A Contrast Between Two Approaches To Total Systems Incentives

by J. Jehring



The article presents information on two approaches to total systems incentives, one is profit-sharing plan and other is production sharing. It demonstrates their effect when employed in a growing manufacturing enterprise. Conclusions. A comparison of a production-sharing plan, and a profit-sharing plan, both used by the same company, a growing manufacturing enterprise indicates that the profit-sharing plan was more successful. Because it is tied more directly to the efficiency earnings of the firm than is the production-sharing plan, a profit-sharing plan adapts more directly to changing business conditions and rewards the employee at the same time that the business prospers. Consequently, it can enhance the incentive prospects of a business in a growth situation. The production-sharing plan tends to produce distortion between employee effort and earnings unless frequent and fairly complicated changes are made to compensate for variations in the product mix, this distortion seriously weakens the incentive effect of the plan.

California Management Review

Berkeley-Haas's Premier Management Journal

Published at Berkeley Haas for more than sixty years, California Management Review seeks to share knowledge that challenges convention and shows a better way of doing business.

Learn more
Follow Us