Should there be a profit sharing among all employees at a company, even to contractors?
Facebook hires a private bus company to operate buses that transport some of its employees to/from work from various commuter lots. Recently the 87 shuttle bus drivers that do this voted to unionize alongside the Teamster’s union. The local Teamster’s rep believes that the pay for these drivers should increase not to have a competitive wage with other bus drivers in the area, but because Facebook makes a lot of money, so their bus drivers should also.
How far should formulaic compensation go? To everyone in the organization regardless of their role? Should everyone share equally?
I’m a firm believer that people should be compensated a fair base wage based upon current market conditions. Then additional compensation should be awarded based upon individual contributions that create value for the firm, regardless of hierarchy. But just showing up and meeting the minimum expectations without creating additional value, shouldn’t result in additional compensation, just because the company made a lot of money.
“These companies need to step up and stop demanding the lowest bid contract,” said Rome Aloise, a vice president with the Teamsters union and the secretary-treasurer of Teamsters Local 853, in a statement released Wednesday. “They need to all agree to pay their contractors an amount that allows the union to negotiate for decent wages and benefits.”
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None of these things are true.
Facebook should simply continue to pay their drivers at the current rate, whether they joined the Teamsters or not. If the Teamsters think they are worth more, they can go on strike. Facebook can then either pay them more, or fire all of them and replace them with scabs. If the Teamster attempt to intimidate any of the scabs, or the management, the Teamsters should be prosecuted to the full extent of the law.
One problem with this is assessing who is responsible for growth, and to what extent. There’s a tendency (natural, I presume) to assume that only those directly responsible for generating revenue are capable of creating value.
For example, say some hotshot sales rep comes up with a new pitch that woos a customer and wins a huge buy. We naturally say that the sales rep generated value. But what about the top-notch janitorial services that presented such clean windows to the visiting customer? Maybe that had a subtle psychological effect on the customer. Likewise, the excellent administrative assistant used just the right tone of voice when speaking with the customer on the phone about the upcoming sales demo, not sounding either arrogant or excessively timid. And let’s not forget the hardworking IT support engineer who make sure that the online videos went by without a hitch and with minimal latency. How do we allocate the reward? Does the sales rep get it all? But that’s not fair? What percentage to we give to each of the staff that helped make it happen?
I don’t understand. The bus drivers are NOT employees of Facebook, why should they share the profits of a company they don’t work for? Shouldn’t they be discussing wage increases with the ACTUAL company they work for?
You don’t even seem to understand the situation. Facebook doesn’t pay the drivers, it pays a company who employs the drivers. The union is saying that if Facebook doesn’t pay the contractor enough, the contractor can’t be expected to come up with the money out of nowhere.
We can argue about who needs to do what, but what the union guy said is factually correct. Your hatred of unions and workers you feel are beneath you blinds you to that.
I’m unsure what the linked article in the OP has to do with profit sharing. It seems to be (just skimming it) about Facebook contracting for bus services and going with the lowest bidder. These guys aren’t even Facebook employees, so how does profit sharing come into the picture? Am I missing something here??
The OP isn’t about the article per se. The article is an example to initiate the discussion about profit sharing. The article and situation is an example of people wanting to get paid more because the companies they work for make more money.
Yes I understand that the bus drivers aren’t employees of Facebook, but the union rep argues that Facebook should pay more for the drivers contract because they are extremely profitable. Ergo:: profit sharing.
The way it is today there is a two tier system, with the nice ladies who clean the bathrooms and empty the trash employed by the contracting agency, and getting none of the perks we engineers get. (Except free coffee and soda - I hope they are allowed that.)
What do you mean by market conditions? In terms of salary, companies create market conditions. In terms of profitability, no one expects a company losing money to pay bonuses to everyone (except the CEO, of course.) That’s the whole deal. But we’re talking about companies making oodles of money and more or less putting it under the mattress because they don’t have anyplace to spend it. Paying the cleaning staff a bonus is not going to affect stockholder value.
A cleaner is not going to invent a new product - but neither will an admin who might and should be in the bonus system. I assume that good cleaners are recognized. Heck, having them eligible might make them clean better, not that I have any complaint with ours.
As for me, I’d just as soon not ride in Bay Area traffic in a bus driven by someone who hates my guts and the guts of my company.
“Now that the entertainment portion of the Board meeting is concluded, back to business. All in favor of upgrading our golden parachutes to platinum, signify by saying ‘aye’…”
During the recession we had several cases of companies cutting pay in order not to bleed red ink. A bad situation, but understandable. But there seems to be a pay diode. Take a cut when we’re losing money, and be happy to have a job. Expect a raise when we’re making money? Screw you. They’ll pay more if they absolutely have to for retention or hiring, but I assume you’re talking about the moral component.
But that’s not how it works, and the union rep is just trying for a cash grab. The bus drivers work for the bus company who contracted with Facebook, not Facebook. They need to work this out with the bus company, who presumably worked out a fair and profitable contract with Facebook within the bounds of what the market rate is for bus services.
That aside, I think profit sharing is generally a good thing. As long as profits are shared in a way that’s material to the rank and file, NOT via some sort of bonus structure, it’s a good way to make everyone hopefully feel like they have some stake in things, and probably more importantly, make everyone sort of self-police each other. People are much less likely, in my experience to put up with slacking if there’s a profit sharing plan than if there’s not.
Setting up profit sharing as a bonus structure sucks balls because it basically means that any kind of bonuses are divorced from a person’s actual performance and are dependent on the more capricious market forces that they can’t control. In other words, whether you get a bonus at all, and the size of that bonus are more dependent on how profitable the company is, rather than on your own performance.
They do need to make profit sharing material- nobody gives a shit about making $10 more per paycheck in profit sharing, or in getting a handful of non-vested class B company shares in your retirement fund.
I’m talking about there’s a market wage for certain jobs, roles, etc. Let’s take an administrative assistant for example. Within a certain region of the country, the avg. pay for an administrative assistant is $XX,XXX. When I am looking at what I pay my current admin, I regularly (at least once a year) review what the current market rate for that role. If my admin’s pay is not in that ball park, higher or lower, I then assess if there is a reason for that. If there isn’t a compelling reason, then if their current pay is lower, I will bump their base pay up so it is line with current market rates. Then annually, when I perform their review, I look at any contributions that they made above and beyond what I expected of them during the past year. Maybe they suggested and devised a new way of cutting down travel expenses for our department, or reducing our supplies expenses through a new relationship with a supplier, or they significantly improved our on boarding of new employees in our department. I would then try to assess the amount of value those contributions made to the bottom line, and recommend that they get a % of that contribution as a performance bonus for this year. Then when I award them that bonus I’ll discuss with them how their bonus is specifically tied to the actions they took during the previous year.
That’s how I manage all of my direct reports. That’s how most if not all of the managers in our company manage and reward our employees across the board. This way people understand what they do makes a difference and incentivizes similar behaviors in the future.
But just because our company is profitable, doesn’t mean that everyone is going to benefit from it. You had to contribute to it somehow. And yes everyone’s contribution varies, just as everyone’s compensation varies.
There are some different meanings for the term should, so I’ll address it that way:
Should as a moral imperative: No, there’s no moral requirement to share profits the same way we say that you should not murder people. There’s going to be some difference of opinion on just what constitutes fair pay to employees, but there will always exist a satisfactory outcome that doesn’t require profit sharing. (i.e. if we pay the bus driver $1 million/year, I’m sure they’d happily shut up about profit sharing. What they really want is a raise; profit-sharing is just an arguing position.)
Should as a legal requirement: Obviously, no. There’s no minimum-wage-like requirement, and if the contracts between the drivers and the company don’t require profit-sharing, then there’s no legal obligation.
Should as a recommendation: Maybe. It’s worth considering. Many companies implement profit-sharing with employees at a variety of levels. It’s almost universal among upper management like CEOs, and pretty rare at the bottom levels. If profit-sharing is seen as a good motivator for employee behavior, then it makes sense for management to implement it. But I’m not sure if profit-sharing is such a good motivator for many people. If it’s not a good motivator, then it’s really just a component of labor costs. If an employee wants $50k/year, do they really want a system where they get $30k one year and $70k the next? It averages out to $50k, but I’m thinking that would be a disaster for most people.
I don’t know how it works in your companies, but when I’ve done salary administration it comes out of a budget for the entire department. If the powers that be give you a crap budget, you wind up giving out crap raises no matter what the market is like or what contributions are. Further, one tends to give the higher performers more which leaves less for the average performer, even if they have contributed. As I’ve noted before salary growth for new hires is almost always higher than that for existing employees because new hires are in more of a real market, and have no cost in turning down an offer in favor of another one.
In big companies especially it is hard to quantify any person’s contribution. What about a person doing a great job in a project which is a disaster?
I was around when bonuses became popular, and the reason for them was to avoid making extra money from a good year a part of base pay. Therefore it is important that they are based in part on profitability. Several plans I know of have base payments with adders for exceptional performance.
I know you want to reward great performers and not reward bad performers, but if you screw all the people in the middle they are going to leave eventually, especially when times are good and hiring new people to replace them becomes difficult and expensive.
Plus, if you treat all but a few as poor performers, they’ll start acting like poor performers.
Institutionalized budget processes are generally horrible and create unprofitable work. We are a Fortune 25 and don’t do budgets. It’s company policy to pay people at current market rates, and all pay changes must be supervisor approved along with an HR leader. So as long as the pay change is in line with market and the necessary approvals support it then it isn’t a hassle.
It’s not hard to quantify people’s contributions. We have well over 50,000 employees and that’s how all of our people are evaluated. We also have very high retention. You definitely have to buy into the culture and be comfortable with the subjectiveness of the process. But most people here (up and down the organization) make well above their peers at similar companies. It’s part of the reason we have been so successful.
We try and evaluate people into 3 categories: A, B and C performers. A performers are those that consistently out perform expectations. The objective is to get people into the right roles so we have as many A performers as possible. B performers are those that meet expectations are good culture fits but do not consistently outperform. C performers are those that generally underperform or are not good culture fits with our company. We generally counsel out or terminate consistent C performers.
We had “profit sharing” back when I worked at Safeway. It was some bullshit. Every quarter, if the store qualified based on their quarterly profits, I would get a check for something like 7 - 10 cents for every hour I worked the previous quarter. I averaged about $30 - $40 per quarter, and we didn’t always qualify because it was out of our control and even if it was in our control, that amount of money is not any real incentive to work any harder at a job that was already pretty hard.
Should the batboy at Yankee Stadium get paid as much as Derik Jeter?
Does driving a bunch of Stanford educated software engineers around Silicon Valley require a higher level of bus driver than driving an airport shuttle bus or driving a bunch of steel workers to their steel mill?
From a business standpoint, there is a certain value in providing profit sharing and other incentives that make goo employees feel like they are contributing to the success of the company. But there is no hard and fast rule for how that contribution should be measured or what form that compensation should take.
