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INTRODUCTION TO TEAM REWARDS The team based compensation system reward employees who work in a team. This means that individual employees are compensated based on team performance. MOHRMAN ET AL(1995) defined teams as groups of individuals who work together to develop products or deliver services for which they are mutually accountable. It has been proved that employees who work in a team perform better results than those who work individually. Team work requires effective design of the organizational structure. It also requires the adoption of a collective performance evaluation method, rather than individual assessment based on the key result area(KRA) and key performance area (KPA). Team based rewards, therefore reward the behavior of the people working in team who can sustain performance.

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Designing a compensation structure based on individual performance will conflict with team set up. To avoid the clerical hassles associated with computing team based compensation, organizations usually prefers a team performance linked compensation plan, where the variables are distributed among the team members following the principle of equity, although individual employees may receive base pay different from each other.


HISTORY OF TEAM REWARDS Organizations adopted the idea of team work during the late 80’s. when teamwork was found more effective and competitive operationally. The collective efforts of people in a team setting increases overall performance and productivity. Simultaneously, team members can afford to take quality decisions, because they can pool their cross functional knowledge and skill. It helps organizations benefit from synergy, cooperation and unity of command. It is driven by 1 goal, provides flexibility and ensures better customer services.

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H owever, teamwork can only be efficient if the team is composed of ‘like minded’ intelligent people, not just intelligent people. Since all the team members report to 1 supervisor, organizations often face the constraint of grading pay. Organizations need to compromise between pay structure and talent. To clarify, a strategy group maybe presented by people from marketing, finance, HR and systems. It is first important to understand the goal of the team and then decide who can subscribe to its common goal. Ex 1 : a sales team represented by sales people sells products and services to customers. Ex 2 : a finance team controls costs to make products and services competitive. Ex 3 : the HR team provides quality manpower to achieve sales goals. EX 4 : system people provide information for decision making.


DEFINTION OF TEAM BASED PAY Tem based rewards are payments or other forms of non financial reward provided to members of a formally established team which are linked o the performance of that team. Their purpose is to : Deliver the message that one of the organizations core value is effective team work; Encourage group effort and cooperation by providing incentives and means of recognizing team achievements. Team reward are shared amongst the members of teams in accordance with a published formula or on an ad hoc basis for exceptional achievements . Rewards fir individuals may also be influenced by assessments of their contribution to team result.



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NATURE OF TEAM A team has been defined by KATZENBACH & SMITH(1993) as ‘ a small number of people with complementary skills who ae committed to a common purpose, performance goals and approach for which they hold themselves mutually accountable.’ B ) HOW TEAM FUNCTIONS? Teams are concerned with task completion(results) and the building of relationships (process). Team rewards therefore need to recognize not only what the team has achieved( its output) but also how the results have been obtained (inputs).

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D) TEAM EFFECTIVENESS Four factors that influence team performance are as follows:


AIMS OF TEAM PAY The aim of team pay is to encourage and reinforce the sort of behavior that leads to and sustain effective team performance by: Providing incentives and other means of recognizing team achievements. Clarifying what teams are expected to achieve by relating rewards to the attainment of predetermined and agreed targets and standards of performance, or to the satisfactory completion of a project or a stage of project. Conveying the message that one of the organizations core values is effective team work.




A. RATIONALE FOR TEAM REWARDS The aim of team reward process is to reinforce behaviors that lad to sustain effective team work. The four reasons for team pay are: Teams are the natural unit of the organization and it is appropriate to reward them as such. Team pay encourages good team work while performance pay that encourages individual effort militates against it. Team performance measures are often that only ones available, measuring output at an individual level can be difficult, especially in the public sector. Team incentives can help to promote peer monitoring in smaller teams, particularly when team members are mutually dependant on each other to achieve results.


When considering introducing team based rewards, these are the following two fundamental questions to be answered: Should teams be rewarded by financial means, by non financial means or combination of the two? To what extent can we rely n extrinsic (external) rewards, whether financial or non-financial, as a distinct from intrinsic (internal) rewards? The emphasis in team reward system is usually on team pay rather than on other forms of non financial rewards. The ultimate rewards for teams especially project team is often the successful accomplishment od a task, as long as it is recognized. Cash is not the only means of recognition. EX: Worldwide research into team pay by the Motorola Corporation n 1994 found that in general their employees were more in favor of non financial rewards rather than financial rewards for teamwork. B) BASIS OF TEAM REWARDS


METHODS OF TEAM PAY The IPD 1995, Industrial Relations Services and the Institute of Employment Studies have conducted research into team pay. Each of these projects showed that the most common method of providing team pay for managerial, professional, technical and office staff was to distribute a cash sum bonus related to team performance among the team members. There are various formula for calculating bonus pool and there are a number of different ways in which such pools are divided between team members. There is o such thing as a typical team pay scheme for people in these categories. Their design will be contingent of the requirements and circumstances of the organizations and these will always differ.




1 ) BONUS FORMULAE Bonus formulae relate the amount payable to individual team members to 1 or more measures of team performance or to the achievement of specifically agreed team objectives. Performance related to defined criteria. Ex: At Lloyds Bank and Norwich Union, criteria is sales and measure of customer satisfaction. Ex: At Pearl Assurance bonuses are related to 3 performance criteria: speed of processing, accuracy and customer service and satisfaction. 2. Bonus related to the overall criterion. Ex: At the Benefit Agency, team bonuses are paid if there has been a ‘valuable contribution to performance as determined by local unit managers.

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3. Bonus related to the achievement of predetermined organizational and team objectives . Ex: At Rank Xerox, bonus is related to key organizational objectives. Ex: At Portsmouth Hospitals NHS Trust, the bonus for directors and senior managers is based on an assessment of the Trust’s success in meeting its corporate objectives.


2) METHODS OF DISTRIBUTING BONUS Bonuses can be distributed to team members in the form of either the same sum for each member, often based on a scale of payments, as at Lloyds Bank and Norwich Union; or as a percentage of base salary, as at the Benefits agency. Payment of bonus as a percentage of base salary is the most popular method. The assumption behind this is that base salary reflects the value of the individuals contribution to the team. The correctness of this assumption clearly depends on the extent to which base salary truly indicates the level of performance of individuals as team members.


3) TEAM PAY AND INDIVIDUAL PAY Some organizations pay team bonuses only. A minority pay individual bonuses as well, which are often related to an assessment of the competence of the person thus, it is thought, providing encouragement to develop skills and rewarding individuals for their particular contribution. Ex: Lloyds Bank, Portsmouth Hospitals NHS Trust and Sunlife , pay tem bonuses only. Ex: Benefits Agency, Norwich Union and Pearl assurance pay both team and individual bonus.


REQUIREMENTS FOR TEAM PAY Team pay works best if it teams: Stand alone as performing units for which clear targets and standards can be agreed and outputs measured. Have a considerable degree of autonomy : team pay is likely to be most effective in self managed teams. Are composed of people whose work is interdependent : it is acknowledged by members that the team will deliver the expected results only if they work well together and share the responsibility of success. Are stable : members are used to working with 1 another, know what is expected of them by fellow team members and know where they stand in the regard of those members. Are mature : teams are well established, used to working flexibly to meet targets and deadlines, and capable of making good use of complimentary skills of their members.


DEVELOPING TEAM PAY Steps required to develop team pay are as follows: Analyze situation and requirements. Identify which team should be rewarded withh team pay ( these can be selected if there is no need to cover the whole organization.) Set objectives for team pay. Consult with and involve employees. Design schemes in terms of bonus formula and the methods of measurement and distribution. Introduce scheme. Train teams and team leaders(as a part of introduction progrma ) Monitor and evaluate scheme.


EMPLOYEE EVALUATION SYSTEM The design of team based compensation also needs to be supported by an employee evaluation system. The most important aspect of teamwork is group dynamics. It bring together to support each other, so that all members of the team become effective. Absence of group dynamics isolates team members. It is important for team members to clearly understand the goal and performance standards. Organizations must provid necessary tools to achieve performance standards by specifying the ways and means to accomplish the same.

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The performance evaluation system needs to be fair and comprehensive. It must be able to track individual and team performance differently. It is necessary for organizations to draw up a performance evaluation system that can segregate the individuals contribution and the teams contribution, and accordingly compensate employees both individually and for their ram effort. Ex: an individual team member in a marketing tea is responsible for achieving a target of t new product designs in a year. The company may assign 50% weight age to achieve this target, attributing to individual efforts, while the other 50% is assigned for tam efforts. Here, team efforts gets 50% weight age because designing a new product requires support from research & development wing to develop a prototype, the tool room to develop tools for bulk manufacturing & so on. Likewise every performance area needs to be understood in the context of individual and team performance measures.

To align individual and team performance to the compensation plan, organization has to follow steps such as::

To align individual and team performance to the compensation plan, organization has to follow steps such as: Identify performance criteria, and the behaviour expected of employees and communicate it to all team members. It is a difficult phase of team rewards. Clarify managements expectations and goals.- team members should understand what role they are expected to fulfill, and also understand how their contribution would help the organization to achieve its goal and objectives. Create performance evaluation process- the process includes a periodic evaluation of an individuals performance and communication between management and the employees. It should include:

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Asses an individuals performance behaviour. Evaluate performance Cleary and objectively. Create a forum for dialogue between the management and the employees. Create a forum for employee coaching to help them set goals to maximize their performance. Link performance and the designated compensation.


GROUP INCENTIVE PLANS In team based compensation design, providing a group incentive to team members is quite common. A group incentive is also known as team based alternative reward, since it differs from other common incentive plans. The entire team shares the rewards based o performance gains, which are linked with the overall profitability of the organization. To design an effective group incentive plan, an organization should first identify performance targets and the standers of performance required to achieve the performance targets. It then needs to document these standards so that it can properly guide team members. In the said documentation , the organization also needs to specify how rewards will be allocated. Group incentive plan thus helps the team members to focus on specific performance targets. Employees can self assess their accomplishments and therefore stay highly motivated. Some organizations find it difficult to administer group incentive plans because of its obvious de-emphasis on individual performance .


GAIN SHARING PLANS Like group incentives, gain sharing is also a type of team based alternative reward system. Gain sharing plans can be better implemented where the team represents a homogenous group, such as a department or a division. Here, the compensation is linked to the achievement of departmental or divisional targets.. Here too the documentation of performance targets performance standards, and allocation of compensation amongst group members is necessary. Whichever team based compensation plan is used, its effectiveness depends on : clearly informing team members about its nature and specific conditions. Team members participation in designing the plan and perceive it as fair.


EFFECTIVE DESIGN OF TEAM REWARDS The effective design of team based compensation id the most challenging task for any organization. For an effective design of team rewards, organizations need to:


ADVANTAGES OF TEAM PAY Encourage team working and cooperative behaviour. Clarify team goals and priorities and provide for the integration of organizational and team objectives. Reinforce organizational change in the direction of an increased emphasis on teams in flatter and process based organizations. Act as a lever for cultural change in the direction of, for example, quality and customer focus. Enhance flexible working within teams and encourage multiskilling. Provide a incentive for group collectively to improve performance and team process Encourage less effective performers to improve in order to meet team standards. Serve as a means of developing self managed or directed teams.


DISADVANTAGES OF TEAM PAY Its effectiveness depend on the existence of well defined and mature teams- but they maybe difficult to identify; and even if they can be, do they need to be motivated by a purely financial reward. Team pay may seem inappropriate to individuals whose feeling of self worth can be diminished. Distinguishing what individual team members contribute could be a problem. Peer pressure which compels individuals to conform to group norms could be undesirable- insistence on conformity can be oppressive and the way in which team leaders manage their performance needs to be monitored. It can be difficult to develop performance measures and method of rating team performance which are seen to be fair

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Problems of uncooperative behaviour may be shifted from individuals in teams to the relationships between teams. Organizational flexibility maybe prejudiced. Pressure to conform, which is accentuated by team pay, could result in the team maintain its output at lowest common denominator levels. High performers in low performing teams may be dissatisfied and press for a transfer especially if they believe they are being penalizes on the reward front


IPD RESEARCH FINDING FOR TEAM REWARDS Formal team pay schemes exist in only a minority (24%) o the 98 UK organizations taking as a part of its survey. There is however quite a lot of interest in team pay as a method of improving performance. There are many different varieties of teams and many different varieties of schemes- it is not possible to prescribe a standard approach in developing team rewards. The condition required for the successful introduction of team pay are stringent and many companies will not feel that they are able to meet them. Success on the use of team pay depends more on the culture, management style and the working environment of the organization than the mechanism of the scheme. Improvement in team performance is not dependant solely on formal reward process

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Over half the organizations with team pay are confident that it is contributing to the improvement of team performance. Some organizations have adopted a “purpose and values” approach including team working as a core value and assess people on the extent to which they uphold it. A number of people are expressing the view that team pay is either inadequate or inappropriate as a means of improving team performance- other forms of non financial rewards can and should be used instead of or at least in conjunction with, team pay. Although not strictly a team pay process, organizations are increasingly including capability as a team worker in their performance management process as a key competency ‘input’ factor to strengthen collaborative behaviour


CONCLUSION Team based rewards work for most of the companies who adopted this scheme. There are many other organizations where the culture and importance of good team work will make team reward an attractive proposition. But one the limitation of team reward is that every scheme is unique- it is not possible to take 1 down the shelf. And they are not always easy to design and manage. Many organizations will not venture into team rewards because they are satisfied with their individual PRP scheme. For the successful implementation of team rewards, it should be aligned with the strategies and the culture of the organization or else they will fail to produce results. Organizations must select appropriate performance measurement tools to make team rewards successful.


BIBLIOGRAPHY ( articles and cases) U tube ( for videos) EPSO ( research articles and cases) Reference and text books: Compensation for teams by Steven E Gross Reward management 3 rd edition by Michael Armstrong. Other compensation management texts in the library.

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