Moving Beyond Profit Sharing

No doubt everyone is pleased to see our automakers making good progress in bringing a major U.S. industry back from the brink of extinction that they experienced less than two years ago. The latest installments of good news are the recent announcements that 40,600 Ford hourly workers will receive $5,000 profit-sharing checks while GM hourly workers take home an expected extra $1,775 and even Chrysler provides a “performance award” of $750 to nearly 30,000 hourly workers despite losing $652 million in 2010.

Profit-sharing (and talks about future shifts to “gain sharing”) programs are a great benefit that allow the companies to “share the wealth” with the employees who helped to realize that profit. These bonuses are typically paid equally to all employees across the board regardless of their level of contribution and are currently said to be offered in exchange for the sacrifices employees have made in recent years.

Separate from profit sharing and other pay-for-performance compensation models, there are additional ways to ensure that employee efforts are focused on corporate priorities.

Structured employee recognition programs reinforce productive behavior and reward those employees who go above and beyond. Employees don’t perform equally and should be rewarded (or not) accordingly. A carefully designed incentive or performance improvement program can ensure that employee performance is aligned to company goals-”from setting team objectives down to achieving individual performance goals. Incentive programs can help clarify goals and focus employee attention on those factors that are most important to an organization.

Studies show that 85 to 95 percent of incentive programs are successful in reaching or exceeding their goals, often producing an ROI of 200 percent. Incentives generally improve performance by an average of 22 percent, with team incentives improving performance by as much as 44 percent. Incentives have proven to be a cost effective way to make people feel valued-”a motivator of growing importance in a multi-generational, multi-cultural work force. The bottom line: companies that use reward and recognition programs outperform their competition.

Whether or not a company offers a defined Profit Sharing program for its employees, reward and recognition programs are another viable way to improve business results for organizations of all shapes and sizes.

Barbara Hendrickson is president of Design Incentives in Livonia, MI and currently serves as president of the Board of Directors for the Incentive Marketing Association in Naperville, IL. She can be reached at [email protected].

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Richard Blanchard
Rick is the Managing Editor of Corp! magazine. He has worked in reporting and editing roles at the Port Huron Times Herald, Lansing State Journal and The Detroit News, where he was most recently assistant business editor. A native of Michigan, Richard also worked in Washington state as a reporter, photographer and editor at the Anacortes American. He received a bachelor of arts from the University of Michigan and a master’s in accountancy from the University of Phoenix.