Impact of Using Profit Sharing as Employee Motivation Strategy: John Lewis Partnership - Research Proposal Example

Research Proposal: Impact of Using Profit Sharing as Employee Motivation Strategy: The Case of John Lewis Partnership Submission: Total Number of Words: 2,501 Abstract To determine whether or not the use of profit sharing scheme can create a positive or negative impact on John Lewis’ employees’ work motivation, the proposed research study will conduct a research interview with the HR manager. To determine whether or not John Lewis’ employees are happy and satisfied with the profit sharing arrangement they have with John Lewis, a total of 100 research survey respondents will be invited to participate in this study. . Table of Contents Abstract …………………………………………………………………………………….. 2 Table of Contents …………………………………………………………………………... 3 1. Introduction ………………………………………………………………………… 4 1.1 Purpose of the Proposed Research Study ………………………………… 4 1.2 Research Objectives ……………………………………………………… 5 1.3 Research Questions ………………………………………………………. 5 1.4 Justification or Rationale for Selecting the Research Topic ...…………… 5 2. Literature Review ………………………………………………………………….. 6 2.1 General Information About Profit Sharing ……………....………………. 6 2.2 Effects of Profit Sharing on Employees’ Work Attitude and Behaviour ..… 6 2.3 Common Reasons Why HR Managers Should Adopt the Use of Profit Sharing Plan ………………………………………………………. 7 2.4 Important HR Management Considerations When Selecting the Best Motivational Strategy ………………………..…………………………… 8 3. Proposed Research Methodology ………………………………………………….. 9 3.1 Research Design …………………………………………………………. 9 3.2 Data Collection Procedure ..……………………………………………… 10 3.3 Sample Population ……………………………………………………….. 10 3.4 Research Ethics ………………………………………………………….. 11 4. Proposed Time Table ………………………………………………………………. 11 References ………………………………………………………………………………. 14 - 16 Appendix I – Semi-Structured Research Interview Questionnaire ....................................... 17 Appendix II – Research Survey Questionnaire ……………………………………………. 18 Chapter 1 – Introduction In response to tight market competition, a lot of companies today are searching for effective employee motivation strategies that can increase not only employees’ commitment and loyalty to the company but also help improve the quality service given to the customers. Often times, the available human resources are considered as an important asset in terms of improving the company’s overall business performance. As part of motivating employees to improve the quality of their work performance, some companies have decided to use profit sharing as their main strategy when it comes to motivating employees (Jana and Petr, 2013; Andrews et al., 2010). A good example of company that provides cash bonuses to each employee as profit sharing is the John Lewis Partnership. With a pre-tax profit of £367.9 million, John Lewis shared a total of cash bonuses worth £200 million to its 76,500 employees in 2011 (Kollewe and Wood, 2011). With a pre-tax profit of £409 million, John Lewis awarded a cash bonus worth £210 million to its 84,700 employees in 2013 (BBC News, 2013). As a common knowledge, each employee can be motivated by using a wide-range of motivational factors (i.e. instrinsic or extrinsic rewards) (Havlíček, 2011, pp. 185 – 186). Often times, profit sharing can be used as a motivation strategy to help increase each employee’s individual work performance. Considering the case of John Lewis, the proposed research study will seek to determine the impact of using profit sharing schemes on employees’ work-related attitude and behaviour. 1.1 Purpose of the Proposed Research Study The main purpose of the research study is to analyze the effects of using profit sharing scheme in the work motivation of John Lewis’ employees. 1.2 Research Objectives To main research objective is to determine whether or not the use of profit sharing scheme can create a positive or negative impact on John Lewis’ employees’ work motivation. Eventually, the following sub-research objectives will also be considered in the proposed research study: 1. To gain better understanding on how profit sharing can affect John Lewis’ employees’ work motivation; and 2. To know more about how John Lewis’ employees perceive the use of profit sharing scheme. 1.3 Research Questions The following research questions will be addressed in this study: 1. What is the short-term and long-term impact of using profit sharing strategy on John Lewis’ employees’ work motivation? 2. Does any of John Lewis’ employees’ develop a negative perception about the use of profit sharing schemes? 1.4 Justification or Rationale for Selecting the Research Topic In business research, the topic on profit sharing is often times related to human resource management. In line with this, several studies strongly suggest that the use of profit sharing strategy can result to as increase in employees’ work productivity, improvements in employees’ turnover rate and absenteeism (DArt and Turner, 2004). Likewise, the use of profit sharing scheme can also positively motivate employees (Robinson and Wilson, 2006), increase employees’ participation at work (McNabb and Whitfield (2007). However, there are some important issues concerning the use of profit sharing scheme. First of all, the use of profit sharing scheme is often times linked to problems related to “free rider” (Waitzman and Kruse, 1990, pp. 98 – 100). It means that companies who choose to adapt the use of this type of reward system can end up rewarding employees who do not deserve to be given additional pay on top of their basic wage. Furthermore, there are several studies suggesting that the use of profit sharing scheme can somehow decrease employees’ earnings in case the company does not profit at the end of each accounting year (Katz and Meltz, 1991). Considering the contradicting remarks found with regards to profit sharing and its effects on employees’ work motivation, it is necessary to conduct the proposed research study to see how John Lewis’ employees really perceive the concept of profit sharing. In the process of completing the proposed research study, it is possible to learn more about the advantages and disadvantages associated with the use of profit sharing when managing a large group of employees. Chapter 2 – Literature Review 2.1 General Information About Profit Sharing Depending on the profitability of the company, profit sharing is actually a type of incentive plan that is normally given to employees as either a direct or indirect payment on top of their basic salary. In the United States, profit sharing is normally given to the employees as part of their retirement plan (i.e. 401(k) plans) (IRS, 2014; United States Department of Labor, 2014; Long, 2010). In the United Kingdom, profit sharing is given to employees as cash bonuses (Work Management, 2013). 2.2 Effects of Profit Sharing on Employees’ Work Attitude and Behaviour The use of profit sharing schemes can create positive effects on the work attitude and behaviour of each employee. Aside from reducing the rate of employees’ turnover and absenteeism (DArt and Turner, 2004), the use of profit sharing can also motivate each employee to increase overall work performance (Blasi et al., 2008; Bryson and Freeman, 2008; Robinson and Wilson, 2006). Furthermore, profit sharing could somehow uplift employees’ morale and improve the overall labour productivity (Bellmann and Moller, 2010). Based on the research study that was conducted by McNabb and Whitfield (2007), it was noted that the use of profit sharing strategy could also increase the willingness of each employee to participate in reaching the business goals. 2.3 Common Reasons Why HR Managers Should Adopt the Use of Profit Sharing Plan In some cases, paying employees their salary is not enough to motivate them at work. With this in mind, Steers, Runde and Nardon (2010) strongly suggest the need to consider profit sharing as a form of employees’ reward. In the process of sharing the company’s profit with the rest of the employees, the HR manager could make each employee feel like they are part-owners of the business (Thompson 2000). This explains why employees who work for companies that offer profit sharing also unconsciously increases their overall work contribution. In another study, Bellmann and Moller (2010) purposely examined the impact of profit sharing on company hiring, massive layoffs, and resignation from the company. As a result of increasing wage flexibility, Bellmann and Moller (2010) found out that profit sharing can actually make employment become more stable. In the process of continuously improving the company’s hiring and subsequently reducing the incidence of massive layoffs, Bellmann and Moller (2010) explained that the use of this type of motivation strategy can indirectly increase the company’s long-term profitability. 2.4 Important HR Management Considerations When Selecting the Best Motivational Strategy At all times, HR managers are being challenged to implement effective strategies that will empower each employee to work harder and be more self-sufficient in their own little ways. With this in mind, HR managers should carefully choose the best motivational strategy that will create positive impacts on the work performance of each employee (i.e. bonuses, profit sharing, etc.). In almost all cases, the HR manager should have better understanding of its long-term business objectives (Masternak, 2009). In line with this, the HR manager should consider answering the following questions: (1) Does the motivational plan need to be effective in terms of retaining or recruiting more employees? (2) Does the company prefer liquidity for its equity or does it want to boost its production? Basically, the answers to these questions will help the company choose the most appropriate motivational plan for all employees (Masternak, 2009; Mello, 2002). Sen (2008) mentioned that profit sharing without involving all employees in decision-making can make this particular motivational strategy not effective. Therefore, HR managers who prefer the use of profit sharing strategy should not only gain more insight on how each employee perceives the use of this type of motivational scheme but also to listen to the personal interests of each employee. Businesses with steady profits can opt to reward employees in the form of either cash money or stock option awards (Mcguigan, 2013). In most cases, a business that is at the start-up age will need to protect and be more cautious with regards to how the company would spend its money. As a company reaches the maturity stage, the HR manager will have more option to use profit sharing strategy. In most cases, new economy enterprises may be far from reaching the profit margins of businesses in old economies. Therefore, stock option can be more attractive to businesses in new economy as a reward (Edward Lowe Foundation, 2014). Employees’ age can also be an important HR consideration when deciding for the best motivational strategy. In situations where in the workforce is young and educated, Edward Lowe Foundation (2014) explained that immediate stock rewards can serve as the best motivation. In case the workforce is composed of older people, the provision of retirement plan is much better (Mejia, Berrone and Santos, 2010). Chapter 3 – Proposed Research Methodology 3.1 Research Design The proposed research method is a combined quantitative and qualitative research survey study. Regardless of age, gender, and nationality, qualified research participants include people who have been employed at John Lewis Partnership for the last three (3) years. Basically, a mixed method will be employed in the proposed research study. For instance, to determine whether or not the use of profit sharing scheme created a positive or negative impact on John Lewis’ employees’ work motivation, the proposed research study will purposely interview the HR manager of John Lewis Partnership for a period of 25 to 30 minutes. In the process of conducting a one-on-one research interview with the HR manager, it is possible for the researcher to obtain a more subjective response to each of the research questions presented on Appendix I on page 17. To learn more about how profit sharing affects the attitude and behaviour of John Lewis’ employees, a total of 100 highly qualified individuals will be invited to participate in the actual research survey study. (See Appendix II on page 18) Based on Saunders, Lewis and Thornhill’s (2007) “research onion”, the proposed research study will make use of a subjectivist position. As such, the research study design will seek to generate subjective response concerning the research interviewees’ personal experiences, feelings, thoughts, ideas, and perception concerning the use of profit sharing and its impact on satisfying the motivational needs of its employees. Eventually, a “top-down” or deductive approach in research will be adapted in the proposed research study. It means that deductive reasoning based on certain theories will be considered before coming up with a more specific conclusion that is generally based on facts. 3.2 Data Collection Procedure As part of the data collection procedure, a semi-structured interview questionnaire was first designed based on the main purpose of the research study as well as the research objectives and sub-objectives (Saudners, Lewis and Thornhill, 2012). Using the semi-structured research interview questionnaire, the researcher will purposely ask about the impact of profit sharing on its employees’ work motivation, productivity, employees’ turnover rate, ability to work in team, and the working relationship between the supervisor and the rest of the employees. Using a research survey questionnaire, research respondents will be asked about whether or not they are happy and satisfied with the profit sharing arrangement they have with John Lewis. 3.3 Sample Population Only the HR manager of John Lewis will be invited on a one-on-one interview with the researcher. A total of 100 research survey respondents who are currently working at Waitrose grocery store in Bishops Stortford will be invited to participate in the actual research survey study. Because of limited time available to complete the proposed research study, a non-probability sampling method known as the convenience sampling will be applied in search for potential research interviewees. 3.4 Research Ethics To protect the privacy of each research interviewees, their personal information will be treated with top most confidentiality at all times (King and Horrocks, 2010, p. 117). As part of the research ethics, it is necessary to inform each of the research interviewees about the main purpose of the research study and their rights as prospective research interviewees. To increase the chances of being able to persuade each highly qualified research interviewee, it is necessary to explain to them that all of their personal information will not be revealed in the final research study report. To ensure that the personal identity of the research survey respondents will be kept anonymous at all times, numerical code will be used to differentiate the responses of each research survey respondents (i.e. research respondent # 1, research respondent # 2, etc.). With regards to the law of informed consent, each of the research survey respondents will be given the chance to decide on participating or not participating in the actual research study (Liamputtong, 2008, p. 124). Chapter 4 – Proposed Time Table During the first week, the research topic will be finalized. Eventually, a written draft will be made with regards to the proposed research objectives, research questions, research method and data collection procedure. Based on the research objectives and research questions, a review of literature is expected to be completed between the 2nd and 3rd week. Between the 3rd and 4th week, a semi-structured research interview questionnaire and research survey questionnaire will be drafted in relation to the main purpose of the proposed research study. Before writing down both questionnaires, the literature review should be finalized first because it will serve as a basis on how and what to ask in the formal research interview and research survey questionnaire. The accuracy and validity of the research findings is somehow dependent on the kind of research questions that will be asked with the research interviewee and the research survey respondents. For this reason, a maximum of two (2) weeks was purposely allocated in designing the actual semi-structured interview and research survey questionnaire. Basically, two (2) weeks is more than enough to allow the researcher to have more time and concentration to reflect on what should be asked during the actual interview and in the actual research survey study. It is challenging to fit in the schedule of the HR manager and eventually locate 100 qualified research survey respondents who are willing to participate in the actual research study. This explains why a maximum of three (3) weeks was designated in search for a the research interviewee and potential research survey respondents. Between the 7th and 8th week, the researcher will focus on analyzing the research findings. On the 8th week, the actual research study report will be finalized. (See Figure I – Proposed Time Schedule on page 13) Figure I – Proposed Time Schedule References Andrews, M., Bellmann, L., Schank, T. and Upward, R. (2010). The impact of financial compensation on workers compensation. Journal of Labor Market Research, 43(1), pp. 72-89. BBC News. (2013, March 7). John Lewis announces 17% staff bonus as profits rise. Department store group John Lewis has announced a 17% bonus for staff after reporting a rise in profits. [Online] Available at: http://www.bbc.com/news/business-21697603 [Accessed 19 June 2014]. Bellmann, L. and Moller, I. (2010). Profit sharing and employment stability. S BR, 62, pp. 73-92. Blasi, J., Freeman, R., Mackin, C. and Kruse, D. (2008). Creating a bigger pie? The efects of employee ownership, profit sharing, and stock options on workplace performance, NBER Working Paper 14230. Bryson, A. and Freeman, R. (2008). How does shared capitalism affect economic performance in the UK. NBER Working Paper 14235. DArt, D. and Turner, T. (2004). Profit sharing, firm performance and union influence in selected European countries. Personnel Review, 33(3), pp. 335-350. Edward Lowe Foundation. (2014). “Profit-Sharing Options: Pros and Cons”. [Online] Available at: http://edwardlowe.org/digital-library/profit-sharing-options-pros-and-cons/ [Accessed 19 June 2014]. Havlíček, K. (2011). Management & controlling of small and medium enterprise. In Jana, F. and Petr, P. (eds) "Profit-Sharing – A Tool for Improving Productivity, Profitability and Competitiveness of Firms?" Journal of Competitiveness. 5(4), pp. 3-25. IRS. (2014). 401(k) Plans. [Online] Available at: http://www.irs.gov/Retirement-Plans/401(k)-Plans [Accessed 19 June 2014]. Jana, F. and Petr, P. (2013). Profit-Sharing – A Tool for Improving Productivity, Profitability and Competitiveness of Firms? Journal of Competitiveness, 5(4), pp. 3-25. Kalmi, P., Pendleton, A. and Poutsma, E. (2005). Financial participation and performance in Europe. Human Resource Management Journal, 15(4), pp. 54-67. Katz, H. and Meltz, N. (1991). Profit Sharing and Auto Workers Earnings—The United States vs Canada. Relations industrielles/Industrial Relations, 46(3), pp. 515-530. King, N. and Horrocks, C. (2010). Interviews in Qualitative Research. CA: Sage Publications Ltd. Kollewe, J. and Wood, Z. (2011, March 9). John Lewis to share nearly £200m in bonuses after successful year. The partnership reported a 20% leap in pre-tax profits to £367.9m, and will create 4,300 jobs this year. [Online] Available at: http://www.theguardian.com/business/2011/mar/09/john-lewis-staff-share-200m-pound-bonuses [Accessed 19 June 2014]. Liamputtong, P. (2008). Doing Cross-Cultural Research: Ethical and Methodological Perspectives. Springer Science. Long, R. (2010). Strategic Compensation in Canada. Toronto: Nelson Education. Masternak, R. (2009). Gainsharing or Profit Sharing: The Right Tool for the Right Organization. [Online] Available at: http://www.hr-guide.com/data/G44301.htm [Accessed 19 June 2014]. Mcguigan, J. (2013). Managerial economics: applications, strategies and tactics. South-Western. McNabb, R. and Whitfield, K. (2007). The impact of varying types of performance - Related pay and employee participation on earnings. International Journal of Human Resource Management, 18(6), pp. 1004-1025. Mejia, L., Berrone, P. and Santos, M. (2010). Compensation and organizational performance: theory, research, and practice. NY: M.E. Sharpe. Mello, J. (2002). Strategic human resource management. Australia: South-Western College Publication. Robinson, A. and Wilson, N. (2006). Employee financial participation and productivity: An empirical reappraisal. British Journal of Industrial Relations, 44(1), pp. 31-50. Saudners, M., Lewis, P. and Thornhill, A. (2012). Research methods for business students. 6th Edition. Harlow: Pearson Education Ltd. Sen, M. (2008). Business management. Jaipur: Oxford Book Company. Steers, R., Runde, C. and Nardon, L. (2010). Management across cultures challenges and strategies. Cambridge: Cambridge University Press. United States Department of Labor. (2014). Profit Sharing Plans for Small Businesses. [Online] Available at: http://www.dol.gov/ebsa/publications/profitsharing.html [Accessed 19 June 2014]. Waitzman, M. and Kruse, D. (1990). Profit sharing and productivity. In Blinder, A.S. (ed) "Paying for Productivity: A Look at the Evidence". Washington, DC: The Brookings Institution. Work Management. (2013, June 17). 60 second guide: Profit-sharing schemes. [Online] Available at: http://www.worksmanagement.co.uk/employment-law/60-second-guide-profit-sharing-schemes/52061/ [Accessed 19 June 2014]. Appendix I – Semi-Structured Research Interview Questionnaire 1. Hi. How long have you been employed at John Lewis as the HR manager? 2. What do you think is the impact of profit sharing on employees’ work motivation? Do you agree that the use of profit sharing strategy has something to do with the increase in each employee’s individual work performance? Can you elaborate your answer please? 3. Based on your professional experiences, do you agree that profit sharing somehow decrease employees’ turnover rate? Kindly provide an explanation to your answer. 4. Do you think that the use of profit sharing can improve teamwork and cooperation among each employee? Why so? 5. How does profit sharing affect the hiring process of each applicant? 6. Thank you. Appendix II – Research Survey Questionnaire 1. Gender ___ Male ___ Female 2. How many years have you been employed at Waitrose grocery store in Bishops Stortford? ___ less than 3 years; ___ 9 to 12 years; ___ 3 to 5 years; ___ 12 to 15 years; ___ 6 to 8 years; ___ more than 15 years. 3. Are you happy and satisfied with the profit sharing arrangements you have with the company? ___ Yes ___ No; Why? _________________________________________ _______________________________________________________________________ _______________________________________________________________________ 4. Are you motivated to work better because of the profit sharing arrangements you have with the company? ___ Yes ___ No; Why? ___________________________________ _______________________________________________________________________ _______________________________________________________________________ 5. Does profit sharing arrangement you have with John Lewis improve your working relationship with your supervisor and the rest of the employees? ___ Yes ___ No; Why? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 7. Do you think that the current profit sharing arrangement you have with John Lewis encourages you to deliver better customer service? ___ Yes ___ No; Why? _________ _______________________________________________________________________ _______________________________________________________________________ *** Thanks *** Read More