When my partners and I first organized our company nearly thirty years ago, we were surprised by the stance our employees took on snacks. That’s right, snacks. The day we opened the doors of our burgeoning consultancy, we decided to stock the communal refrigerator with tasty fruits and juices. The company would purchase these snacks and then give them to employees, vendors, clients, and anyone else who stumbled into our office.
We chose this tactic for good reasons. Not only were the treats enjoyable, we also knew that employees collaborate more frequently and effectively when they routinely bump into each other—say, over a mid-morning “fruit and juice” break. These weren’t just snacks we were giving away, they were fructose-charged team builders.
Another perk we took great pride in sponsoring during those early years was the practice of offering employees an annual bonus. Each December, the entire staff would gather in the main conference room where the founders would sound a trump, beat a drum, and give each employee a sealed envelope containing a check.
“It’s your bonus,” we’d explain, “for the wonderful work you do.”
Despite our best intentions, this practice felt a bit off-kilter. A bonus can feel like a gift and that’s unfortunate because the money we shared with employees each year was something they had earned. It wasn’t a gift the owners had magnanimously bequeathed them. The owners hadn’t earned all the profits and then in an act of colossal generosity, passed out money to anyone tangentially involved. Everyone who worked with us had been an essential part of our success. Everyone had earned a share of the profits.
So, we gave up the practice of handing out bonuses and instituted profit sharing. Staff members would now take home a part of the company’s earnings—based on their salary and the firm’s annual profits. Each employee’s financial well-being was now tied directly to the health and wealth of the company. As corporate profits increased, so did everyone’s profit-sharing check. This put everyone in the same boat, headed in the same direction, and seeking the same destination—in one swift maneuver.
Now, back to our snacks. The day after we announced profit sharing, a sign mysteriously appeared on the refrigerator door: Fruits and Drinks $1. I asked Phil, our art director, what was going on. He explained now that everyone was taking part in profit-sharing, he and the rest of the staff weren’t willing to give away costly treats.
“When we give away fruits and drinks,” Phil explained, “the cost comes straight off the bottom line. Money that’s headed for our pockets is redirected elsewhere. We’re not on board with that.”
Instituting profit sharing led to a significant and enduring change. The minute employees learned that they were participating directly in the company’s financial success, they began treating the company as their own. For instance, it wasn’t long until every new-hire had to be reviewed by a selection committee to determine if hiring the proposed new employee would bring in more money than it would cost to keep the person employed. When other companies were shifting to new copy machines, our employees found that refurbished ones worked just fine. If somebody got thirsty, they had to pony up the cash. You get the point.
As you read this account, you might be intrigued by the idea of sharing profits in your own company, but if you’re like most people, you lack the authority to implement such a system. Don’t let this stop you from talking to those who do have the authority. And if you’d like a sample of how profit sharing works, there is a place where you can conduct an experiment. Your home. Here’s an example of how my wife and I created a culture-change by using the home version of profit sharing.
During our children’s teenage years, our family visited a foreign country each summer—on the cheap. Unfortunately, traveling on a tight budget led to friction. Our children lobbied for buying souvenirs, eating in nice restaurants, etc., whereas Louise and I pressed for not spending a cent that wasn’t absolutely necessary. With each trip, I became increasingly ensconced in the role of “guardian of the family treasure” while the children honed their skills in plundering.
Then came the year of the refrigerator note. I thought to myself: What if we applied the concept of “we’re in this together” to our family? We could create a detailed travel budget and then present it to the kids in the following way: “Here’s our budget (from food, to transportation, to lodging). If we stick with it, we’ll be fine. However, every penny we save against the budget, we’ll put towards our first family computer.” (Something we all sorely wanted.)
It was the company culture-change, all over again. From the day we landed in Paris, the kids refused to eat the restaurant meals we had budgeted—insisting that we buy baguettes and cheese at the local markets and make inexpensive and tasty meals on our own. This plan was coming from my children, not from me. It was their lips that were moving, not mine.
And so, throughout the vacation the six of us carefully kept an eye on the sights and the budget.
“I’m not going to spend my souvenir money that’s in the budget,” our 14-year-old son proclaimed. “Who wants a cheap miniature replica of the Eifel Tower, anyway?”
“If we walk the Champs-Élysées,” explained my oldest daughter, “we’ll see the avenue close up, eventually get to the Arc de Triomphe, and save six bus fares.”
“Plus,” her sister chimed in, “we can refill our water bottles along the way—rather than buy new ones. It’ll save us two bucks a bottle.”
With the goals of enjoying the trip and buying a computer firmly in mind, not once during our vacation did our kids characterize me as a skinflint while they portrayed themselves as the balanced, reasonable ones. Gone was the language of us versus them. In its place stood a shared desire to travel as a family, while carefully watching our expenses.
The effect of sharing a financial goal was so powerful that occasionally we had to deal with proposals that seemed too frugal. For instance, one morning our youngest son announced: “Breakfast is for sissies.” (He desperately wanted a computer and the Frogger game that came with it.) As you might suspect, this pronouncement required a discussion. Nevertheless, imagine talking with your teenage son about the risk of being too frugal. I didn’t think that day would ever come. Creating common objectives can do that. Sharing profits can do that.
So, the next time you find yourself in a heated argument, replace your efforts to defeat others via debate with efforts to seek common ground. The ability to seek similarities in purpose may not be as attention-grabbing as the capacity to deal a clever blow during a fiery debate, but the ability to find common ground is far more effective.
This being the case, did our family’s change plan work as well as the profit sharing efforts we implemented at work? It did. By closely watching our expenses we were able to enjoy Paris and save enough money to purchase a brand-new IBM PC—complete with 256k of RAM. Wow! A whole 256k of RAM. We were set for life.
ABOUT THE AUTHOR
Cofounder of VitalSmarts, Kerry has coauthored four New York Times bestselling books as well as co-designed the company’s line of award-winning training programs. As author of our most popular column, Kerrying On, Kerry shares his vision, experience, and advice through fun and insightful stories from his past.