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.
 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?
MGMT 4030 - Managing Employee
Reward Systems
 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