EFFECT OF PROFIT SHARING SCHEME ON EMPLOYEE PERFORMANCE IN CAMEROONIAN RETAIL FIRMS

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Employee profit sharing, a longstanding practice in the realm of compensation, remains prevalent among various firms in Cameroon (Kalmi Pendleton & Poutsma, 2019). One significant rationale for its adoption is the belief in its capacity to enhance company productivity (Long, 2018). However, while there is substantial evidence indicating that, on average, employee profit sharing does indeed boost company productivity (Blasi et al., 2020), it's equally evident that this isn't universally true (Magnan & Stonge, 2021). Thus, a crucial task is to identify the circumstances under which this relationship holds, though such conditions remain unresolved empirically (Bayo & Larraza 2019). A profit-sharing scheme is a compensation arrangement offered by employers to their employees, where a portion of the company's profits is distributed among the employees in addition to their regular wages or salaries. This scheme is designed to incentivize employees to contribute to the company's profitability and success by linking their financial rewards directly to the company's performance. Profit sharing schemes represent a form of incentive compensation wherein employees receive a share of the company's profits based on predetermined criteria. By linking employee rewards directly to organizational performance, profit sharing schemes aim to motivate employees, enhance job satisfaction, and foster a sense of ownership and commitment. Team-based production has often been posited as a potential condition affecting the impact of employee profit sharing on company productivity (Heywood & Jirjahn, 2009; Jones et al., 2010), yet empirical attention to whether this holds true remains scarce, with few exceptions (Jones et al., 2010), despite other studies suggesting that work teams and financial incentives, albeit not necessarily profit sharing, complement each other (Boning et al., 2007; Ichniowski et al., 1997; MacDuffie, 1995). Therefore, a survey will be conducted to examine the effect of profit sharing scheme on employee performance in Cameroonian retail firms.

1.2 Statement of the Problem

Profit sharing schemes have gained increasing attention as a potential tool for enhancing employee performance and organizational success.  However, while profit sharing may help align the interests of workers with those of shareholders, some scholars have argued that its effectiveness in motivating workers may be limited (Alchian and Demsetz 2019). Despite the theoretical benefits of profit sharing schemes, empirical evidence on their effectiveness in the context of Cameroonian retail firms remains limited. While profit sharing schemes have been widely studied in various global contexts, the unique socio-economic and cultural factors in Cameroon may influence the outcomes of such schemes differently. Hence, it is in the light of these that the study seeks to examine the effect of profit sharing scheme on employee performance in Cameroonian retail firms.

1.3  Objectives of the Study

The main purpose of this study is to examine the effect of profit sharing scheme on employee performance in Cameroonian retail firms. Specifically, the study will;

To determine the extent profit sharing scheme is adopted and implemented among retail firms in Cameroon.

To determine whether there is a significant relationship between profit sharing scheme and employee performance in Cameroon.

To examine the impact of profit sharing on employees performance in retail firms.

To examine the disadvantages of profit sharing in retail firms in Cameroon.

1.4 Research Questions

The following questions have been prepared for the study:

What is the extent of adoption and implementation of profit sharing schemes among retail firms in Cameroon?

Is there a significant relationship between profit sharing schemes and employee performance in Cameroon?

What is the impact of profit sharing on employee performance within retail firms in Cameroon?

What are the disadvantages associated with profit sharing in retail firms in Cameroon?

1.5  Research Hypothesis

H0: There is no significant effect of profit sharing schemes on employee performance in Cameroonian retail firms.

Ha: There is a significant effect of profit sharing schemes on employee performance in Cameroonian retail firms.

1.6  Significance of the Study 

From the results of this study, government agencies and policymakers will have an understanding of the implications of profit-sharing schemes on labor market dynamics and economic growth and also increase their interest in promoting fair compensation practices in Cameroonian retail firms. Additionally, investors and shareholders will be able provide capital to Cameroonian retail firms in exchange for ownership shares or equity. This will allow them to earn returns on their investment, which can come in the form of capital appreciation (increase in the value of their shares) and/or dividends (distributions of profits). Also, retail business owners will be to design the profit-sharing scheme, determine its structure, eligibility criteria, and how profits will be distributed among employees.

Further more, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to the effect of profit sharing schemes on employee performance in Cameroonian retail firms.

1.7 Scope of the study 

The scope of this study is boarded on the effect of profit sharing schemes on employee performance in Cameroonian retail firms. Empirically, this study will determine the extent profit sharing scheme is adopted and implemented among retail firms, determine whether there is a significant relationship between profit sharing scheme and employee performance, examine the impact of profit sharing on employees performance in retail firms and the disadvantages of profit sharing in retail firms in Cameroon.

Geographically, the study will be delimited to employees of some selected organizations in Yaounde, Cameroon.

1.8 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. 

More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.9 Definition of Terms

Profit sharing Scheme: According to the Cambridge Dictionary, a profit-sharing scheme is "an arrangement in which employees receive a share of the company's profits as part of their pay."

Employee Performance: is a dimension to measure the success of retail firm in which the firm must be able to create high employee performance in order to maintain survival and a sustainable competitive advantage

Employee effectiveness: According to the study is a measure of the relationship between employee inputs (skills and effort) and outputs (good and services produced) and in simple terms the more output an employee can achieve with a given amount of inputs, the more effective they become.