Q” I believe that if my employees would think more like entrepreneurs, our company could have a much higher profit, which I would gladly share with them. Does having a profit-sharing plan make employees more entrepreneurial?
A: Not necessarily. Before you decide whether profit sharing is the best way to go let’s start from the beginning.
If you want employees to think more like entrepreneurs, then you need to define what that is. What does that look like in your company? What behaviors or characteristics do you think entrepreneurs display? Is it showing initiative; taking responsibility; willingness to take risks; coming up with new solutions to persistent problems? All of the above? By asking this you determine which behaviors are currently missing and which should be present.
Once you have identified desired behaviors and characteristics, make them part of your core values and company culture. Try adding them to your performance evaluations. Employees need to know what’s expected, valued and rewarded in your company.
You could also identify key positions that would benefit the most from an entrepreneurial mind-set and invest in their professional development. Perhaps it’s those who have the most customer contact, or perhaps it’s those who design the software your customers use, or both.
Now you’re ready to decide what type of incentive plan to choose. Yes, part of it could be profit-sharing, but individual incentives as well as team rewards are sometimes more motivating because they are more immediate and employees feel more in control of the outcome. Compared to company profit can be affected by things they can’t control.
Do make sure your incentive plan doesn’t create “perverse incentives” or unintended consequences. For example, when sales reps get rewarded for only making a sale –regardless of whether or not the client is satisfied, or paid their bill, or the product was a good fit– it could result in reps who don’t take care of clients after the sale. That’s not what you want. In this example a team incentive would be more effective -as long as individual rewards are commensurate with team members’ contributions.
I hope now you’ll agree that profit-sharing isn’t the only (or best) way to get employees to think like entrepreneurs.
© Copyright Eva Del Rio