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Preparation:

Read Article on Pros and Cons of Profit Sharing with employees.
View 3 Videos:
1. Starbucks profit sharing stores
2. Set B: 5 steps dealing with ambiguity
3. Set B: Inspiring leadership

Discussion:

Is profit sharing good for Starbucks – why or why not. Provide objective evidence to support your decision, at least three reasons.
Should more Starbucks stores move to profit sharing - why and why not.
1. If not, provide specifics about your rationale.
2. If so, outline strategy - timeline to open stores, number of stores, and which region of U.S. or International.

Considering the following competitors of Starbucks – Peet’s Coffee, Costa Express, and Caribou Coffee

Which of the three companies is in the best position to implement or expand profit sharing stores – why is the competitor is selected. Provide objective evidence to support your decision, at least three reasons. the article is
- FIN620_article_Pros and Cons of Employee Profit Sharing.pdf the videos are in you tube 1/ 5 Keys to Inspiring Leadership, No Matter Your Style 2 / Five Steps for Effectively Dealing with Ambiguity
  3/ STARBUCKS LAUNCHES PROFIT SHARING STORES IN NYC AND LA
- Put the question first and the answer down & use simple words & avoid plagiarism

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Pros and Cons of Employee Profit Sharing Pros and Cons of Employee Profit Sharing Derek Croucher/ Photographer's Choice By Susan M. Heathfield Updated October 13, 2016 Profit sharing is an example of a variable pay plan. In profit sharing, company leadership designates a percentage of annual profits as a pool of money to share with employees or a portion of employees such as executives. The pool of money generated is then divided across covered employees using a formula for distribution. This formula can vary from company to company. They can either share in terms of stocks and bonds, or straight cash. Profit sharing, when distributed as a percentage of annual pay - a common practice - results in less money shared with employees in lower paying jobs and higher amounts shared with highly compensated employees. A highly paid senior employee can sometimes see very significant profit sharing bonuses - 40 or 50% of annual salary is not uncommon for a senior executive. However, a lower level employee may only see 1 to 2% of his salary as his part of the profit sharing. This reflects the belief that more highly compensated employees are responsible for managing the company, making decisions, taking more risk, and providing leadership to the other employees. While a low-level employee is secure that his salary will be the same year after year, perhaps with a modest increase, a high-level employee knows that if she doesn't ensure the company's success, her compensation may become significantly less. Profit sharing payments are generally made only if the company has been profitable for the time period specified, or when an employment contract requires the compensation. For people without contracts, the company can change the terms of the plan at will. Profit sharing usually occurs annually after the final results for the annual company profitability have been calculated. Employers can choose how to set up their profit sharing plans, but they must set up an official plan with the relevant documents. The Department of Labor recommends that you:  Adopt a written plan document,  Arrange a trust for the plan's assets,  Develop a record keeping system, and  Provide plan information to employees eligible to participate Companies can decide whether to administer the plans themselves or hire a plan to administer. Companies must keep strict records and have a strict fiduciary responsibility for the plan. Plan documents are legal documents that must be followed exactly. Companies are free to change their plans, but they must do so with the proper oversight. Positives About Profit Sharing The positive impact of profit sharing is that it sends the message that all of the employees are working together on the same team. The employees have the same goals and are rewarded equivalently to reinforce this shared service to customers and lack of competition with each other. Employees who know that they will receive financial rewards if the company does well are more likely to want the company to succeed. They have a vested interest in its success. Profit Sharing's Weakness The weakness of profit sharing plans is that individual employees cannot see and know the impact of their own work and actions on the profitability of the company. Consequently, while employees enjoy receiving their profit sharing money, it gradually becomes more of an entitlement than a motivational factor. Senior level employees, of course, who generally receive a much higher percentage of the profit share, know what is going on and make decisions that can make an impact on the bottom line. A front line receptionist may not understand that her interactions with vendors, clients, and random people off of the street can actually make a difference in the profitability of the company. With profit sharing, employees receive the profit sharing money regardless of their performance or contribution.
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Explanation & Answer

Attached.

Running Head: PROFIT SHARING

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Profit Sharing
Institution Affiliated
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PROFIT SHARING
Profit sharing is the way that the annual profits of a company are shared amongst the
stakeholders in such a company. It comes with a lot of advantages to the company that applies.
This means that it is good for Starbucks also. There are different reasons why profit sharing is
important for any company. One of the reasons is that it brings about loyalty in the company.
When employees feel that they have an opportunity to get more, they love the company that they
are working for and they would not want to leave such company (Wang, 2000). Starbucks would
really benefit from employee loyalty because it brings about organizational commitment that
ensures that the money that would have been used to train other new employees is saved because
the employees of the company would not leave it easily.
Another good reason is that it brings about increase in productivity. Profit sharing means
that when all the profits are pooled together, the beneficiaries share them out. The more the
profits, the more each beneficiary will get and the less the profit the less they will get. This
makes the employees to work extra harder so that their share will increase and by this the
productivity of the company increases.
Profit sharing also works to create a better reputation for a company. A good reputation
means that the company will have a good image and this works to increase customer loyalty and
also to attract more customers. When this happens, the profits of the company increase. This is
because when the employees are satisfied they advertise the company they work for by way of
word of mouth (Wang, 2000).
More and more Starbucks should move to profit sharing strategy. The reason why they
should do this is because of the benefits that they stand to get from this. As shown earlier, the

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PROFIT SHARING
company with profit sharing gets more employee loyalty, increased productivity and also
customer loyalty that comes from the good reputation that comes with profit sharing.
Caribou Coffee is the best suited competitor of Starbucks that stands to benefit more by
implementing profit sharing strategy. The reason for this is because as it is, the employees
complain about working conditions in the company and this works to demoralize them. In order
to boost their morale and make them more active and more productive, they should be given a
promise of getting a reward because of their hard work. This would make them to work extra
hard and this would mean that the company would get higher profitability. The company would
also save the money required for advertising because the employees’ word of mouth is enough to
attract more customers for the company (Wang, 2000).

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PROFIT SHARING

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References

Wang, H. (2000). The effects of employee stock ownership and profit sharing on firm survival.
Minneap...