National Evaluation Series (NES) Business Studies Practice Test

What is one outcome of an effective profit-sharing plan?

1. Decreased employee motivation

2. Increased competition among employees

3. Enhanced alignment of employee and company goals

4. Higher employee turnover

The correct answer is: Enhanced alignment of employee and company goals

An effective profit-sharing plan creates a sense of shared purpose and community within a company, as it ties the financial success of the organization directly to the earnings and rewards of its employees. This alignment encourages employees to work towards common goals, knowing that their contributions can lead to tangible benefits for both themselves and the organization. When employees feel that their efforts directly impact the company’s financial health, they are more likely to engage fully in their roles, driving productivity and enhancing overall performance. The other options do not accurately describe the outcomes of a well-implemented profit-sharing plan. Decreased employee motivation and higher employee turnover contradict the intent and benefits of profit-sharing, as such plans are designed to retain talent by rewarding performance. Increased competition among employees is not beneficial in this context; rather, profit-sharing fosters collaboration and teamwork, as all members of the organization have a shared interest in the company's successes.