In a variety of ways a bonus or a premium may be paid for quality, or for economy in the use of materials (as to a fire man for using less coal), or for various other results. Every business has its peculiar conditions that make certain results especially desirable and certain methods of reward prac ticable. In some industries, for example, the various plans of piece work and of premium payment are applied to groups of workers (as in collective piece work), the total payment being then divided among the members of the group in some agreed proportion.
§ 9. Aim of profit-sharing. Profit-sharing is rewarding the laborer with a share of the profits in addition to his usual contract wages. Payments by the piece and premiums for output are solely dependent on the efforts of the particular workman (or collective group), but in the plan of profit sharing a premium is given in addition to the regular wage if, at the end of the year, the business as a whole has yielded a profit above a certain amount. Profit-sharing is not merely a gift; it is done usually in accordance with a definite promise in advance. The employer adopting the plan does not intend to lose by it. His purpose is to stimulate the in dustry of the workers, thus reducing waste and cost of labor and supervision, and thereby increasing profits. He offers to divide with the workman the additional profits that are expected to result from their efforts. There is, in every fac tory, greater or less waste of materials, destruction of tools, and loss of time, that no rules or penalties can prevent. If the worker can be made to take a strong enough personal in terest, he will use care when the eye of the foreman is not upon him. The product also can be slightly increased in many ways by the workman's exertions or suggestions. In some cases the quality of the work cannot be insured by the closest inspection as well as it can be by a small degree of the worker's interest. Either responsibility for the fault can not be fixed, or the defect is one not measurable by any easily applied standard. Strikes may be averted, good feeling pro moted, and contentment furthered if the interest of the worker can be made to approach, and in large measure to become in harmony with, that of the employer. The eco nomic result of the plan, if it can be made to work, should be to reduce the costs of these establishments below what they are. The crucial question is whether profit-sharing alone in
any particular case will insure that the costs will be less than those of competitors, thus giving a source out of which an increased amount, really a wage, can be paid to the laborer. For the amount of profits is affected not only by the amount of output, but also by a number of other things that are quite outside the control of the workmen.
§ 10. Examples of profit-sharing. The profit-sharing plan seems first to have been successfully tried in Paris, in 1842, by Leclaire, a house-painter. In house-painting there is often a great waste of materials and time by men working singly or in small groups in different parts of the city. By this new method Leclaire enlisted the aid of the workmen, reduced the costs, and increased the profits. It is a remark able fact that the plan has been continued successfully by the same firm to the present time. It has been tried in many hun dreds, possibly thousands, of cases, and is operating in some form or other, in more than a hundred firms in Europe and America. The most notable examples of profit-sharing in the United States are the Pillsbury Mills in Minnneapolis, Procter and Gamble's soap-factories in Ivorydale, Ohio, the Nelson Manufacturing Company in Leclaire, Ill., and the Ford Auto mobile Works in Detroit. In some cases both manufacturer and workmen value the system highly. It probably has its greatest success when applied in prosperous establishments where profits are regular and large, and where a steady work ing force is especially desired. The proportion of business done in this way is not large. One hundred firms is a very small fraction of 1 per cent of the total number of firms in Germany, France, England, and America. A still more impor tant fact is that true profit-sharing has spread little since 1890, though various practices have developed under that name. The most noteworthy of these is the selling of stock, usually at a somewhat lower price, to the employees of a cor poration, so that, as stockholders, they may have a motive to work for the success of the company (e. g., the United States Steel Corporation). This method as applied to a select few of the employees, who are advanced to official positions in a corporation, is very widely adopted.