Individual or Team-Base Incentives? When to Use One, the Other or Both.

 

Twenty-five years ago, less than 20% of firms reported their workforce was engaged in one team or more at any given time.  Studies today show that teamwork and collaboration consume about 80% of the typical knowledge worker’s day. 

While most employees agree that team-based work is essential, only one-quarter prefer to work in teams versus alone.  Before the pandemic, 68% say the teams they work on were dysfunctional.   As business becomes increasingly global and cross-functional, silos are breaking down, connectivity is increasing, and teamwork is seen as a key to organizational success. 

When planning reward initiatives, designs to optimize team incentives is not immediately obvious or intuitive. The type of work that teams perform ranges widely and can change over time. For incentives to do good rather than harm, they should encourage the types of actions and behaviors appropriate to the work of the team in question – the right incentives at the right time. 

Things to consider when planning your team incentives might include:

 Whether the work of the team is highly-interdependent (tight team) versus loosely dependent (loose team).

 Organizations emphasize individual achievement when it comes to compensation, promotion, rewards and recognition because they’re comparatively easier to measure and administer.  Yet individual rewards might contribute very little to team dynamics and performance, or even detract from them.

 For a variety of reasons, team-based incentives and rewards may prove more difficult to administer (particularly in larger teams) because individuals come to their teams with different goals and contribute varying levels of effort and/or value.  Team rewards may even introduce issues where individuals let their teammates do most of the work while sharing equally in the reward. Adversely, individuals may have to give up personal recognition for the benefit of team performance.

There is a growing body of research that offers compelling evidence that where small teams engage in highly-interdependent work, team-based rewards drive better performance and outcomes than individual rewards.  This is possibly driven by intergroup competition.

 In small, highly-interdependent teams, hybrid rewards – which recognize team achievements and the behaviors and productivity of individual team members – can drive the best results of all. 

 As small teams become more interdependent, better communications and greater cohesion will result in better performance.

 When a team does not perform highly-interdependent work, greater communications and cohesion might actually harm performance; largely because it is time-consuming and unnecessary. Here, individual incentives are likely more effective.

 So do the research. Determine if you have tight teams (highly interdependent like a volleyball team or restaurant crew) or a loose team; whether you have small teams (10 or less) or large teams (more than 10 members.)

Small and tight teams are more effective at driving performance than large and loose teams.  For large and loose teams consider using Hybrid awards that reward the teams’ accomplishments as a whole and rewards the behavior and performance of the individuals as well.