Employee Profit Sharing: Consequences and Moderators

Abstract

Although there is substantial evidence that, on average, employee profit sharing improves company performance, little is known about the conditions under which it does so or the mechanisms through which it operates. Based on theory and previous empirical research, this study identifies possible consequences and moderators of profit sharing, and then utilizes a data set from 108 Canadian profit sharing-firms to empirically examine them. Virtually all of the predicted consequences emerged, although to varying degrees. Three main factors moderated their emergence. Results were significantly more favourable in firms that had a high involvement managerial philosophy, that communicated extensively about profit sharing, and that allocated the profit-sharing bonus according to measures of individual employee performance.