The Impact of Profit Sharing on the Performance of Financial Services Firms*

Magnan, Michel; St‐Onge, Sylvie

doi:10.1111/j.1467-6486.2005.00518.x

Cited by 46 publications

(36 citation statements)

References 73 publications

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“…Magnan and St-Onge (2005) confirm that prediction for firms adopting PSPs. However, it is not clear from their findings if the enhancement in profitability results from a one-time earnings improvement or from continuous earnings growth.…”

Section: Conceptual Framework and Hypothesessupporting

confidence: 78%

The adoption and success of profit‐sharing plans in strategic business units

Magnan

St‐Onge

Cormier

2005

International Journal of Productivity and Performance Management

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -To provide insights as to the determinants of profit-sharing plan (PSP) adoption, as well as conditions that underlie their successful implementation. Design/methodology/approach -The sample comprises strategic business units (SBUs) within a large financial services organization, some of which voluntarily adopted a PSP while others did not. All sample SBUs face similar economic and market conditions. Through a logit analysis, we identify determinants of PSP adoption. Through longitudinal cross-sectional design, we assess the impact of PSP adoption on earnings growth, as well as conditions that underlie successful implementations. Findings -Larger SBUs as well as SBUs exhibiting superior asset growth are more likely to adopt a PSP than other SBUs. Prior earnings performance is not found to be a determinant of PSP adoption. PSP adoption translates into superior earnings growth, but such impact quickly declines over time. Among PSP adopters, earnings growth following PSP adoption is greater for SBUs that adopt late (late adopters) and for those which had poor prior earnings performance. Research limitations/implications -Limited external validity as the analysis is performed within a single North American organization. Practical implications -PSPs are found to be an effective performance turnaround tool. In addition, their limited life cycle suggests that continuous reinforcements and communications are needed to maintain effectiveness. Originality/value -In contrast to most prior research that uses multi-industry samples, the paper relies on a unique organizational database that controls for confounding factors and different earnings generation processes. Moreover, the paper provides additional insights as to the conditions for success.

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Section: Conceptual Framework and Hypothesessupporting

confidence: 78%

The adoption and success of profit‐sharing plans in strategic business units

Magnan

St‐Onge

Cormier

2005

International Journal of Productivity and Performance Management

Self Cite

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“…However, while the research evidence is quite clear that employee profit sharing does increase company productivity on average (Weitzman and Kruse 1990;Blasi, Freeman, Mackin and Kruse 2010), the evidence is equally clear that it does not do so in all cases (Kruse 1993;Magnan and St-Onge 2005;Robinson and Wilson 2006). But note that a causal connection between employee profit sharing and employer productivity is not a necessary condition for profit sharing to result in an increase in employee earnings.…”

Section: Theoretical and Empirical Backgroundmentioning

confidence: 85%

Do Employees Profit from Profit Sharing? Evidence from Canadian Panel Data

Long¹,

Fang²

2012

ILR Review

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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. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in EconStor may D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.IZA Discussion Paper No. 6749 July 2012 ABSTRACT Do Employees Profit from Profit Sharing? Evidence from Canadian Panel DataUsing panel data from a large sample of Canadian establishments, this paper examines whether employee earnings increase, decrease, or do not change in the period subsequent to adoption of profit sharing, relative to establishments that do not adopt profit sharing. Our research contributes to knowledge by utilizing longitudinal analysis to assess the effects of profit sharing adoption on employee earnings growth within a carefully constructed sample of Canadian establishments, and by assessing both cash real earnings growth and total real earnings growth, while controlling for a wide array of variables that may affect these results. On average, employees in Canadian establishments that adopted profit sharing during 1999-2001 appeared to benefit from the introduction of profit sharing, in terms of both their cash real earnings growth and total real earnings growth, in the five-year span following introduction of profit sharing. This advantage was both statistically and practically significant, adding about 15 percentage points to real employee earnings growth over the five-year period, a period during which employee earnings growth was generally modest. is important to scholars trying to unravel the effects of profit sharing, to managers and employees trying to decide whether to embrace profit sharing, and to public pol...

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“…Profit sharing relies on the output of a collective of individuals who will later share the fruit of their commonly created productivity. This is likely to foster greater relatedness, even if it could potentially decrease feelings of competence (because such systems are known to lack a clear link between individual performance and firm productivity; Magnan & St-Onge, 2005). Two studies found that rewards in the form of profit sharing and stock ownership were positively related to affective organizational commitment (Coyle-Shapiro, Morrow, Richardson, & Dunn, 2002;Kuvaas, 2003), which has been linked to autonomous motivation (Gagne´, Boies, Martens, & Donia, 2006).…”

Section: Objectivity Of the Performance Appraisal Methodsmentioning

confidence: 99%

The study of compensation systems through the lens of self-determination theory: Reconciling 35 years of debate.

Gagné¹,

Forest²

2008

Canadian Psychology / Psychologie canadienne

191

190

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´du Que ´bec a `Montre ´al Although compensation specialists generally argue for incentive systems that link rewards to performance, self-determination theory argues that such contingent rewards can have detrimental effects on autonomous motivation. The authors present a model of the motivational effects of compensation systems that attempts to reconcile the self-determination theory view and the literature on compensation. This model evaluates how compensation system characteristics, such as the amount and variability of pay, can influence the satisfaction of the needs for autonomy, competence, and relatedness, which in turn influence autonomous work motivation.

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The Impact of Profit Sharing on the Performance of Financial Services Firms*

Cited by 46 publications

References 73 publications

The adoption and success of profit‐sharing plans in strategic business units

The adoption and success of profit‐sharing plans in strategic business units

Do Employees Profit from Profit Sharing? Evidence from Canadian Panel Data

The study of compensation systems through the lens of self-determination theory: Reconciling 35 years of debate.

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