The use of team-based incentive programmes is slowly beginning to rise, but Jamin Robertson explains that employers should still account for individual performance to ensure staff pull their weight
Case study: Merchants
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The 2005 movie The Greatest Game Ever Played depicts the 1913 tale of unknown 20-year-old Francis Ouimet who turned the golfing world on its head with a stunning US Open play off victory. The golfer is depicted taking time out to thank Eddie, his prodigal 10-year old caddy. "We’re a team," he says. Indeed they were, but there’s no doubt who got the lion’s share of the plaudits. Transferring the analogy from sport to business, team motivation methods still tend to work best when the reward recognises individual contributions.
According to the Chartered Institute of Personnel and Development’s (CIPD) Reward management 2006 survey, 25% of organisations operate team-based bonus and incentive plans. This is a jump from the 16% which claimed to do so the previous year. The CIPD classifies team types into four main categories: organisational teams of top management, permanent work teams such as a group of salespeople, project teams set up to complete a task, and teams of people brought together on an ad-hoc basis. Although statistics suggest team reward systems are on the increase, historically there has been a slow uptake in the UK.
While teamwork is often prized within an organisation, some employers have found it difficult to implement team reward systems because it can be hard to measure team performance. Despite this, Peter Jauhal, senior compensation consultant at Hewitt Associates, believes it is a worthwhile aim. "It builds co-operation and collaboration. You want people to work together to share their knowledge, and get along better. It’s like a glue." Team incentives are most effective at creating a team environment when individual contributions are clearly measurable, targets are clear and realistic, and staff can be aligned to focus on a common goal. Employers that provide such schemes can choose from a wide variety of suitable rewards.
Money is an obvious method, enabling employers to offer some form of variable pay such as a team bonus based on communal targets. But team incentives are not limited to cash, and can include one-off giveaways such as shopping vouchers, and team days out of the office, where employees may be treated to anything from a day of spa treatments to a corporate day at a horse racing meeting. Unless the entertainment is wildly out of step with employees’ interests, these methods are almost guaranteed to beat a day spent at work and will hardly diminish an organisation’s image. Employers may also recognise special effort by awarding prizes to top performers, although Jauhal warns this can alienate the rest of the team. "There is a danger around prizes where perhaps the top sales guy gets a really good parking space or to drive a Porsche for the weekend. The danger with those is person who comes second, who might only [have performed] a little bit worse, is demotivated."
The automotive business is just one industry where team reward systems can operate effectively. Although repair centre mechanics are often rewarded individually with a bonus if they complete tasks well within an allotted time, automotive industry consultancy Forester Grant Associates believes there can be difficulties with this approach and has designed a team incentive system to improve organisational outcomes. Tim McGing, managing director, explains: "When individuals [are] incentivised, they play the game in such a way that they benefit themselves. They pick all the juicy jobs that are very quick.
Any diagnostic work they wouldn’t want to touch, because they’ve got to spend a period of time trying to find a fault, which may only be a simple thing." The consultancy has introduced its system in approximately 100 Peugeot repair centres. "They’re all working together as a team, so you might get two or three people working on the same job. It’s been very successful in the fast-fits, because as long as you monitor this on a daily basis, perhaps by a graph, [employees] can turn it into physical money. People know exactly where they are at any part of the day," adds McGing. He believes such systems have helped to remove a lot of workplace disharmony in organisations where employees of similar abilities had previously earned different bonuses.
For professional high flyers, meanwhile, team incentives can be effective when aligned with corporate performance criteria. "If teams are offered £50,000 or £100,000 to [successfully complete a] project in some ways that can be healthy. A profit sharing pool is then doled out to high performers. Divisional teams might get [a bonus] based on divisional results and some based on corporate results to encourage cross group co-operation," Knight explains. But one of the reasons team incentives remain the exception rather than the rule is due to the fact it is often very hard to determine and reward individual levels of contribution.
"Team incentives have got to have a certain number of things going for them. It is clear that they really work well when you have a bunch of like-minded people with clear business goals working together with enough headroom to get on with it," says Knight. But a joint initiative between the Department of Health, Hay Group and the Institute for Employment Studies (IES) in 2004 found team incentives can, in general, work, although some teams did better than others. Staff at NHS hospitals were incentivised to work together and were rewarded with a pool of money to spend as the team wished. Peter Reilly, director of consultancy at the IES, explains: "One of the things we tried out was to make a sum available to the team to use in a way the team wanted. [Whether it be] personal training, social events, facilities, it was up to them. It encouraged team thinking. "The argument was that, in the NHS, people work together and should be encouraged to work together, and as such would team pay provide incentivisation? [The answer] in general [was] yes, although there was a range of outcomes."
But problems remain with how to manage poor performers, who may take an undeserved share in team reward, especially where contributions are not always easy to measure. "The mistake managers make is that they don’t want to upset anyone so they tend not to differentiate [between] payments. If you see someone free-riding and getting the same payment it really [annoys] the hard workers. Although organisations say they do manage poor performers, very rarely do they do that," says Jauhal.
One solution is for line managers or teams to take on greater responsibility for recognising such individuals. "The team is self-policing. If they get a guy that is very lazy, they either drop his share, or kick him out," explains McGing. So employers must take heed of individual contributions and team reward schemes should be flexible to allow for varying levels of individual performance, particularly if a bonus is involved. "The way to do it [is through] feedback, talking to people involved. You also need good data to do that," explains Jauhal
Types of team
A top management team is bound together because it contributes to overall business strategy.
These are self-contained and permanent teams, which focus on achieving a common purpose.
Project teams These are brought together to complete a task. Once this is complete, they disband.
Ad-hoc teams These are set up to deal with a problem. These teams are short-lived and operate as a task force.
Case study: Merchants
This month, Merchants, a provider of outsourced call centre operations, launched a team reward programme called Smiles Reward Points. Its 500-strong workforce is organised into teams of up to 15 employees, which are managed by a team leader. Teams are then sorted into houses which compete against one another. Handlers can earn points for themselves and their team by providing good service, which are redeemed online for products. The company is also considering subsiding developmental courses as a further incentive. Adrian Garton, HR manager, hopes that the scheme will have a widespread appeal, boosting motivation levels in an industry that typically has a high staff turnover. "We want to make sure that people doing a hard job are incentivised to hit the targets we need them to. We’re always striving to get better teamwork [for example] if you learn something in your organisation you can share it with someone else, and that can lead to greater efficiency and profit. "The manager can close the week off by saying ‘these four people did a great job, they get 10 points each’. It’s not much more than a thank you, but it’s recognition they have done a good job." Unlike a commission-based scheme, it puts the emphasis on teamwork. "For me, any incentive scheme should target teamwork, quality, and [output]," Garton adds.