Adequate communication is essential for addressing issues related to equity, especially because profits can shrivel for reasons beyond employees’ control. At Jim’s Formal Wear, a tuxedo wholesaler, workers at each warehouse split 3% of the facility’s profits in the second, third, and fourth quarter of each year. Employees also can earn up to $1,200 per year in bonuses if the company meets goals for customer satisfaction. Every month, managers at each warehouse review the facility’s business performance, comparing the current year with the previous year and with the year’s goals. Every week, employees gather in team meetings to discuss ways to improve the next week’s performance, such as reducing costs or errors.26 The weekly and monthly meetings provide opportunities to educate employees and involve them in decision making.Given the limitations of profit-sharing plans, one strategy is to use them as a component of a pay system that includes other kinds of pay more directly linked to individual behavior. This increases employees’ commitment to organizational goals while addressing concerns about fairness.Stock OwnershipWhile profit-sharing plans are intended to encourage employees to “think like owners,” a stock ownership plan actually makes employees part owners of the organization. Like profit sharing, employee ownership is intended as a way to encourage employees to focus on the success of the organization as a whole. The drawbacks of stock ownership as a form of incentive pay are similar to those of profit sharing (see “HR Oops!”). Specifically, it may not have a strong effect on individuals’ motivation. Employees might not see a strong link between their actions and the company’s stock price, especially in larger organizations. The link between pay and performance is even harder to appreciate because the financial benefits mostly come when the stock is sold—typically when the employee leaves the organization. Ownership programs usually take the form of stock options or employee stock ownership plans. These are illustrated in Figure 13.4.
Adequate communication is essential for addressing issues related to equity, especially because profits can shrivel for reasons beyond employees’ control. At Jim’s Formal Wear, a tuxedo wholesaler, workers at each warehouse split 3% of the facility’s profits in the second, third, and fourth quarter of each year. Employees also can earn up to $1,200 per year in bonuses if the company meets goals for customer satisfaction. Every month, managers at each warehouse review the facility’s business performance, comparing the current year with the previous year and with the year’s goals. Every week, employees gather in team meetings to discuss ways to improve the next week’s performance, such as reducing costs or errors.26 The weekly and monthly meetings provide opportunities to educate employees and involve them in decision making.<br><br>Given the limitations of profit-sharing plans, one strategy is to use them as a component of a pay system that includes other kinds of pay more directly linked to individual behavior. This increases employees’ commitment to organizational goals while addressing concerns about fairness.<br><br>Stock Ownership<br>While profit-sharing plans are intended to encourage employees to “think like owners,” a stock ownership plan actually makes employees part owners of the organization. Like profit sharing, employee ownership is intended as a way to encourage employees to focus on the success of the organization as a whole. The drawbacks of stock ownership as a form of incentive pay are similar to those of profit sharing (see “HR Oops!”). Specifically, it may not have a strong effect on individuals’ motivation. Employees might not see a strong link between their actions and the company’s stock price, especially in larger organizations. The link between pay and performance is even harder to appreciate because the financial benefits mostly come when the stock is sold—typically when the employee leaves the organization. Ownership programs usually take the form of stock options or employee stock ownership plans. These are illustrated in Figure 13.4.
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