<i>Dear Workforce</i> What Basic Principles Should We Follow When Implementing Team Compensation

June 27, 2002

ADear Anxious:

From the brief description, it sounds as if a plan like this could besuccessful. Team-based incentive programs are a meaningful way to link teamperformance and pay. Ultimately, a program of this nature can be successful,given the proper culture and environment. The challenge lies in properlydefining, designing, implementing, and communicating the plan.

Like any compensation plan, it needs to be developed in support of a company’sbusiness and compensation strategy. Companies also must be aware of competitivenorms within their industries and internally whether a plan is applicable andeconomically viable.

In the process of designing such an incentive plan, some basic elements needto be considered in the design process. These include, but are not limited to:determination of employee eligibility, desired results and expected behaviors,types of measurement and the ease with which these can be measured andunderstood, method of performance evaluation, extent to which individualperformance is considered in determining the final award, schedule/format ofplan pay out, and employee buy-in. The last of these, employee buy-in, cannot beunderestimated.

Employee belief and support in a team-based incentive plan is critical to thesuccess of the plan. Employees need to believe that they can control meeting thedeadlines and quality. If other factors will play a greater role in determiningthe outcome, this plan will not be as successful. Additionally, employees mustbelieve that the rewards are appropriately distributed. For example, if awardsare equally allocated, members of the team may feel one member is notcontributing his/her share and be dissatisfied with the plan results. The sameis true when an employee feels his or her contribution deserves a greater rewardthan another team member with lesser responsibilities.

SOURCE: Martha J. Glantz, associate principal and compensation consultant,Buck Consultants, Inc., New York, New York, March 1, 2002.

LEARN MORE: AAL Uses Varied Approach to Compensate Teams

The information contained in this article is intended to provide usefulinformation on the topic covered, but should not be construed as legal advice ora legal opinion. Also remember that state laws may differ from the federal law.

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