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 (Cont’d)
• 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?
• Individual’s 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
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.
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MGMT 4030 - Managing Employee
Reward Systems