Benefits and Compensation

Goal-Driven Profit-Sharing? Sure

[Go here for 1. Straight and 2. Hurdle-Rate Profit Sharing]

3. Goal-Driven Profit-Sharing Plans

In a goal-driven profit-sharing plan, profits are used to establish an incentive opportunity, but employees also must earn that opportunity, based on achieving other goals. These other goals are broad corporate goals, rather than unit operational goals, which are used to highlight and focus all employees on the important behaviors for business success.

Usually, goal-driven profit-sharing plans are combined with a hurdle-rate approach, with or without pay at risk, in order to communicate the importance of these other drivers of profit.

For example, a company could fund an award pool based on 15 percent of incremental profits over business plan targets. If the excess profit equals $1 million, the incentive opportunity equals $150,000; however, the entire $150,000 is not automatically distributed to employees, as it would be under a hurdle-rate profit-sharing plan. At least a portion of that profit pool must be earned by the employees’ achieving other performance goals, such as cost control and customer service, or quality.

One advantage of a goal-driven profit-sharing plan is that, compared to objective-based plans, it reduces risk to the company. The fund does not earn for attaining the other objectives until designated profit thresholds have been achieved.

Another advantage is that goal-driven plans stress the importance of other goals for company success and, in this way, provide a forum for talking about what employees can do to achieve them. For these reasons, goal-driven profit-sharing plans commonly are used by companies to communicate their important business results.

Profit-sharing plans, including goal-driven ones, offer an organization flexibility, and they are easy to integrate with other reward and recognition programs.


Job descriptions are the foundation … for hiring, training, compensation, and a lot more. Make sure yours are up to date and legally compliant. New 70-page affordable e-book: How to Create Job Descriptions: Maintain Compliance and Help Employees Excel. Order now or find out more.


A successful employee-suggestion plan can be dovetailed with profit sharing, by matching the idea value under the suggestion plan. For example, an award of $1,000 paid for an employee idea can be matched by the profit-sharing plan when the profit-sharing plan funds. This feature reinforces the link between cost-saving ideas and company profits.

Companies are looking for ways to make employees stakeholders in the business and to communicate the need for new behaviors and activities, particularly around the customer and continuous-quality improvement. While not as effective in directing employee behavior as other group incentive plans that measure success “closer to home,” they do nevertheless provide a simple and easy way to include large numbers of employees in group incentive programs. When combined with pay at-risk strategies, they can be effective ways to link compensation programs to company affordability.

Any kind of incentive or compensation plan has to be rooted in the basics of what the employee is expected to do, and that falls back directly to the job description.

In fact, your job descriptions are the basis for your hiring, training, and compensation. You’d better get it right. Good news! Our new affordable e-book, How to Create Job Descriptions: Maintain Compliance and Help Employees Excel, will help to make sure your job descriptions are accurate, effective, and legally compliant.

This 70+ page guide takes you through the entire job description process, from research to final communication and implementation. You’ll even get sample job descriptions to use as templates for crafting your own.

How to Create Job Descriptions: Maintain Compliance and Help Employees Excel includes clear guidance for:

  • Identifying core responsibilities and requirements of any job
  • Specifying the knowledge, skills, and abilities needed for employees to be successful in the job and ensure that you’re filling openings with the most qualified employees
  • Avoiding language that discriminates against protected classes of employees and applicants
  • Using descriptions as the foundation of successful performance appraisals and improvement plans
  • And much more

Download Now!
or
Find out more.

Lots of companies have let their job descriptions languish. It’s easy to understand why. Job descriptions are not simple to do—what with updating and management and legal review, especially given the Americans with Disability Act (ADA) requirement of a split-off of essential functions from other functions in the description.


Job descriptions up to date? ADA compliant? In existence? Be sure you’ve got it right with our affordable 70-page Job Descriptions ebook.Order now or find out more.


Download this extensive tutorial on setting up a complete job descriptions program and how to encourage participation from all parts of the organization. That includes top management, the employees, and any union or other collective bargaining entity.

Order now or find out more.

Leave a Reply

Your email address will not be published. Required fields are marked *