HR MANAGEMENT - Team-Based Compensation Vs. Individual

Team-Based Compensation Vs. Individual

by Mark Applegate, Demand Media

Teamwork is important.

Facilitating individual and team performance is a primary goal of any manager. One of the most challenging parts of management is deciding which methods of compensating employees most enhances individual performance without hindering group performance. Group compensation can be a way to increase productivity while attempting to monitor and improve individual performance at the same time. There are significant differences between team and individual compensation.

Team Compensation Overview

Team compensation is typically used when teamwork is mission critical. In technical fields such as software development, there may be several interdependent teams creating a final deliverable. These teams are judged corporately as to speed and accuracy, assuming each member of the team is required to complete the task on time and at budget. The compensation of the group is typically scaled in percentages of the maximum pay scale depending on when or how well the team completes the task.

Individual Compensation Overview

Individual compensation, the norm in many industries, pays wages strictly based on individual performance. It can be comprised of hourly wages, sales commissions and subjective periodic reviews. While tasks may be intertwined among the members of a team, every employee is typically measured and compensated based on his contribution to the team, not the team's final deliverable. The positions most likely to receive this kind of compensation are commission sales, assembly and non-technical labor positions among many others.

Team Compensation Advantages

In team compensation, employees may perform better in hopes of not letting down the team. This is especially so in project-based jobs which require every team member to complete a task before the rest of the team can advance to the next stage of work. Information is shared more freely when teams are reviewed and compensated as a group because the incentive to withhold information for personal gain is reduced. A 2010 study by University of California, Santa Barbara, states workers will try to perform in a way may make them "willing to make sacrifices for teammates ("take one for the team") that they would not otherwise make."

Individual Compensation Advantages

Individual compensation pays specifically based on individual performance regardless of team performance. This provides more pay to higher-achieving employees and less pay to lower-achieving ones. It allows for competition among employees for prestige and pay which provides a strong incentive to perform. It also avoids punishing employees based on the poor performance of fellow team members, resulting in better morale for the individuals. This compensation may also seem more personal, especially to higher-performing employees.

Team Compensation Disadvantages

Team compensation can lead to individual employees carrying too much burden and others being compensated for poor performance. Arguments among the team in these cases may diminish morale and harm the quality of the deliverable. Power struggles for credit when a task goes well or blame when it goes poorly can arise in a group compensation model.

Individual Compensation Disadvantages

Individual compensation can breed unethical competition as in commission sales when staff members fight over a customer or a sale. Employees posturing for a better positions or rankings at the exclusion of teamwork can come from this method. Information and work techniques may pool with motivated employees to the exclusion of those who need to be trained.