Team-based Pay

Team Definition (Katzenbach & Smith, 1993) Group of employees whose members are mutually accountable to each other for common goals. Team members interact on a regular basis. There is the possibility of synergy between team members. Size of team is between 2 and 25 members.

MGMT 4030 - Managing Employee Reward Systems

Types of Teams
(Cohen & Bailey, 1997)

Work Team
Controls a business process such as customer service or manufacturing. Product or service quality is a key criteria. Permanent work assignment and full-time commitment.

Project Team
Project is limited by completion time such as new product design or construction project. Delivery time, budget variance and design quality are some criteria. Full-time commitment; after project team members are reassigned to different projects.
MGMT 4030 - Managing Employee Reward Systems

Types of Teams (Contd)

Parallel Teams
Used to solve specific problems such as quality, safety, employee grievances or impact of technology change. Used in parallel to functional units where employees spend most of their work time. Requires only a part-time commitment as team member.

MGMT 4030 - Managing Employee Reward Systems

Why Use Team Pay?

To Encourage Behaviors such as Peer Cooperation Information Sharing Unselfish behavior supportive of team
Sacrifice personal interest for good of team such as giving up leisure time on weekend to work for an important team goal.

Mutual Monitoring
Provide performance feedback to team members.
MGMT 4030 - Managing Employee Reward Systems

Monetary Team Rewards

(Gomez-Mejia & Balkin, 1992)

Team Bonus - Cash payment to tied to achieving major team performance outcome and allocated on non-recurring basis. Team Merit Pay - Cash adjustment to salary tied to achieving team behavioral and performance outcomes. Skill-based Pay - Adjustment to base pay rate of team members tied to team competence level. Gainsharing - Share gains of unit/department with interdependent teams. Spot Cash Rewards - Discretionary basis.
MGMT 4030 - Managing Employee Reward Systems

Non-monetary Team Rewards

Team Recognition Reward - Public ceremony or announcement in company newsletter. Team Celebration - Celebrate team win; includes special dinner, ticket to sports event,etc. Merchandise - Team jacket, pin, emblem to build team identity and espirit de corps. Travel - Team members (and possibly spouses) travel to resort for relaxation and fun - often used for sales teams after successful marketing push.
MGMT 4030 - Managing Employee Reward Systems

Team Pay: Design Issues

Eligibility - full or part time? managers? Newcomers? Size of Reward - large or small? Individuals shares - equal or equitable shares? Frequency of rewards - one time only? recurring? Criteria for Reward - performance metric? Outcome? Milestone? Behavior/ Funding the reward - self-funding: costs savings, profits, customer goodwill. Administration of rewards - team? managers? HR? customers? 4030 - Managing Employee Reward Systems MGMT

Team Pay: Controversies

Dealing with Free Riders Inhibiting High Individual Performers Interdependent Teams may Compete rather than Cooperate with each other.

MGMT 4030 - Managing Employee Reward Systems

Team Pay Case

Develop a Team pay Strategy for one of the 3 cases your team is assigned to analyze. Be prepared to present it to the class. MGMT 4030 - Managing Employee Reward Systems