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.

  

Are Incentives for Team Selling a Recipe for Disaster?

Well the cop out answer is no and yes.  They certainly can be if they are not well planned in the first place.  And more importantly if you don’t account for the metrics of the different departments involved, how they are measured for performance and how they are compensated, you could be headed for a calamity.

Here’s a simple example:

A sales force is challenged to sell more of their base product, let’s say a sophisticated and expensive software system.  The VP Sales offers an incentive to the sales force for incremental sales especially to new customers.  However to make the sale, the sales force must bring in service technicians because the system requires expensive implementations.  In addition engineering needs to be involved to make sure it is a proper fit and includes the proper features to do the job.  In this example lets’ assume that the sales force is responsible for managing the team.

As tradeoffs between product features and other services can exist, the sales force opts to defer features that they feel (right or wrong) can be managed by the service team, or re engineered by IT.  Sales also rely on service and engineering to ensure proposals are realistic and on budget.  Teamwork is essential.

But it may never happen.  What if the sales team is incented on gross revenue and the service team is compensated on profit margin?  And then add to the complexity that engineering earns a bonus based on project accuracy and timeliness and that bonus can grow based on overall department profitability.

In team selling, much friction can arise and has the potential to cause a loss in sales and customers, lower customer satisfaction scores and can even effect employee retention and morale.

Before you plan and implement a sales incentive activity you need to gather the department heads involved and hash out all these contingencies.  Look at the metrics across all the functioning teams and make sure your teams are incented to work together.  When all the puzzle pieces fit, you will have less likelihood of program that can fail or do great harm and ultimately be very successful.

For more information on Ultimate Choice Inc.’s products or services contact us at Ultimatechoiceinfo@cox.net