Good Idea?

[profitsharing]

100 percent profit sharing.

Gross - cost = profit. Profit/# of employees = salary per person.

Owner gets same percent of profit as everyone else, but he also increases net worth through the equity in the company’s assets.

This concept would align the employee’s interest with those of the owner. Risk and reward would be shared by both employee and employer.

During a period of recession, salary per person would decrease only until certain employees quite. At that point # of employees would decrease therefore increasing salary per person.

During a period of expansion, employees may opt to work longer hours to keep the # of employees down and salary per person up.

People tend to be more careful with there own cars than with rented cars. Why? Because they have an investment in one over the other.

Why would I care about keeping cost down or working harder when at the end of the week my paycheck will be the same? If I double my workload, at the end of the year they may give me a 5 percent raise over the standard 3. Or I could just do the minimum and get the standard 3. That extra 4 hours in the office will translate to maybe $20 bucks a week. That is less than minimum wage.

[golson]

This would be great in a small partnership where people do equal work. However, the reason people make different salaries, especially in larger companies, is because they have different skills, responsibilities, and levels of experience. Do you want to pay a mail clerk with a high school education the same as a CEO with an MBA from a top b-school? Probably not. That is why we call it capitalism. What you are describing is idealistic communism which cannot exist because some people are going to be "slackers" by nature and some are going to be "go-getters". If the slackers get paid the same as the go-getters, then they are just going to drag everyone else down with them.

[YPAL]

Awful idea, so as an owner and the one responsible in the end and liable for everything they would receive no extra benefit? Spend 6 years at uni at receive no extra benefit?

It could possibly work at McDonalds but even then wouldn't last very long.

[LightHouse]

plus theres no level of heirarchy and no check and balances, pretty much it was already summed up.

Also it seems like to increase you would acctually be backpeddling the comapny by losing employees. those employees are human so eventually they will get tired of working. absolutly horrid idea but keep the thought process going. remeber there has to be seperation otherwise their is no incentive and no management.

[jdoc]

Your idea is at the other end of the fixed benefit/variable benefit pendulum. Niether extreme is healthy. At the end of the day, you'll want to find a mix of incentives (profit sharing is one, equity is another depending on the size and type of company) as well as base wages that motivates your particular team to put in a lot of effort. I would never commit all profit back to compensation - if you have no retained earnings how can you grow the business, protect against downturns, diversify if needed, etc.?

[Cobrainside]

damn, how can people come up with this?

[jameswg12]

I think you have a great start of an idea. 100 % means that there would be no growth in the company and thus people would be competing for a shrinking amount of resources. Some form of profit sharing, across the division and the company is great idea to get employees thinking about their company as a whole, as well as performing their job. It would be great for "labor" to start embracing an expanding pie thesis where they derive benefit for hardwork.

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[Mozzie]

There are large companies in the UK (e.g. Waitrose supermarkets) where the workers effectively own the company and share the profits. i believe they are unlikley to share them equally however - the MD (CEO) is most likely to own a higher number of shares than the till assistant, and while it is advertised as the way they make sure the customer gets service ("because we own the company") in reality the service in their stores is still crap.

Having employed a vast number of people over the years and used all sorts of incentive and bonus schemes I can honestly say I have never found one that gets 100% of the workers singing off the same hymn sheet.

Your idea is intriguing but needs more work - don't give up on it - but try it from every angle before committing your own company to it just in case all your workers gang up on you and sack you!

[CardCat]

I agree with many of the points here. Having been in HR and Compensation jobs, it would be hard to get people to sign on to this structure.

You could try having levels, with different percentages of the profit sharing pool assigned to each level. The CEO at the highest level gets 10% of total pool. The 5 VPs get 6%. The 10 Managers get 3%. The 15 line workers get 2%.

Now you have people working to get the profit pool up, but also working towards advancement in the company.