<i>Dear Workforce</i> Which Is Better Team-Based Incentives Or Individual Bonuses

October 17, 2003
Dear Debate Settler:

A bonus program will encourage employees to focus on the things that will help them get the bonus. If you want employees to pay attention to particular aspects of their jobs, an individualized bonus program can encourage them to do just that. But it may also result in workers doing what they need to get the bonus at the expense of team or other needs.
If employees work independently of one another and don't depend on others for resources, information, or support, this may work for you. If jobs are interdependent and you need people to work more as a team, you will want a team reward. But be aware that with a team plan, you may also get some employees who will slack off and ride on the work of others. It's a bit of a trade-off either way.
A hybrid bonus program is somewhat more complicated to administer than either an individual or team bonus, but will help reduce the negative aspects of choosing one plan over the other. For example, you might offer two-thirds of the bonus based on individual results, but retain one-third for overall team results. This helps employees to pay attention to the activities that affect their own performance without losing sight of group needs.
When determining bonus criteria, a good rule of thumb is to pay a team bonus for those things you want people to accomplish as a team, and pay an individual bonus for things you want individuals to accomplish. If others have an impact on an employee's success, the bonus almost always has to be based on the work of the whole group if it's going to be an incentive.
An alternative approach to motivating performance with bonus plans is to create an organizational culture that supports individual initiative and commitment for the success of the whole, and then share the profits the organization reaps as a result. This keeps the focus on overall business results, encourages greater employee commitment to the business, reduces the problem of employees doing things at the expense of the whole, and provides rewards as a natural outcome of a supportive culture.
SOURCE: Kevin Herring, president, Ascent Management Consulting, Tucson, Arizona, Jan. 9, 2003.
LEARN MORE: ReadBasic Principles for Implementing Team Compensation.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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