Profit sharing (was remuneration forget six sigma)

["Paul Hollingworth" <PH@4gm.com>]

The goal should be to recognise the collective efforts of everyone in
achieving profits. This important, if we are to avoid profit sharing
becoming an extrinsic motivator leading to short term thinking.

The point about a percentage split rewarding those at the top
disproportionately has already been made. In contrast, the benefit of the
equal shares split is felt more greatly by the lowest paid members of the
team. The only modification I would make is to allocate the funds pro-rata
to part-time staff or those who only worked for the organisation for part of
the financial year. This is easily explained if we think of the profit share
being like the declaration of a share dividend. Each shareholder gets the
same amount per share. In this case though, working full time for the whole
year represents one share. This reflects what that person has invested in
the company. i.e. one year of their working life. All shares are valued
equally.

It is possible to build other factors into the equation, for example so as
not to discourage investment in training or plant, in order to increase
profits short term. However, since the people who make these decisions
generally have less (in financial terms) to loose using the equal shares
method, I would rather see things kept simple.

The biggest barrier to adopting equal shares is the acceptance that we
cannot differentiate the contribution individuals have made to the
performance of the system. Once leaders fully understand this, it is easy to
see why the equal share system is the most effective (and least damaging)
way to 'reward performance'.

Any other method would be anathematic to Dr Deming, I believe. 

Paul Hollingworth    PH@4GM.com