What compensation system involves establishing a baseline of unit-level results and sharing improvements above that baseline with employees?

Gain sharing is the correct response because this compensation system is specifically designed to enhance performance at the operational unit level. In gain sharing, a baseline of performance is first established, and any improvements or gains that occur beyond this baseline are shared with the employees. This fosters a collaborative work environment where employees are motivated to innovate and improve processes, as their efforts directly influence their compensation.

By aligning employee rewards with the success of the unit, gain sharing encourages teamwork, increases productivity, and enhances overall organizational performance. This system contrasts with others, such as profit sharing, which is tied to the company's overall profits rather than specific unit-level performance improvements. Similarly, commission-based structures typically reward individual sales or performance rather than collective performance improvements, and bonus structures may not be directly linked to baseline performance metrics in the same way.