Is Profit Too Important to Share?

Ford Motor has a new chief executive on the way—so who will it be?

To be sure, current chief Alan Mulally has to exit first, and that’s not likely to happen until sometime next year, but, according to the The Wall Street Journal, speculation on his successor is already rampant. And the money seems to be on Mark Fields, who is president of the company’s operations in North and South America.

One point cited in Fields’s favor is that he has been eager to share the wealth with Ford employees when times are good. “In 2011, Mr. Fields convinced Mr. Mulally to pay union workers profit-sharing bonuses of $5,000 each, more than was required under its labor contract,” the Journal reported today. “Mr. Fields argued that paying the bonuses, after Ford finished one of the most profitable years in its history, would win goodwill among the union’s rank and file and ease talks over a new contact later in 2011.”

That sure sounds reasonable, but Peter Drucker might have seen things differently. While Drucker believed strongly in giving every employee a meaningful and satisfying stake in an enterprise, he doubted that profit sharing was the way to do it.

Profit sharing had “been tried for well over a century,” Drucker noted in The Practice of Management, and the results were “not encouraging.” It’s not that workers minded getting the extra money. “But,” Drucker cautioned, “the real job is to convince workers that there is an ever-present danger of loss, and therefore profit is necessary to build their own future job and their livelihood.”

Profit-sharing, Drucker explained, risks convincing workers that “making a profit—a big profit—is easy if not automatic.”

Drucker also questioned whether workers really cared about sharing in profits as some executives seem to think.  “The profit-sharing dividend of most of the plans which is entirely outside of the job, will at best appear to the worker as ‘parsley on the soup,’ a pleasant but unessential relish,” Drucker wrote in The New Society. “He may even resent it as emphasizing an order of values and priorities that he considers hostile to him.”

What do you think of profit-sharing as a policy?