MGMT 4030 - Managing Employee Reward Systems

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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