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MGMT 4030 - Managing Employee

Reward Systems

What is Team-Based Pay?

The collective behavior of a business defines its operating
The method of compensation is at the core of a business
Temporary teams
Permanent teams

Todays relentlessly changing business climate demands a compensation

system that meets the following five non-negotiable criteria:
1. Combined with fiscal responsibility, it must fit the financial reality of
the business today and into the foreseeable future.
2. It must be controllable, not a large fixed percentage of revenue.
3. It must encourage and reward the right individual behaviors, and
performance consistent with the vision and culture of the business.
4. It must give clear guidelines and pathways for individual growth.
5. It must inspire and reward teamwork, team culture, and attainment of
the business overall performance and revenue goals.

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
Size of team is between 2 and 25 members.

Types of Teams
(Cohen & Bailey, 1997)

Work Team
Controls a business process such as customer service or
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
Full-time commitment; after project team members are
reassigned to different projects.

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.

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.

Monetary Team Rewards

(Gomez-Mejia & Balkin, 1992)

Team Bonus - Cash payment 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.
Gain sharing - Share gains of unit/department with interdependent teams.
Spot Cash Rewards - Discretionary basis - Non-cash rewards include
restaurant vouchers, a congratulatory note or verbal appreciation by the
manager, a training opportunity, team dinners etc.

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

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?
Funding the reward - self-funding: costs savings, profits, customer
Administration of rewards - team? managers? HR? customers?

Team Pay: Controversies

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