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WORKBOOK — THE LUMINOUS GAINSHARE EMPLOYEE

Chapter VII.07 · Indigenous Economic Wisdom, Sourced

For the person working inside a gainshare arrangement — where a defined share of verified improvement returns to the people who created it. This chapter is about the oldest and largest gainshare arrangements on earth, and reading them from the inside will tell you more about your own than any scheme document will.

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WHY THIS CHAPTER IS YOURS

A gainshare is a written promise with four parts. If any one is missing, it is not a gainshare — it is a discretionary bonus wearing the word.

1. A baseline. What was true before. Agreed, signed, dated.
2. A measure. How improvement is computed, precisely enough that two people get the same answer.
3. A share. The percentage that returns to the people, stated as a number.
4. A period and a verifier. When it is computed, and by whom.

Now look at what this chapter contains. United States v. Washington is a share — 50 percent of the harvestable surplus — with a verifier and a period, fixed in 1974. The savanna fire abatement method is a baseline: a rolling 10-year pre-project emissions figure, written into law, against which improvement is measured and paid. The Ngāi Tahu settlement is a corpus with a distribution policy. Coast Funds is an endowment with a draw rate.

These are gainshare instruments. They are two hundred years older than yours, they have been litigated to the Supreme Court, and every failure mode you will ever meet has already happened to one of them and been written down. That is why this chapter is the most useful one in the volume for you.

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PART ONE — DISCOVERY

Read the oldest schemes in the world

Exercise 1.1 — Map your scheme onto theirs (2 hours)

Take your scheme document and fill this in.

Where your column has a question mark, you have found the part of your scheme that has not been written yet. A missing part is not a flaw in the scheme. It is the next thing to ask for, and it is much easier to ask for a definition than to ask for money.

Exercise 1.2 — The share-is-not-a-fish test (45 minutes)

The single most important lesson here, and it applies directly to your pay.

   your gain  =  your share  ×  the measured improvement

The treaty tribes won the first term decisively: from under 5 percent to 50 percent, a 10.0× multiple. The second term has been falling for fifty years, because the party that controls the habitat was not put under an obligation at the same time.

So ask, in writing: who controls the thing my share is a share of, and what obligation are they under? If your gainshare is measured on output and somebody else controls the input quality, the tooling, the headcount or the schedule, your percentage is an index on an asset you do not manage.

Write the sentence out. It is the most valuable question in this workbook.

Exercise 1.3 — Find your counting institution (45 minutes)

Every durable arrangement in this chapter has one, owned by the beneficiaries: the Northwest Indian Fisheries Commission's laboratories, the North Slope Borough's wildlife department, Warddeken's fire-scar mapping, Menominee Tribal Enterprises' own forest inventory.

Now answer: who computes your gainshare number? If the answer is "finance, and I see the result," you are a stakeholder in your own compensation. Ask for the workings, once, politely, in writing. The response tells you what kind of scheme you are in, and it costs you nothing to find out.

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PART TWO — THE ARITHMETIC

The numbers you are entitled to check

Exercise 2.1 — Compute your own break-even (60 minutes)

Run the chapter's counterfactual on yourself. Let s₀ be your share before the current scheme and s₁ your share now, and M the measured improvement.

   break-even  =  s₀ / s₁

If your share went from 2 percent to 8 percent, the improvement pool would have to fall to one quarter of its old size before you were worse off. If it went from 6 percent to 8 percent, it only has to fall to three quarters. The size of the win in the share term tells you how much room you have in the pool term, and most people have never computed either.

Exercise 2.2 — The ratchet, and the price you did not capture (45 minutes)

The West Arnhem case is the clearest warning in the chapter for anyone paid on a contracted rate. 100,000 tonnes a year for 17 years at about A$1 million a year is A$10.00 a tonne; the same tonne has since traded near A$35, a 3.5× uplift the producers did not capture because the contract had no ratchet.

Now look at your own scheme for the same shape. A fixed rate per unit, agreed when the value of the unit was uncertain, and no clause that shares the upside if the value rises. Write the clause you would want: above a stated reference, a defined share of the difference returns to the people producing it.

You are not asking for more. You are asking for the same deal at both ends of the price range, and that is a far easier sentence to say in a meeting.

Exercise 2.3 — The endowment question (60 minutes)

The most advanced form of a gainshare is not a payment. It is a corpus.

   corpus × real draw rate  ≥  the annual cost of the thing you want permanent

Worked, for a programme of 12 positions at a loaded C$88,000 over 45,000 hectares:

   operating cost  12 × 88,000        =  C$1,056,000 / yr
   hectares each   45,000 / 12        =  3,750 ha
   corpus at 4.0%  1,056,000 / 0.040  =  C$26,400,000
   corpus at 3.5%  1,056,000 / 0.035  =  C$30,171,429
   a 3-year grant                     =  C$3,168,000
   the endowment is worth                8.3× the grant

Ask what the perpetual version of your gainshare would cost, and ask it once. Most schemes have never been valued as a perpetuity, and the number is usually smaller than everyone expects — which is exactly the finding that makes it possible.

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PART THREE — DREAM AND DESIGN

What to ask for, and in what order

Exercise 3.1 — The five components, for your scheme (45 minutes)

1. The share as a number. Not a range, not a pool at discretion. A number.
2. The counting, visible. You see the workings, not only the result.
3. The obligation on the other side. Whoever controls the input carries a stated commitment, with a rate and a date.
4. The method you can operate. Where the gain comes from something you produce, the measurement sits with you or with an agreed independent verifier.
5. The permanence. A corpus, a covenant, or at minimum a term longer than the asset it manages.

Score your scheme out of five. Then ask for the lowest-numbered missing component, because they make each other cheap in that order.

Exercise 3.2 — The baseline ratchet, again (30 minutes)

Ask the question that decides whether a gainshare is worth being in: what happens to the baseline when the gain is realised?

If it resets to the improved level each period, you are on a treadmill — every gain raises the bar you are measured against, so the same effort yields less each cycle. The savanna method handles this explicitly with a rolling baseline defined in the determination rather than at the buyer's discretion, which is why a project can plan a decade ahead.

Find your scheme's answer. Write it down. If there isn't one, that is the single highest-value sentence you could get added this year.

Exercise 3.3 — The data clause, for you (20 minutes)

Who owns the record of what you did? In this chapter the answer decides everything downstream, and the test is asked at the start or not at all. Ask for your own performance data in a portable form, annually. It costs the firm nothing, and it is the difference between a track record and a memory.

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PART FOUR — DESTINY AND DELIGHT

Exercise 4.1 — The four failure modes, translated (30 minutes)

Write the first visible sign of each, and who would notice it first. That is a monitoring instrument and it took you half an hour.

Exercise 4.2 — The second owner (this month)

One person is a hobby, two is a practice. Find one colleague who will read the scheme document with you and check the arithmetic each period. Give them the credit for the first thing you find.

Exercise 4.3 — Delight

There is a specific pleasure in checking a number and finding it correct. Most people never experience it, because they never check.

And there is a larger one in this chapter that is worth carrying. The Menominee have been running a gainshare on a forest since 1854 — more than 2.3 billion board feet off about 220,000 acres, about 13,529,412 board feet a year, 61.5 per acre, with more timber standing now than when they started. Nobody supervised it. They simply kept counting, and the counting became a forest you can see from orbit.

That is what a well-designed share does over a long enough period, and it is the most encouraging fact in this volume.

Exercise 4.4 — Write your own source ledger (45 minutes)

The chapter's discipline is that every claim resolves to a document. Apply it to your own scheme, and you will find it is the most practical thing in this workbook.

Make a two-column list. On the left, every belief you hold about your gainshare: the share percentage, the baseline treatment, who verifies, what happens if the business is sold, what happens if you leave mid-period, whether the pool is capped. On the right, the document and clause that says so.

Most people find that half the right-hand column is empty, and that what is in it is a slide from an all-hands rather than a term. That is not a grievance. It is a list of definitions to request, one a quarter, and a definition is the cheapest thing anybody can give you.

Exercise 4.5 — The thirty-year test (30 minutes)

Every arrangement in this chapter was designed, or has had to be redesigned, to outlive the people who negotiated it. The Menominee cut has survived allotment, termination, restoration and eleven decades of commodity cycles. The treaty share has survived fifty years of litigation. The savanna method has survived two changes of national government and a renamed scheme.

Ask your scheme the same question in three parts, and write the answers.

1. If everyone who designed this left tomorrow, what would still be true? Whatever is in the plan document survives. Whatever is in somebody's intention does not.
2. What is the first thing a new owner or a new finance director would change? That is your most fragile term, and it is the one to get written down first.
3. What would it take to make this scheme outlast us all? Usually a corpus, a covenant, or a term longer than the asset — and usually it has never been priced because nobody asked.

The finding is almost always the same, and it is an encouraging one: the permanent version of the scheme costs less than everyone assumes, because a perpetuity at a sensible draw rate is a smaller number than a decade of rising annual contributions, and nobody had computed either.

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WHAT TO ASK FOR, IN ORDER

1. The workings, this period.
2. The baseline treatment, in writing.
3. The obligation on whoever controls the pool.
4. A ratchet, if your rate was fixed when the value was uncertain.
5. A term longer than the asset.
6. A corpus.

Ask for one a quarter. Six quarters is eighteen months, and at the end of it you are in a genuinely different arrangement without a single difficult conversation.

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THE ONE THING TO CARRY OUT OF THIS CHAPTER

Of everything here, carry this: the people in this chapter won their share and then spent fifty years discovering that a share is not the whole instrument. They needed the counting institution, the obligation on the other side, the revenue method they could operate, and the corpus. Each one was learned at cost, in litigation, and written down.

You are not required to learn them the same way. The whole sequence is available to you as a checklist, and you can run it against your own arrangement in an afternoon. That is an unusual position to be in, and it is the practical reason this chapter earns its place in a book about your compensation.

There is also a courtesy that goes with it, and it is the chapter's own rule turned around. If something in these arrangements helps you — and the baseline question, the ratchet clause and the corpus equation will — say where it came from. Name the people, the place and the practice. The Nisqually and the Lummi. The Nawarddeken of western Arnhem Land. Te Rūnanga o Ngāi Tahu. Menominee Tribal Enterprises. It costs nothing, it is accurate, and it is the difference between learning from somebody and borrowing from them without saying so.

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APPRECIATIVE QUESTIONS FOR YOUR TEAM

1. When has our scheme paid out in a way that felt exactly right? What was true about that period that we could make normal?
2. Where do we already see the workings, and what does that let us do?
3. What is the longest-running arrangement any of us has been part of, and what kept it running?
4. If our scheme had to last thirty years, what is the first thing we would write into it?