Profit-sharing plans distribute rewards based oncompany-wide financial performance, which often feelsabstract or uncontrollableto front-line or non-executive employees. If they cannot see a clear connection between their daily work and the bottom line,motivation and engagementmay suffer.
Extract from HRCI-aligned HR knowledge (Total Rewards domain):
Strategic compensation models highlight that for variable pay to be effective,“employees must understand the connection between performance and reward.” SPHR guidance warns thatprofit-sharing can be demotivating if employees feel too far removedfrom the metrics or don’t perceive personal impact on results.
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