About the research
Profit sharing has been identified with positive outcomes such as increased organisational productivity, innovation and profits, reduced worker turnover and increased worker training. Those who favour profit sharing claim it improves the workplace by increasing co-operation between co-workers and superiors as well as generating positive peer pressure and mutual monitoring.
This study evaluated these claims by examining how profit sharing arrangements influence the relationship between workers and supervisors. Specifically, the aim was to evaluate the effect of profit sharing arrangements on the quality of relations between workers and supervisors, using workers’ reported satisfaction with their supervisor as a proxy. From data in the BHPS, the researchers generated a panel dataset of employed individuals where the primary interest was in regressing satisfaction with the boss on profit sharing arrangements.
In contrast with the positive findings of previous research, this study showed that workers under profit sharing agreements tend to have lower satisfaction with their supervisor. This result was largely driven by women, who may be less able to respond to peer pressure, and for non-union workers, who may have more to lose by failing to respond to peer pressure.
These results suggest that introducing group payment schemes into the workplace may harm workforce cohesion and co-operation and result in increased pressure on employees. In particular, group payment schemes in non-unionised and/or feminised workplaces have the potential to increase conflict not only between workers and supervisors but also between co-workers.
Methodology
In addition to the ‘satisfaction with the boss’ variable, a range of other control variables such as gender and union membership were taken from the individual response files. From this a panel dataset of employed individuals was generated, where the primary interest was in regressing satisfaction with the boss on profit sharing arrangements. The analytical methods used were ordered probit regressions and individual fixed effects variants of these models that aim to control for non-random sorting of individuals into profit sharing arrangements.
Publications
More details of the research can be found in Green, C. and Heywood, J. (2010) Profit Sharing and the Quality of Relations with the Boss, and Green, C. and Heywood, J. (2009) Profit Sharing and the Quality of Relations with the Boss. Read coverage of this research in The Telegraph.