprovisions of the plan, employees re-ceived half of the savings.

In 1997, using a bid-to-goal approach,San Diego’s metropolitan wastewaterdepartment persuaded the union toagree to a set of operating revisions thatpromised to reduce cost by $78 millionover a six-year period while achievingcompliance with environmental stan-dards. A gainsharing plan, distributing

Philosophical opposition often centers on the belief that the wages being paid to local gov-ernment managers, supervisors, and other employees already oblige them to share their mostcreative ideas and contributetheir most diligent efforts.

s p r i n g / s u m m e r 2 0 0 6 35

50 percent of any savings beyond thetarget, to a maximum of $4,500 per em-ployee annually, provided an additionalincentive. By the sixth year, cumulativesavings had surpassed $109 million,and employees had enjoyed gainsharingchecks every year, ranging from a low of$1,500 to the $4,500 maximum.13

In 1997 a consultant hired by EastLansing, Michigan, concluded that thecity’s wastewater treatment facility couldreduce costs by 20 percent if it elimi-nated eight positions and adopted bestpractices.14 The department and its em-ployees devised a plan to achieve thesesavings over a six-year period, relyingon attrition rather than layoffs and in-troducing a gainsharing plan calling forthe distribution of 25 percent of savingsto employees. The targeted reduction wasreached in just two years rather than six.

The managed-competition efforts ofIndianapolis under Mayor StephenGoldsmith earned national acclaim. Un-derlying Indianapolis’s efforts was againsharing program that helped reverseunion opposition and produced em-ployee bonus checks as high as $1,750 a year. Osborne and Hutchinson report,“[U]nion officials were quietly approach-ing managers and suggesting functionsthat could be outsourced, to reducecosts. Since their members could nowshare in the savings, their interests werealigned with the mayor’s.”15

Other cost savings and program in-novations have been credited to gain-sharing programs in Baltimore County,Maryland, and College Station, Texas.16

Gainsharing in North CarolinaLocal Governments

At least four North Carolina local gov-ernments have introduced gainsharingplans: Charlotte, High Point, Pitt Coun-ty, and Zebulon. Of this group, onlyZebulon has chosen to discontinue theincentive.

CharlotteCharlotte features two varieties ofgainsharing. First, some departments,called “business units” in Charlotte,compete with the private sector in man-aged competition. When they win thebid, they can enjoy the benefits of gain-sharing if they can find ways to spendeven less than their bid amount. Em-ployees share 50 percent of the additionalsavings, provided that performanceobjectives are met.

For example, in the mid-1990s, Charlotte-Mecklenburg Utility em-ployees won the managed competitionfor the opportunity to operate a watertreatment facility and a wastewatertreatment facility. Gainsharing bonuseswere conditioned not only on achievingadditional savings but also on complying

fully with all environmental standardsand suffering no lost-time accidents.17

In managed competition the operatingstrategies of the public sector are sub-jected to the test of competition, and therisks to public-sector employees aresignificant. When municipal employeeswin the competition and subsequentlyfind ways to reduce costs further, thegainsharing rewards—at 50 percent ofadditional savings in Charlotte—can besubstantial.

When program officials in Charlottecome up with ideas for improvingoperations, sometimes gleaned from thelessons of competition, and proceed toimplement these ideas without actuallyfacing managed competition, the processis called “optimization.” These optimi-zation projects also can qualify forgainsharing bonuses, but because theideas have not stood the test of actualmanaged competition, the gainsharingpool is established at a lesser rate, 33 percent of savings. Nevertheless, the savings and gainsharing payoutsfrom these optimization projects can be substantial. (For gainsharing savingsand payouts arising from managedcompetition and optimization projectsin recent years, see Table 1.)

The second version of gainsharing inCharlotte has an even greater scale.18

Each year the city manager sets a savingsgoal for the general fund. If the goal ismet or surpassed, 50 percent of thesavings becomes available in the gain-sharing pool. Only half of this pool isdistributed to all employees automatic-ally. The distribution of the other halfdepends on whether or not a givenemployee’s business unit meets its keyobjectives for the year. These objectivesare called “incentive targets” andtypically are tied to customer service,efficiency, quality, time standards, andsafety. If the business unit meets fourout of five incentive targets, employeesreceive an 80 percent share of this secondcomponent of the gainsharing pool. Em-ployees in units meeting all their targetsare eligible for a full share of bothcomponents—generally $300–$650.19

High PointIn 1999, High Point embraced gain-sharing as part of its bid-to-goal initia-tive in the public services department.20

Table 1. Charlotte’s Gainsharing Program

Gainsharing Individual Fiscal Year Savings Distribution Gainsharing Awards

Managed-Competition Projects

2000 $ 35,000 $ 17,359 $1,073–$1,690

2001 195,000 97,406 $282–$3,797

2002 387,000 193,253 $157–$1,113

2003 325,000 162,709 $322–$4,055

2004 5,000 2,551 $386–$1,380

2005 12,000 5,993 $205–$449

Optimization Projects (Cost Savings without Managed Competition)

2000 $ 469,000 $154,770 $124–$3,822

2001 1,339,000 441,901 $28–$3,501

2002 2,170,000 715,267 $84–$6,497

2003 1,670,000 551,998 $177–$3,334

2004 2,000,000 660,283 $32–$5,610

2005 3,650,000 119,046 $205–$3,812

Source: Information provided by Kim Eagle, Eval. Manager, Budget & Eval. Dep’t, City of Charlotte.

36 p o p u l a r g o v e r n m e n t

The department submitted a bid foroperation of the wastewater treatmentplant that shaved 30 percent from itsprevious operating expenses and metthe consultant’s bid-to-goal target. A three-year contract then was signed,specifying performance and safety stan-dards and authorizing gainsharing inthe form of quarterly bonuses for costsavings beyond the department’s bid.Half of any additional savings would beretained to increase fund equity. Theother half would be distributed to em-ployees as gainsharing bonuses.

High Point’s bid-to-goal system hassince been expanded from the waste-water treatment plant to other opera-tions. Contracts based on the bid-to-goal methodology now are in place forother divisions of the public servicesdepartment, including the water filtra-tion plant, central lab services, the in-dustrial pretreatment program, andmaintenance services. (For savings andgainsharing distributions at the WestsideTreatment Plant, see Table 2.)

Pitt CountyThe employee incentive programadopted by Pitt County in 2001 invitedemployee suggestions that would “savemoney [or] increase revenues without

reducing services or increasing taxes orfees” and good ideas that wouldimprove services or provide intangiblebenefits.21 The awards have differedacross these twocategories. Em-ployees whosesuggestions providebenefits but produceno savings or ad-ditional revenuesearn $250 and acertificate of ap-preciation. Awardsin this category arelimited to twenty-five per fiscal year.Employees whosesuggestions producesavings or additionalrevenue receive 10 percent of the first year’s savings, upto $10,000 per suggestion. (If a groupof employees makes the suggestion, theaward is shared equally among thegroup members.) These awards are notrestricted in number because the savingscreate their own gainsharing pool.

Employees submit their suggestionsto their immediate supervisors. Thesupervisors forward the suggestions toPitt County’s monetary awards review

committee, which considers whether agiven suggestion does one or more ofthe following:

• Identifies and reduces safetyhazards

• Saves money or increases revenues

• Increases productivity or efficiency

• Improves conditions

• Improves services to the public

• Conserves resources

• Increases employee morale

Once approved, a suggestion isimplemented and monitored for twelvemonths to confirm its value. If a teamsubmits a suggestion, all team membersmust be identified at the time of thesuggestion, and the monetary award isdivided equally among them. (Forsavings and gainsharing distributions inrecent years, see Table 3.)

Pitt County’s approach to its largermonetary rewards requires monitoringand documentation of success. Throughthis single program, Pitt County hassimultaneously encouraged employeesuggestions, performance measurement,

and program eval-uation.

ZebulonGainsharing inZebulon was initi-ated in 1992, whentown officials soughtan alternative to amerit-pay systemthat seemed drivenless by merit con-siderations than bythe need for cost-of-living adjust-ments.22 Gain-sharing was intro-

duced in hopes of encouraging and re-warding greater efficiency and excellentemployee performance.

Zebulon’s gainsharing pool wasmodest relative to others described inthis article. Only 5 percent of any end-of-the-year savings went into the pool.The other 95 percent went to the fundbalance.

Two factors determined employees’eligibility for gainsharing bonuses. One

Table 3. Gainsharing in Pitt County’s Employee Suggestion Program

IndividualGainsharing Gainsharing

Fiscal Year Savings Distribution Awards

2001–2002 $95,678 $2,004 $250–$1,504

2002–2003 5,957 753 $250–$253

2003–2004 6,933 943 $154–$279

2004–2005 25,900 2,590 $2,590

Source: Information provided by Michael Taylor, Chief Info. Officer, Mgmt. Info. Sys., Pitt County.

Table 2. Gainsharing at High Point’s Westside Treatment Plant

Bid-to-Goal IndividualPrescribed Actual Gainsharing Gainsharing

Fiscal Year Savings Savings Distribution Awards

1999–2000 $290,000 $336,142 $17,496 $1,458

2000–2001 290,000 303,229 5,568 464

2001–2002 290,000 255,960 0 0

2002–2003 290,000 362,874 1,164 97

2003–2004 355,744 514,556 6,768 564

Source: Information provided by Chip Vanderzee, Pub. Serv. Analyst, Pub. Serv. Dep’t, City of High Point.

Gainsharing has been shown to produce favorable results in localgovernments that are willing toestablish a substantial gainsharingpool and are prepared to monitorthe pool’s distribution rigorously.Gainsharing programs that areself-funded by savings in localgovernment operations offer theopportunity for a win-win result.

s p r i n g / s u m m e r 2 0 0 6 37

was performance on annual organiza-tional goals set by the town council andthe town manager, although exceptionswere granted even when targets werenot met. The other was satisfactory per-formance on individual employee per-formance appraisals, judged to be aperformance rating of 2.95 or higher ona 5-point scale.

The town council eliminated thegainsharing initiative in Zebulon in2000, following the recommendation of a new town manager to replace gain-sharing with an annual contribution of5 percent to 401(k)’s for all employees.23

The gainsharing program was thoughtto have little employee support, and itwas only loosely anchored in a set of or-ganizational goals produced with little,if any, employee participation and littleemployee buy-in. With the establishmentof 401(k) contributions from the city,the passing of the gainsharing programstirred little sentiment.

The rise and fall of gainsharing inZebulon should not be regarded asespecially unusual. Some private-sectormanagement experts note that fewerthan half of all gainsharing planssurvive beyond five years and manyappear to begin losing effectiveness aftertwo or three years.24 Some, however,exhibit much longer staying power.

Conclusion

Gainsharing has been shown to producefavorable results in local governmentsthat are willing to establish a substantialgainsharing pool and are prepared tomonitor the pool’s distribution rig-orously. Gainsharing programs that areself-funded by savings in local govern-ment operations offer the opportunityfor a win-win result. That is, they pro-duce bonuses for employees while ex-panding, rather than drawing down, local government resources.

Notes

1. Mark Michaels, The New Game ofMotivation, 101 AMERICAN CITY & COUNTY

36 (1986); Katherine C. Naff & RaymondPomerleau, Productivity Gainsharing: AFederal Sector Case Study, 17 PUBLIC PER-

SONNEL MANAGEMENT 403 (1988); U.S. GEN-ERAL ACCOUNTING OFFICE, GAINSHARING:DOD EFFORTS HIGHLIGHT AN EFFECTIVE TOOL

FOR ENHANCING FEDERAL PRODUCTIVITY

(Washington, D.C.: USGAO, Sept. 1986),available at http://161.203.16.4/d4t4/131110.pdf; Scott Wilson, Counties TryProductivity Bonuses, WASHINGTON POST,Mar. 26, 1998, at M1.

2. Most management authorities tracegainsharing to the 1930s, the steel industry,and the introduction of the gainsharingScanlon Plan, named for union official andsubsequent Massachusetts Institute ofTechnology lecturer Joseph Scanlon. A fewtrace it back farther, to 1896, when HenryTowne coined the term “gainsharing.” SeeSusan Hanlon et al., Consequences of Gain-sharing: A Field Experiment Revisited, 19GROUP & ORGANIZATION MANAGEMENT 87(1994); KENNETH MERICLE & DONG-ONE

KIM, GAINSHARING AND GOALSHARING (West-port, Conn.: Praeger, 2004); J. L. Zalusky,Labor’s Collective Bargaining Experiencewith Gainsharing and Profit Sharing, in PRO-CEEDINGS OF THE 39TH INDUSTRIAL RELATIONS

RESEARCH ASSOCIATION ANNUAL MEETING

(Madison, Wisc.: IRRA, 1986). 3. Robert Masternak, GAINSHARING:

A TEAM-BASED APPROACH TO DRIVING

ORGANIZATIONAL CHANGE (Scottsdale, Ariz.:World at Work, 2003); Richard S. Saver,Squandering the Gain: Gainsharing and theContinuing Dilemma of Physician FinancialIncentives, 98 NORTHWESTERN UNIVERSITY

LAW REVIEW 145 (2003); CARL G. THOR,GAINSHARING: CREATING AND SHARING SUCCESS

(Menlo Park, Cal.: Crisp Publ’ns, 1999).4. Brian E. Graham-Moore & Timothy L.

Ross, Understanding Gainsharing, in GAINSHARING: PLANS FOR IMPROVING PERFOR-MANCE 3 (Graham-Moore & Ross eds., Wash-ington, D.C.: Bureau of National Affairs,1990); Saver, Squandering the Gain, at 149.

5. Corporations have regarded incentiveplans as the positive side of a rewards-penalties coin. On the negative side of thecoin are terminations for poor individualperformance and broader layoffs for poorcompany performance. Although variouslimitations apply, governments have thesenegative options too, but typically have beenless inclined and slower to exercise them.

6. STEVEN COHEN & RONALD BRAND,TOTAL QUALITY MANAGEMENT IN GOVERN-MENT (San Francisco: Jossey-Bass, 1993);STEVEN COHEN & WILLIAM EIMICKE, TOOLS

FOR INNOVATORS: CREATIVE STRATEGIES FOR

MANAGING PUBLIC SECTOR ORGANIZATIONS

(San Francisco: Jossey-Bass, 1998).7. DAVID OSBORNE & TED GAEBLER,

REINVENTING GOVERNMENT: HOW THE

ENTREPRENEURIAL SPIRIT IS TRANSFORMING

THE PUBLIC SECTOR (Reading, Mass.: Addison-Wesley, 1992); DAVID OSBORNE & PETER

PLASTRIK, BANISHING BUREAUCRACY: THE FIVE

STRATEGIES FOR REINVENTING GOVERNMENT

(Reading, Mass.: Addison-Wesley, 1997);DAVID OSBORNE & PETER PLASTRIK, THE RE-INVENTOR’S FIELDBOOK: TOOLS FOR TRANS-FORMING YOUR GOVERNMENT (San Francisco:Jossey-Bass, 2000); DAVID OSBORNE & PETER

HUTCHINSON, THE PRICE OF GOVERNMENT:GETTING THE RESULTS WE NEED IN AN AGE OF

PERMANENT FISCAL CRISIS (New York: BasicBooks, 2004).

8. William C. Rivenbark & David N.Ammons, Rewarding Greater Accountabilitywith Increased Managerial Flexibility inDavidson County, POPULAR GOVERNMENT,Winter 2005, at 12.

9. Pamela A. Syfert & David Cooke,Privatization and Competition in Charlotte,POPULAR GOVERNMENT, Winter 1997, at 12.

10. JOHN M. GREINER ET AL., PRODUCTIVITY

AND MOTIVATION: A REVIEW OF STATE AND

LOCAL GOVERNMENT INITIATIVES (Washing-ton, D.C.: Urban Inst. Press, 1981).

11. Barry M. Gullet & Douglas O. Bean,The Charlotte Model for Competition: A Case Study, POPULAR GOVERNMENT,Winter 1997, at 19.

12. OSBORNE & HUTCHINSON, THE PRICE

OF GOVERNMENT.13. Id.14. Id.15. Id. at 328.16. See James Fox & Bruce Lawson, Gain-

sharing Program Lifts Baltimore Employees’Morale, 112 AMERICAN CITY & COUNTY 93(1997), and the following websites:www.cstx.gov and www.co.ba.md.us.

17. Gullet & Bean, The Charlotte Model.18. Information on Charlotte’s citywide

gainsharing program is based on a telephoneinterview with Ann White, budget manager(Feb. 25, 2004).

19. OSBORNE & HUTCHINSON, THE PRICE

OF GOVERNMENT.20. Public Services Dep’t, City of High

Point, Bid-to-Goal Proposals (May 2000).21. Pitt County, Pitt County Employee

Incentive Program Policy (Nov. 2001).22. Kevin R. Patton & Dennis M. Daley,

Gainsharing in Zebulon: What Do WorkersWant? 27 PUBLIC PERSONNEL MANAGEMENT

117 (1998).23. E-mail Correspondence with Rick

Hardin, Town Manager, Town of Zebulon(Feb. 18, 2004).

24. Jeffrey B. Arthur & Lynda Aiman-Smith, Gainsharing and OrganizationalLearning: An Analysis of Employee Sug-gestions over Time, 44 ACADEMY OF

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