Team-Based Rewards

Rewards for performance are commonly used to maximize work output and productivity. With the increased use of team-based work, a variety of team-based reward systems have been developed, with the intent of maximizing performance and satisfaction in work teams. A team-based reward is commonly defined as any formal incentive provided to a work team or at least one of its individual team members. Rewards may be based on organizational, team, or team member performance or other outcomes (e.g., sales, customer satisfaction, and profit).

Rewards provided to teams can be categorized as monetary or nonmonetary. Monetary team-based rewards include one-time cash bonuses, permanently increased base salary, and variable pay (i.e., earning a specified percentage of base salary). Nonmonetary team-based rewards include achievement awards, time off work, and special dinners. Team-based rewards can be distributed equally across team members, so that all members receive the same reward (e.g., amount of money, recognition award), or nonequally, either based on individual performance within the team (i.e., equitably) or in proportion to individual base salary.

There are seven major categories of team-based rewards:

• Team gainsharing/profit sharing. Team rewards are tied to organizational outcomes; rewards are generally cash in nature and shared equally among all teams in the organization. With profit sharing, the organizational outcome is financial in nature (e.g., organizational profit); gainsharing refers to nonfinancial organizational outcomes (e.g., overall company customer satisfaction, improvements in organizational productivity or quality).
• Team goal-based rewards. The organization (often in conjunction with the team) formulates goals or targets for each team that are believed to reflect effective short- or long-term performance outcomes (e.g., predetermined production objectives, customer service goals). When the team meets its goal(s), it earns predetermined reward(s).
• Team discretionary rewards. Also known as spot rewards, these team-based rewards, like goal-based rewards, evaluate team outcomes (e.g., customer satisfaction, team productivity) when determining whether a specific team should be provided with incentives. Unlike in goal-based systems, however, the team is not provided with a predetermined performance standard that will guarantee the receipt of a specific predetermined reward. Instead, when the organization determines a team has done an outstanding job, the team is provided with a reward.
• Team skill rewards. Teams are rewarded for acquiring valued skills (e.g., collaboration, cooperation, interpersonal understanding) regardless of team outcomes, following the rationale that if such skills improve, desired outcomes will eventually be achieved. Skills are generally evaluated by supervisors.
• Team member skill rewards. Individual team members are rewarded for acquiring team-related skills (e.g., adaptability, communication, leadership, initiation of ideas). Skills are generally evaluated by other team members and/or supervisors.
• Team member goal-based rewards. Individual team members are rewarded when they achieve [Page 786]predetermined performance goals, often in conjunction with quarterly or annual formal performance evaluations.
• Team member merit rewards. Individual team members are rewarded when they make an outstanding contribution to the team, as determined by other team members and/or supervisors.