IMPROVING THE EFFECTIVENESS OF GAINSHARING - THE ROLE OF FAIRNESS AND PARTICIPATION

This paper investigates gainsharing plans and identifies problems that may limit potential gains in productivity. It explains how contemporary gainsharing plans constitute social dilemmas and provide an opportunity for "free-riding" and thus lower productivity. It also presents theoretical and experimental findings that suggest hypotheses regarding the impact on productivity of a fairer distribution rule and worker participation in the development of such a rule. The paper then describes two experiments designed to test these hypotheses. The experimental data reported in this study indicate that fair distribution rules that are participatively developed can ameliorate the social dilemma inherent in gainsharing plans. The paper offers prescriptions for improving gainsharing plans and discusses other implications of our findings.