HR MANAGEMENT - Does Team Based Pay Motivate Employees?

Does Team Based Pay Motivate Employees?

by Leigh Richards, Demand Media

Team based pay is part of an increasing emphasis on teamwork.

Team based pay is a type of performance based pay used in some organizations. In a team based pay compensation structure, a portion of an employee's wages or bonus is tied to the success of team goals, with all team members typically receiving the same or similar incentive pay. While increasingly popular, team based pay still has many critics.

Competition

Individualized performance based compensation can result in employees becoming competitive with one another. This is especially true when there's a fixed amount of incentive based compensation available and employees are competing for limited bonus money. Using a team based pay compensation program can help alleviate tension that may arise between employees, but can also eliminate the motivating effect of competition, unless work teams compete against other work teams. The desired level of competitiveness in a company will typically depend on each organization.

Free Riders

A free rider -- a term that originated in economics -- refers to an individual who takes advantage of the work of others when that work creates benefits shared by an entire group. One disadvantage many critics point to is the potential for some low performing team members to free-ride on the work of other members. This is an example of how team based pay can reduce the motivation of some members of the group.

Social Pressure

While some business professionals and academics argue that team based pay can lead to incentives to free-ride, others argue that colleagues will feel social pressure from one another to not only resist free-riding, but to put in considerable effort towards the achievement of team goals. In other words, team members won't want to be seen as the weak link by their peers.

Incentive for Improvement

One benefit of performance based pay schemes, whether individual or team oriented, is that they often involve an element of improvement in calculating the individual's or the group's bonus. For example, a sales group's team based bonus might include incentives for improving new customer acquisition by a certain percentage over previous periods. Rather than being satisfied with consistent numbers year to year, a bonus for improving performance can motivate employees to constantly work harder and more efficiently.