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PROFIT-SHARING SCHEMES

What is this practice and how effective is it?

Many organizations use profit sharing to provide a fairer approach to recognizing and rewarding managers and employees. But most programs fail to survive a bad year in which profits fall and employees receive little or no bonus. This “entitlement creep” problem—bonuses are soon built into an individual’s expectations—suddenly becomes a crisis, and the scheme is abandoned. We will examine how a few smart organizations have found ways around these problems.

Alternative names and related topics: gainsharing; fair compensation; team-based rewards

Most social scientists criticize financial incentives when they are applied to individuals but are less concerned about teams. Indeed, ...

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