Designing Sustainable Profit Sharing Schemes

Abstract: Profit sharing schemes are an attempt by many organizations to provide a fairer approach to management and employee recognition and rewards. But most fail to survive a ‘bad year’ in which profits fall and managers/employees receive little or no bonus. This ‘entitlement creep’ problem (bonuses soon get built in to an individual’s expectations) suddenly becomes a crisis and the scheme is abandoned. As this paper explains a few smart organizations have found ways around these problems.