Teambased Pay

1
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.

2
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.

3
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.

4
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.

5
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.

6
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.

7
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?

8
Team Pay Controversies

• Dealing with Free Riders
• Inhibiting High Individual Performers
• Interdependent Teams may Compete rather than
  Cooperate with each other.

9
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.