Team-based 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. MGMT 4030 - Managing Employee Reward Systems

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. MGMT 4030 - Managing Employee Reward Systems

3. 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

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. MGMT 4030 - Managing Employee Reward Systems

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. MGMT 4030 - Managing Employee Reward Systems

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.” MGMT 4030 - Managing Employee Reward Systems

7. 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

8. 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

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. MGMT 4030 - Managing Employee Reward Systems