It’s not every day that a Baltimore mayor visits the city’s fleet garage—in fact, it’s practically unheard of. So when Mayor Catherine Pugh showed up on February 15, 2019, along with a gaggle of other downtown dignitaries, the wrench turners (that’s shop-speak for automotive technician) were anxious. Their anxiety turned to delight when she presented an oversized check in the amount of $444,750.67 made out to “Department of General Services Fleet Team Members.” Each of the 250 fleet employees, including technicians, supervisors, clerical staff, and data analysts, would see an extra $1,750 in their next paycheck. It was the first dividend from an unusual experiment called gainsharing.

That February day was emotional. “Guys were shellshocked,” remembers Brian Jones, who was a supervisor in the fire department shop and is now maintenance supervisor at large. When fleet staff had been told some six months before that they would share in cost savings they produced, provided they met key performance metrics focusing on fleet availability standards, many were skeptical, even hostile. They did not trust the higher-ups, pointing to years of broken promises. “I thought it was a joke and they were trying to trick us into working harder,” says Domenic DeMarco, a lead mechanic in the truck shop. “That first check changed my mind. I was surprised.”

For Vetran Johnson, a welder, $1,750 meant buying four tires all at once for the first time. Others used the money to pay bills, take a vacation, or go shopping. The gainsharing payment did something else, too: It began to change the culture of the fleet division. At a time when “government efficiency” has become a focal point, the story of how Baltimore’s gainsharing plan came to be, and how it transformed the fleet division, is both inspiring and instructive.

Inspired by Indy

Historians trace the origins of gainsharing all the way back to the late nineteenth century, but the practice was popularized in the 1940s by Joe Scanlon. Scanlon was an accountant-turned-open-hearth-tender whose waste-cutting initiatives at Empire Steel eventually landed him a staff job in the industrial engineering department of the Congress of Industrial Organizations (CIO), where he organized labor-management production committees at some 50 companies.

What came to be known as the “Scanlon Plan” was first tried at The Adamson Company, a maker of steel storage tanks. There, savings from reducing the ratio of labor costs to sales were split 50-50 between salaried management employees and hourly workers. Scanlon later joined the faculty at MIT, where he became a sought-after labor relations consultant and helped install gainsharing programs in dozens of firms.

The person credited with bringing gainsharing to local government is Steve Goldsmith, who was elected mayor of Indianapolis in 1991 on a platform that included privatizing city services. He quickly learned that it is competition, not privatization, that improves service. Goldsmith’s “managed competition” strategy put city services out for bid, inviting proposals from both incumbent city workers and private vendors. To Goldsmith’s pleasure, the city’s labor unions proved to be incredibly innovative and resourceful, winning over half of the contracts. In the case of the fleet services contract, the Indianapolis Fleet Services union’s proposal offered to forego four years of previously negotiated pay raises in exchange for a split of savings generated beyond those guaranteed in the proposal. In addition to the workers earning extra pay, the results included large reductions in lost time due to injury, parts shrinkage, and employee grievances. Fleet services even attracted new public sector customers, including local townships.

Gainsharing became a hallmark of Indianapolis’s cost savings and reform efforts, inspiring a boomlet of city and county gainsharing programs around the country. While some of these are best described as glorified employee suggestion programs, they represented a shift toward greater employee engagement in making government work better and cost less. Sadly, these initiatives faded as politicians backed away from giving “bonuses” during tough economic times.

A quarter century after Steve Goldsmith’s bold experiment, Baltimore included an Indianapolis-style gainsharing program as part of its first-ever 10-year financial plan and hired Skip Stitt, one of Goldsmith’s former lieutenants, as a consultant to help bring gainsharing to life.

From Idea to Implementation

The gainsharing notion was born in Baltimore’s budget office, which assigned a team of Duke University graduate students to research gainsharing best practices, including financial and performance measurement and legal issues. The Duke report was handed off to Berke Attila, then the CFO of the department of general services (DGS), which oversees the fleet division. Attila, who is now the director of DGS, was hired into city government as a budget analyst, in part because of his enthusiasm and in part because of his private sector experience shaving pennies off the cost of custom countertops.

Making gainsharing work requires the art of persuasion and negotiation as well as the science of financial modeling. Even with his gregarious personality and data-driven mind, Attila would be challenged on both fronts.

Baltimore’s fleet employees are represented by three different unions, one each for front-line technicians and laborers, administrative and supervisory employees, and managers. At the first meeting to discuss gainsharing, union leaders were disbelieving. They asked question after question, searching for the “gotcha.”

From a technical standpoint, gainsharing is predicated on three things: a measure of cost, a standard of performance, and a formula for sharing savings. The basic bargain of gainsharing would be that savings below a defined cost baseline would be split between the city and employees, provided that the agreed-upon performance standards are met. Agreeing on these details took a series of meetings between city and union officials. According to Stitt, the unions were very perceptive about the cost and performance baselines. They were concerned about how the baselines would account for factors outside of their members’ control, such as vehicle abuse, planned fleet electrification, and employee vacancies.

For the cost baseline, the two sides landed on a four-year moving average of total salaries (including overtime), contractual costs, and supplies, adjusted for inflation. A portion of funded vacancies was excluded from the baseline to allow for required staffing up while also encouraging “rightsizing.” Vehicle abuse costs were also taken out, because fleet employees have no control over customer agency abuse. Each month, actual expenses would be compared to the baseline, with any surplus becoming part of the gainsharing pool.

The primary performance standard was fleet availability because it is what mattered most to fleet customers. Availability is measured on a daily basis. For essential vehicles, such as fire trucks, ambulances, police cars, and trash packers, a pre-set number must be available. For the rest of the fleet, the target is 87.5% of all vehicles. Under the gainsharing agreement, which is enshrined in a side letter to the labor contracts, fleet can miss up to three days in a month of meeting the availability standards before losing gainshare. A fourth missed day reduces the share of the pool to 75% and any more misses mean zero share.

The gainsharing formula works like this: the first $190,000 of savings over the six-month gainsharing period goes to fleet employees. Any savings in excess of that amount is divided equally among employees, a DGS training account, and the city’s general fund. The employee share is allocated in equal amounts to all fleet employees, regardless of rank, seniority, or salary.

As the negotiations progressed to more complex policy decisions, which involved vehicle abuse, parts inventory management, fuel operations, internal chargebacks for the city’s shared services (e.g., facilities, IT), and disposition of surplus vehicles, both the unions and fleet management proved hard to move. Stitt, who had a long track record of gainsharing experience, was “the adult in the room,” according to Attila. He connected the Baltimore team with their Indianapolis union counterparts, played cheerleader, and spent time observing fleet operations and suggesting “low hanging fruit” savings opportunities. He ultimately convinced the group to stop studying gainsharing to death and get started, assuring them that they could make adjustments later on.

Where the Rubber Meets the Road

Jones, the maintenance supervisor at large, has been a mechanic pretty much his whole life. Upon joining Baltimore’s fleet operation, he found the culture to be much more relaxed than what he was used to. “Guys didn’t have to be conscious of costs, and there wasn’t much oversight,” he recalls. “They would slow roll jobs, taking 4-5 hours for a repair that should only take two.” Jones wasn’t sure his crew was up for the challenge of gainsharing. The biggest savings would come from doing more of certain types of jobs in-house, where fleet had a cost advantage, instead of sending them to outside vendors. To capture those savings, the technicians would need to be more efficient, complete more jobs, stay focused on their tasks, and hustle from job to job.

A key measure of productivity in the garage is direct time, which is time that can be billed to customers. According to Jones, before gainsharing, direct time ran about 40% of total time logged. It would double to over 80% after the incentive was introduced. This didn’t happen overnight, but the statistical rundown of the first six months of gainsharing is eye opening. A memo from DGS to Mayor Pugh spells out that, compared to the same period the previous year, fleet technicians completed 25 more work orders a month with internal staff, worked more than 3,000 additional direct labor hours, took 10% less leave time, and reduced the parts inventory without disrupting speed of service.

Initially, management imposed stricter rules for sending repair jobs to vendors. Technicians used to be able to send work out; now it required approval from higher-ups. As Jones puts it, “We were no longer an open checkbook for vendors.” Some of the slack in the system was being taken up by way of policy change; after the first gainsharing check, culture took up the rest.

Talking to technicians, there is no doubt that the first gainsharing check flipped a switch. With the promise of extra pay now very real, Terrence Washington, a supervisor in the truck shop, saw a shift. “Where before some guys would use any excuse to take a break and sit on a job, now they were moving faster, going to a supervisor when there was a problem, and even asking for more work.” Video monitors installed in the garage allowed technicians to see in real time where they stood on meeting daily availability targets. Making data visible to everyone in this way was an additional nudge for productivity. Peer pressure was another motivator. When welder Vetran Johnson sees fellow technicians wasting time, he yells at them, “Don’t play with my money!”

Little Things Mean a Lot

Beyond insourcing, fleet employees found literally dozens of other ways to save money for the gainsharing pool and keep vehicles available. Antwan Wilson, who was the bike mechanic in his neighborhood as a kid, is now Lead Maintenance Supervisor for the entire fleet operation. When gainsharing was announced, his message to wary technicians was, “We might as well try it. Let’s see if it works.”

From Wilson’s vantage point, generating savings was easy. “After the first check, everyone went out of their way to be resourceful. I didn’t have to say much. Guys were raising their hands for work, coming in on Saturday to keep trash trucks ready to go, and making sure they charged their time properly so we weren’t giving away work.”

DeMarco, who is a hard man to impress, admits that the first check changed his mind about gainsharing. He tells of ordering fewer new parts and instead reusing old ones – rethreading bolts or picking over surplus vehicles. When a part needed to be ordered, technicians asked about the cost of overnight shipping, because availability numbers and savings are on the line.

Waste has become the enemy. Rags and gloves are now used more than once, half-empty cans of fluid are no longer thrown out, and technicians take only the parts they need from the supply room, so that extra bolts don’t get swept up. Johnson, the welder, explains that in his shop, he and his co-workers have become more conscientious about turning off machines when they’re not in use, conserving water, and reusing scrap metal. “Our motto is ‘Waste nothing,’” he says proudly. All this parsimony has made a difference in the bottom line. Quarterly materials costs are down from $70,000 to $19,000.

Something that gets lost in the romantic stories from the shop floor is the role data has played in making gainsharing successful. Fleet uses software called FASTER to keep track of every minute, every part, every cost. These data had long been underutilized; today, operations research analysts like James Trimarco help fleet managers find new ways to cut costs. “For awhile, we had a gainsharing work group to find savings ideas,” he explains. “People would shout out ideas, and I would try to figure out if they would work.” One idea that worked came from the observation that dirty vehicles are more expensive to maintain than clean ones. Fleet moved quickly from thought to action, starting a mobile cleaning service that makes daily rounds to vehicle lots around the city. For his next project, he wants to develop an “apples to apples” cost comparison between vendor and in-house work, so that Fleet can make better sourcing decisions for each type of repair.

The Human Side of Gainsharing

“What would make for a great day at work?” That question comes from Stitt, who has some answers: “Dignity, respect, feeling like you’re recognized as a human being.” For Jones, the rewards of gainsharing have been more than financial. “Fleet often feels like it gets shunted to the background. It felt good that other agencies were coming to visit us to see what we were doing.”

The appreciation for gainsharing was not just local. In 2019, gainsharing earned Baltimore the National Association of Counties’ prestigious “Best in Category” award for financial management. The award citation read, in part, “This program not only saves money for the government and makes money for its employees, but the allowance for more employee input improved work efficiency, morale, and innovation.”

We have seen how gainsharing changed work habits and sparked new efficiency ideas, but did it make Fleet employees happier? Yes, it seems, though how much happier is a matter of perspective. Renee Johnson, who runs FASTER reports, saw morale shoot through the roof. “The mood on the floor shifted,” she recalls, and the data reflected the mood: there were fewer callouts.

Along with improved morale, gainsharing inspired a greater sense of teamwork. Johnson says the relationship between the technicians and managers became more collaborative, instead of the “us versus them” mentality that had prevailed before. In Jones’s words, “we were all of a sudden on the same page with management.” Monthly gainsharing meetings between union and city leaders were held to review cost and availability data and discuss how leadership could support the employees. Wilson believes that including floor staff in the meetings helped with buy-in. “The technicians could see that their peers were at the table, which is a big deal.”

The Future of Gainsharing

In August 2021, DGS paused the gainsharing program. Because of the pandemic, technician staffing had dropped to 90, some 30% below the authorized level. As a result, more work had to be sent to vendors and, in the words of a memo from the fleet chief to the city’s labor commissioner, “Fleet cannot successfully pursue cost avoidances while continuing to meet its availability targets.”

Baltimore’s current mayor, Brandon Scott, would not only like to see gainsharing revived for fleet, he would like to try it with other city operations. If that is done successfully, gainsharing could evolve from a bold but brief experiment in one city’s fleet division to a shining example of government efficiency for others to follow.

ANDREW KLEINE is a former budget director for Baltimore, Maryland, USA, and author of City on the Line: How Baltimore Transformed Its Budget to Beat the Great Recession and Deliver Outcomes.