Chapter 10 - Class Notes
- in exam or test
Types of teams
1. Parallel teams
- participating employees are taken out of their regular departments and placed in
separate team structures with different operating procedures and objectives
- eg. problem solving teams, quality circles, etc
- variety of methods can be used to reward parallel teams
- gain sharing is the most common
- gainsharing - program that returns cost savings to the employees, usually as a
lump-sum bonus
- profit sharing - organsations set targets, if teams meet or exceed targets, they would
get a bonus
2. Project teams
- involve a diverse group of knowledge workers, such as design engineers, process
engineers, programmers and marketing managers
- brought together to conduct projects for a defined but typically extended period of time
- require reward systems that specifically support them
- rewards that are tied to accomplishments are often preferred and the rewards should
be distributed at the time the group completes the project
- sometimes it may be necessary to focus on individual performance in project teams by
measuring the contributions of individuals to the team’s effectiveness and to measure
each individual’s performance at the completion of each project
3. Work teams
- mostly found in manufacturing firms settings
- they are performing units in which members report through the team and are
responsible for the group’s performance
- eg. production, assembly and administrative support teams
- traditional reward systems are designed to support individual job performance
- work teams need to be rewarded differently
- most effective way to motivate teams is to establish metrics for successful team
performance and link rewards to team success
- using team performance appraisals can assist
- using gainsharing plans can also be effective
- merit pay in the form of salary increases or bonuses can be distributed to a team based
upon the results of a team performance appraisal
- for performance appraisals to work for teams, there must be clear and explicit
objectives, accepted measures and feedback about team performance
Options for team performance rewards
1. If members are not highly interdependent, then it makes sense to combine team
and individual merit pay
2. This can be though the use of special award or recognition programmes
- only used to recognise special team achievements
3. Gain sharing, which requires the work unit to be covered to be relatively
autonomous, responsible for a measurable output and comprised of members
who are interdependent with one another
Best practice guidelines
- do not rely on peer group pressure to deal with ‘freeloaders’ (social loafing)
- if you have team work and team pay, make sure there is an adequate system for individuals to
develop themselves and progress their careers
- team performance indicators which may be suitable in the design of a team bonus scheme
include - quantity of work done by the team
- cost effectiveness
- client satisfaction
- value of sales
- accuracy of work
- staff development indicators, eg. level of skills, staff retention and staff turn over
Team based pay plans
- building successful teams requires the delicate balance of remunerating individual efforts as
well as team efforts
- pay performance plans may be divided into 4 main areas
1. Individual based pay
- most used pay for performance plans
- merit pay is very popular
- merit pay consists of an increase in base pay, normally given once a year
- ratings from supervisors normally used to determine the amount
- once merit pay has been given, it remains part of the employee’s base pay
- based on ratings given during appraisals
2. Team based plans
- normally rewards all team members equally based on group outcomes
- outcomes should be measured objectively
- criteria for defining a desirable outcome may be broad or narrow
- payments may be in cash bonuses or in the form of non-cash rewards such as trips
- may be given incentives
3. Business area-department-wide pay
- same as team-based pay
4. Corporation-wide pay-for-performance plans
- rewards all employees based on the entire corporation’s performance
- profit sharing is the most widely used or share schemes
- profit sharing uses a formula to allocate a portion of declared profits to employees
- normally used in the form of cash bonuses and not added to a salary
Design considerations
- elements of an incentive plan include:
- purpose and objectives
- eligibility to receive incentives
- participation
- alignment of team and organisational goals
- funding
- measurement
- timing
- administration
- unhitching
- arbitration
- evaluation of whether plan needs to be changed
Performance measurement
- ability to measure the performance of a team is important
- first step is to identify the measures, then link them to appraisals before linking appraisal to
remuneration
- finding the right things to measure is critical
- measurement must be something the team has control over and must have potential to add
value to the organisation
Why teams fail
- unclear objectives
- changing objectives
- lack of accountability
- lack of management support
- lack of role clarity
- ineffective leadership
- low priority of team
- no team based pay
What makes a good team
- strong and effective leadership
- clear objectives
- the ability to make informed decisions
- the ability to act quickly on these decisions
- free communication
- the requisite skills and techniques to fulfil the project at hand
- clear targets for the team to work toward
Rewarding performers
- right awards presenter must be selected
- peers must be assembled for the presentation
- stress the employees’ performance and highlight their personal contribution
- include a few anecdotes and a brief history to show how the employees’ achievements tie to
the organisation’s culture and values
- thank the employees sincerely
- praise in public and punish in private to prevent humiliation
Pay the final frontier
- when you get to the point of determining team based pay, addressing the following questions
- how should individual performance be factored into pay decisions?
- how much of a bonus is the correct amount?
- should team members be paid different bonuses?
- will the incremental pay be enough to boost performance?
Advantages and disadvantages of various team incentive schemes
1. Gain sharing
Advantages
- money or resources that are saved by a team are returned
- to some degree to the team, used by many companies
- it links people with organisational success
- very easy to set up
Disadvantages
- it is hard to measure the success of most kinds of individual teams in money
2. Profit sharing
Advantages
- more widespread than gainsharing
- every year, profit share is paid to employees on corporate or division wide performance
Disadvantages
- because it is an organisation wide measure, the line of sight for low level employees is
poor
Employee ownership plans
- share options - help motivate employees
- makes employees have a sense of ownership
- but some companies are not worth owning
Non financial rewards
- there are many no-cost or low cost ways to keep team members involved and in the mood to
perform including:
- establish a prize
- get team members involved
- you may not be rich, but you can be famous
- praise in print
- meet the boss
- share the spotlight
- treat team members to a free lunch
- lavish team members with attention
Ingredients of a successful team
- team members must be galvanised by a common goal
- the most essential ingredient is a cause that everyone agrees on
- the culture of the organisation in which teams are rewarded
- team members have to like one another and what they are doing
- team members should be at ease with the leader
- diversity is one of the keys to a successful team
Recommended best practice
- cash reward has to be generous enough to get team member’s attention
- team bonuses can be linked to milestones
- let the team members divide up the bonus pool
- cash awards are manageable when people in an organisation participate in only one or two
teams
- give employees a choice of cash or non-cash awards
- combine cash and non-cash awards
