Business and employees: a common goal
CEO’s and their counterparts from industry leading companies across the world have long recognised that employee performance is directly connected to how vested they feel to the company they work for. And that’s one of the reasons that many of these companies have begun to consider and implement profit sharing plans as a powerful incentive to align their employee’s goals with the success of the company’s.
Recent research indicates that 80% of businesses now have some kind of incentive or bonus scheme in place and much as we’re often encouraged not to ‘jump on bandwagons’ in this case, it would appear that the opposite is true. But first things first, before you introduce any profit sharing scheme you must be profitable; “First make sure you are profitable. And, make sure you expect to continue making money for at least the next three years, to the best you can anticipate, “says David Wray, president of the Profit Sharing/401k Council of America. “If you announce the plan and you have no profit sharing for a couple of years, it loses its credibility as a motivating force.”
When you are confident that you will maintain profitable for the foreseeable future these are our Top 3 considerations to make when choosing and implementing a successful profit sharing plan.
1. Determine your purpose
You need to have a clear vision of what you want to accomplish by introducing an employee share scheme; is it increased motivation, increased productivity, improved retention, all of the above? There is a variety of profit sharing schemes and all serve specific purposes whether it is a deferred profit sharing plan to attract and keep those top-level execs, a retirement plan or a cash profit sharing plan. Your overall objective should determine the type of plan you choose.
2. Educate and engage
For any plan or new initiative to be a success everyone from the boardroom down needs to know about it and know how they can get involved, why it exists and ultimately how they can help to drive the overall profit of the company and why they might want to! Educating employees on the concepts behind the cash is an ongoing process but without their collective buy-in, it will be hard to get the momentum you seek. Jack Stack, CEO of Springfield, Missouri commented, “The education is part of an ongoing process that is necessary to maintain a successful profit sharing plan.”
3. Consider all the options
Not all incentive plans have to be profit sharing. Profit sharing is the most commonly used incentive but you know your company and your employees and alternatives like holiday bonuses or gain sharing plans which pay on the savings made by the company as a result of better performance. If you know what you want to improve or mitigate, this can be incorporated into your incentive schemes to ensure that on successful implementation you have a community of engaged employees all working toward a common goal and one which is rewarding for you both.