So lets start with the most convincing evidence that our theories are correct and work our way backwards to what might help us achieve that proof.
Why not search for the evidence which falsifies our theories, and change our theories to the one with the strongest evidence?
My reference proposal would be a retail coffee shop, wherein the owners would receive a smaller percentage of ‘net profits’ than traditional, and the employees would be paid a minimum base rate (complying with minimum wage regulations), plus a prorated part of a significant percentage of the net profit of the business. Rather than try to prorate based on production, I was expecting to use a proxy such as ‘hours worked’.
Hypothesis: A business which quarterly distributes a portion of its net profits back to all employees will have higher net profits than a control.
Proposed experimental evidence: Gather the most reliable information about the expected performance of a ‘traditional’ business, and create the experimental business instead. Compare the actual results with the traditional estimate. This can also be done by projecting the performance of an existing traditional business model and changing the model.
Potential outcomes: Null: Net profit does not vary with portion of profits distributed to employees
Counter: Net profit diminishes with increasing portion of profits distributed to employees.
Variant: Net profit varies in a non-simple manner with portion of profits distributed to employees.
Hypothesis: Net profit increases with portion of profits distributed to employees.
(In all cases, I’m counting the base wages as an expense and a reduction to profit, but the profit redistributed remains in the profit column; this is probably wrong by accounting standards. As a result, it is expected that there is some point where increasing profit-sharing increases net profit while decreasing stockholder returns.)
Not considered: Distributing an amount of money which is a strictly increasing nonlinear function of net profit.
I’ve been researching this while making a website to do with experimenting with organizations to reduce corruption in them. I came across this reference. From the way it was quoted it suggested that profit sharing wasn’t effective, but random checking with a very low punishment pay if insufficient effort was. I’ve not read it, but thought you might find it interesting. It is going on my pile of things to read.
Why not search for the evidence which falsifies our theories, and change our theories to the one with tIghe strongest evidence?
How much money do you have to experiment with? If it is not very large, we have to consider the ability of whatever experiments we do to enable us to raise money for more experiments.
About 20% of small businesses fail in the first year, what happens if our coffee shop, for some reason, is one of them? Just having a better organisational structure does not mean it will be free of accidents or illnesses. And I am not worried about the loss of money, but that a single business failing or succeeding won’t allow us to falsify a hypothesis. A small business with a better business structure may only have a 10% chance of failing but we would need more trials to tease out the confounding variables (of which there are many).
I would also need to look into the history of cooperatively owned and other profit sharing businesses, but as they have not taken over the world I doubt they are strictly better than non-profit sharing businesses.
What I meant by take over the world is: Collectively be successful and displace other organisation types. Out-compete. Not literally take over the world.
Why not search for the evidence which falsifies our theories, and change our theories to the one with the strongest evidence?
My reference proposal would be a retail coffee shop, wherein the owners would receive a smaller percentage of ‘net profits’ than traditional, and the employees would be paid a minimum base rate (complying with minimum wage regulations), plus a prorated part of a significant percentage of the net profit of the business. Rather than try to prorate based on production, I was expecting to use a proxy such as ‘hours worked’.
Hypothesis: A business which quarterly distributes a portion of its net profits back to all employees will have higher net profits than a control.
Proposed experimental evidence: Gather the most reliable information about the expected performance of a ‘traditional’ business, and create the experimental business instead. Compare the actual results with the traditional estimate. This can also be done by projecting the performance of an existing traditional business model and changing the model.
Potential outcomes:
Null: Net profit does not vary with portion of profits distributed to employees Counter: Net profit diminishes with increasing portion of profits distributed to employees. Variant: Net profit varies in a non-simple manner with portion of profits distributed to employees. Hypothesis: Net profit increases with portion of profits distributed to employees.
(In all cases, I’m counting the base wages as an expense and a reduction to profit, but the profit redistributed remains in the profit column; this is probably wrong by accounting standards. As a result, it is expected that there is some point where increasing profit-sharing increases net profit while decreasing stockholder returns.)
Not considered: Distributing an amount of money which is a strictly increasing nonlinear function of net profit.
I’ve been researching this while making a website to do with experimenting with organizations to reduce corruption in them. I came across this reference. From the way it was quoted it suggested that profit sharing wasn’t effective, but random checking with a very low punishment pay if insufficient effort was. I’ve not read it, but thought you might find it interesting. It is going on my pile of things to read.
How much money do you have to experiment with? If it is not very large, we have to consider the ability of whatever experiments we do to enable us to raise money for more experiments.
About 20% of small businesses fail in the first year, what happens if our coffee shop, for some reason, is one of them? Just having a better organisational structure does not mean it will be free of accidents or illnesses. And I am not worried about the loss of money, but that a single business failing or succeeding won’t allow us to falsify a hypothesis. A small business with a better business structure may only have a 10% chance of failing but we would need more trials to tease out the confounding variables (of which there are many).
I would also need to look into the history of cooperatively owned and other profit sharing businesses, but as they have not taken over the world I doubt they are strictly better than non-profit sharing businesses.
“better” can mean a lot of things, only one of which is “more likely to take over the world”.
What I meant by take over the world is: Collectively be successful and displace other organisation types. Out-compete. Not literally take over the world.