Profit Sharing: Does It Make a Difference?

Kruse, Douglas

doi:10.17848/9780585261614

Cited by 200 publications

(168 citation statements)

References 61 publications

(99 reference statements)

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“…The first set of motives is based on substitution: firms use profit sharing to substitute for fixed pay components (wages and benefits) to better align the firm's labor costs with fluctuations in its ability to pay [2]. When the firm's financial capacity is high-in times of high profitability-employees receive higher earnings, but when financial capacity declines, so do employee earnings, which reduces labor costs.…”

Section: Motives For Profit Sharingmentioning

confidence: 99%

“…Such alignment may prompt beneficial worker behaviors such as increased motivation and effort, enhanced cooperation with management, increased monitoring of workers' own and others' behavior, positive workgroup norms, and development of more efficient work methods [2]-in other words, profit sharing may cause workers to work harder and smarter.…”

Section: Profit Sharing and Workplace Productivity: The Role Of Team mentioning

confidence: 99%

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Profit sharing: Consequences for workers

Fang¹

2015

izawol

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.

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Section: Motives For Profit Sharingmentioning

confidence: 99%

Section: Profit Sharing and Workplace Productivity: The Role Of Team mentioning

confidence: 99%

Profit sharing: Consequences for workers

Fang¹

2015

izawol

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“…Owing to these organizational changes, traditional Fordist control measures are put into question or rendered more costly, because individual effort cannot be measured easily any more (Kruse, 1993;Holmstrom and Milgrom, 1994;Milgrom and Roberts, 1995). Therefore, a coherent set of HPW measures should also contain indirect methods of control and financial incentives in order to bring the employeesḿ otives into line with the objectives of the management.…”

Section: Theoretical Considerationsmentioning

confidence: 99%

“…There are several theoretical approaches linking shared compensation schemes, such as profit sharing and employee share ownership as well as profit related pay, to firm performance (Conyon and Freeman, 2001). On the one hand, wages that are partly oriented towards the profit of the firm or payments in terms of firm shares give employees a material interest in improving the economic situation of the firm (Kruse, 1993). On the other hand, performance related pay schemes may support free rider behaviour, because each employee hopes that his or her colleagues work harder to increase the outcome and the remuneration of the team than he does himself or she does herself.…”

Section: Theoretical Considerationsmentioning

confidence: 99%

“…While most empirical studies derive positive productivity effects, 3 at least for some of the measures, little evidence supports the hypothesis that there are complementarities between the measures (Kruse, 1993;Huselid, 1995;Delaney and Huselid, 1996). Some studies even find, that the interaction terms of the measures in the production function estimation are negative (McNabb and Whitfield, 1999b) and thereby indicate that the combined effect is detrimental for productivity.…”

Section: Empirical Evidencementioning

confidence: 99%

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Reassessing the Impact of High Performance Workplaces

Wolf

Zwick

2003

SSRN Journal

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Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0207.pdf Non-technical summaryInnovative personnel measures that increase involvement, qualification and motivation of (non-managerial) employees (so-called high performance workplaces or just HPW) were extolled as an efficient means to increase firm productivity. The theoretical literature further stresses the complementarities between these measures. In practice, it is however noticeable that some measures, such as profit sharing or employee share ownership have been adopted by a small minority of firms. Despite the supposed complementarities, only very few firms use the full set of measures or combinations of some measures. Some authors point to the fact that extensive organizational changes or incentive contracts may not necessarily provide the expected results, but may even impair employee satisfaction and hence firms' performance. Other reasons for the finding that the incidence of high performance workplaces is smaller than the theoretical literature suggests could be the high implementation costs, employee resistance against innovations and last but not least small and uncertain productivity effects.The empirical evidence on the productivity effects of HPW is not clear either. While a couple of papers find significant and durable positive effects of HPW on productivity, several studies are rather sceptical about the productivity impacts. The differences between the results may be due to measurement problems, limited and deliberately chosen samples of firms, and the fact that most studies analyse different sets of personnel measures. We show that unobserved heterogeneity among firms and endogeneity of the management practices may affect the conclusions substantially. While unobserved heterogeneity is corrected for in several studies, the endogeneity problem is ignored in most analyses. The vast majority of the empirical studies on the productivity effects of HPW refers to Anglo-Saxon countries, whereas the evidence for Germany is very scarce.The original contribution of our paper is that we simultaneously account for both unobserved heterogeneity and endogeneity using representative and very detailed establishment panel data for Germany from 1996 to 2000. We find that firms often introduce specific related bundles of individual HPW measures. One common set of measures includes the reduction of hierarchies and the introduction of team-work and independent work groups (denoted here as "organizational changes"). The other (some...

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Employee versus conventionally-owned and controlled firms: an experimental analysis

Frohlich

Godard

Oppenheimer

et al. 1998

Manage. Decis. Econ.

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Full employee ownership, under which employees enjoy dominant ownership and control rights, is an innovation which alters the relationship between employees and the organization in which they work. Although it has been hypothesized to have a number of positive implications, it has suffered from poor diffusion and survival rates overall, and selection biases have limited the generalizability of field research. We have therefore attempted to develop experimental methods to test hypotheses about the effects of employee ownership on selected economic, social, and psychological outcomes. In our experiments, subjects in employee‐owned firms exhibited higher productivity, perceived greater fairness in the pay they received and the method used to pay them, reported higher levels of involvement in their tasks, had more positive evaluations of their supervisors, and showed a greater propensity to interact with and provide assistance to their co‐workers than did those in employee‐owned firms. Four areas where further research is needed are identified; these will refine our understanding of employee ownership and the conditions under which it will operate as hypothesized. © 1998 John Wiley & Sons, Ltd.

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Profit Sharing: Does It Make a Difference?

Abstract: Profit sharing : does it make a difference? : the productivity and stability effects of employee profit-sharing plans / Douglas L. Kruse p. cm. Includes bibliographical references and index.

Cited by 200 publications

References 61 publications

Profit sharing: Consequences for workers

Profit sharing: Consequences for workers

Reassessing the Impact of High Performance Workplaces

Employee versus conventionally-owned and controlled firms: an experimental analysis

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