Yesterday’s Advisor featured consultant Katie M. Busch’s tips on incentives for nonexempts. Today, her take on team vs. individual awards, plus an introduction to the unique guide just for smaller—or even one-person—HR departments.
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Busch, whose remarks came at a recent BLR-sponsored webinar, is owner of HR Compensation Consultants, LLC. Here are her suggestions about team and individual incentives.
What Are Team-Driven Incentives?
Team-driven incentive are intended to foster a collaborative environment in which team members are focused on helping one another. They:
- Are based on a team’s performance.
- Place the focus on how a team comes together to drive the business.
- Types of plans:
- Gain-sharing plans
- Profit-sharing plans
- Earnings-at-risk plans
Types of Team-Driven Rewards
- Team incentive carve-out—A broadening of individual performance measures to include team performance.
- Team multiplier—Multiplies the individual’s incentive earning by a factor based on team performance.
- Team pool—Typically used in sales; allocates the incentive to team members based on each person’s role in the sales process.
- Unique team measures—Specifically created for a unique team; generally are customer-focused measures.
Individual Performance Measurements
- Quantity of work output
- Quality of work output
- Monthly sales
- Work safety records
- Work attendance
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Advantages and Disadvantages of Individual Incentives
Advantages
- Relate pay to performance of individual.
- Help retain best performers.
- Provide equitable distribution of compensation.
- Suitable for individualistic culture.
Disadvantages
- Factors not rewarded may be overlooked.
- Factors not in the employee’s control might impact outcomes.
- Establishing performance standards is time-consuming.
- Unrealistic standards can hamper motivation.
- Can lead to mistrust between workers and management.
Advantages and Disadvantages of Team Incentives
Advantages
- Improve organizational performance.
- Based on organizational measures.
- Periodically measured.
Disadvantages
- Line of sight may be lessened.
- May not be accepted by high-level individual performers.
- Increases to compensation at risk—lack of stability.
Is there a time and place for both types?
- Yes, based on the organization’s compensation philosophy.
- Individual incentives are focused on achieving work-related performance standards.
- Team incentives reward collective performance.
Examples of when team-driven goals may be the way to go instead of individual rewards:
Team-Driven
- Use to build a sense of ownership.
- Use to recognize increases in performance measurements that move the business forward.
- Use to promote teamwork and collaborative efforts.
Individual
- Use when the contribution to the business was performed independently.
- Use to recognize that individual contributions are part of the organizational culture.
- Use if individual competitiveness is desired.
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