I thought of this, in part, because of the complicated nature of trying to divvy up equity. So, if profit-sharing worked, then presumably I would not have to worry about keeping track of equity.
Personally I think it's the only legitimate way to run a business. Shareholders are scum and do not deserve the free ride they get off the backs of real workers. Workers should own and control the means of production directly, not shareholders and certainly not the government.
> How is it?
It's nice. Take all the things you hate about working for a capitalist, and it just magically goes away.
Instead of working to make someone else rich, you work to make you and your fellow workers a good and reasonable amount of money. Everyone except the capitalists make more than before, and if the capitalist was also a worker they make a reasonable amount now too. The fundamental difference is that there isn't someone claiming ownership of stuff that belongs to others.
Instead of having an almighty ruler who dictates things because they have a subconscious need for control and no self awareness, things are decided by the people actually doing the work, who actually know the knowledge required to make good decisions. How many times has a superior forced you to make a stupid decision?
There is no strict set of hours you must work. There is no strict limitations for what role you play in the company. There are no unreasonable rules you must follow. There is no fear of having your family's source of ability to live taken away from you just for making some arbitrary mistake or questioning some grown-up child's authority.
This isn't limited to just small firms. Check out companies like the Mondragon corporation with over 80k employees in 2019 (latest data I could find).
> Do you think it could motivate employees?
Yes, and several studies have reported higher job satisfaction in worker-owned firms. Worker-ownership leads to higher productivity because, unlike in capitalist firms, working harder benefits the workers.
There is also greater satisfaction from having more control over the work you do. Humans have a desire to be the cause behind things.
> Is there any way to do it wrong?
Yes, absolutely there are ways to do it wrong, but first let's talk about the right way. The right way would be for every employee to have exactly 1 share of the company, and no one else has any shares whatsoever. It is acceptable for there to be a new-hire probation period, and it is acceptable to still have a variable hourly-wage or salary system (or not, that's even better), but the profit itself must be divided amongst everyone evenly.
Letting some sub-group claim some kind of higher status than everyone else. This is especially wrong if said special group gets a bigger cut of the profits or has authority over everyone. That just makes it a regular company at that point.
Trying to make every decision be voted on by the whole company is another way to go wrong. Things should be decided by the people who work with and know about that particular thing. There's no reason for the office staff to have input on what type of welding gloves we should stock, for example. To allow this is what I'd call tyranny of the majority, the biggest flaw with the authoritarian democracy which permeates our society. It allows people who don't know what they're talking about to ruin things that could have been great.
Trying to copy what "the big companies" do is especially bad for a worker-owned co-op, because the big companies are explicitly built around the domination of laborers by a superior class. Worker-owned companies should lead to more dynamism, not more of the same bureaucrap.
Not having a solid grasp on procedures of consensus democracy will lead to ruin. It will either lead to gridlock during meetings or domination by a sub-group. Ideally you would have consultants from an already-existing worker-owned co-op come in and run/advise the first few meetings to get things started in a good way.
> Why don't more businesses do it, in particular lower wage-type businesses, like fast food, that seem to struggle with employee motivation?
Because that fundamentally goes against what capitalism is for, and what capitalists are doing in general with their lives. Capitalism encourages shareholder profit above all else, that's why we're stripping and contaminating the entire planet for useless trinkets and more ability to work ourselves into the grave. They won't allow worker co-ops to form under their noses because it's the one thing they fear the most: less profit for them to throw down their bottomless pit.
And who decides each year/quarter what portion of the profits go to employers, and how much stays in the kitty to keep the business strong?
50% profit retained by company for growth
25% profit distributed to shareholders
25% profit distributed to employees.
The Employee distribution (distributed quarterly, paid out after 6 months, only to employees still employed at the time of payout)
- 40% Based on number of years with company
- 40% Based on last 12 months earned salary
- 20% Based on cumulative salaries earned to date since starting at the company
In my business we split it "evenly" with weight given to how many hours each person worked on each project. You could think of it like a variable hourly wage based on the profit of the business as a whole. But that's just one model that works for us as a small firm, there are other ways to structure it. Again, I recommend reading about Mondragon's policies for another example, though I can't say I agree with everything they do, but that's up to them not me.
> And who decides each year/quarter what portion of the profits go to employers ...
I'm assuming "employers" was meant to be "workers", as there is no longer a separation between employee and employer. Everyone is equal.
Ideally this would be decided by all the employees through consensus-based meetings, with some discussion about what is necessary and what is not. That's not to say there can't be financial experts involved giving more knowledgeable opinions, but the decision must be everyone's.
People are more incentivized to let some profits stay in the company if the company is theirs. It's not much different from how the capitalist feels about "the company's money". The co-op company growing stronger is directly beneficial to each and every individual worker. If I personally work extra hard, I directly gain more money in my paycheck. That does not happen with a capitalist company, where working harder benefits one or a few shareholders who have nothing to do with the work being done.
how do you balance rewards for initial risk takers vs new hires who joined an already well oiled machine?
We simply don't consider the fact that people who started work first started with a less-oiled machine and took more personal risk. If you wanted you could, but we don't because we simply don't mind. Personally I don't believe in using the fact that I started doing something first as a reason to get a greater share of what other people produce when they start working.
It works out in the end. Sure, I spent a lot of money on my tools, and some other guy is using them because he doesn't have his own. But if he sticks with it he'll end up buying his own tools, and I'll use them sometimes, and eventually he'll have an apprentice of his own who will use his tools. Not to mention, having someone to help is a lot better than not having anyone.
It's ultimately up to the workers at each specific firm to decide exactly how to handle these things. One firm could decide that initial-risk-takers deserve a bigger cut, others could decide not to. The group consensus is what matters most.
Intel had a similar plan with profit sharing based on corporate profits. plus a profit sharing based on product division success.
Today, corporation focus is strictly improving the stock price. Therefore paying more to staff with profit sharing is bad.
