Wednesday, May 11, 2016

Incentive Plans: Individual vs. Team- Based

               When creating an incentive compensation plan, an organization needs to first consider if its work environment can support an individual or team-based program. There are advantages and disadvantages with both.  Depending on the mix of industry and position types, certain organizations thrive on one form of incentive over another. In this issue of Astronology®, we’ll discuss the advantages and disadvantages of both individual and team-based incentives.

Individual Incentives
              An advantage of an individual incentive program is the recognition it gives individuals for their efforts. Such recognition motivates the top performer to keep it up…and can serve to motivate others. By storytelling how the top performer achieved his / her goal, underachievers may have inspiration as to how they too can become better.

Naturally, individual incentives also have their fair share of problems. An overly competitive environment can be created.  Workers may even be pushed to cross boundaries and make questionable ethical decisions in order to reach goals. To curb these possible challenges, a hybrid incentive plan allows for employees who individually go above and beyond to be awarded while simultaneously recognizing group efforts and values.  Additionally, the hybrid approach gives other employees an opportunity to gain some recognition for what they do for the whole collective. This lowers the chances of an overly competitive environment developing. Careful monitoring and transparent reporting can also slow possible negative competition and dishonesty in order to achieve goals.

Team-Based (Group) Incentives
              An advantage to group incentives is positive peer pressure. Lisa McQuerry, in an article on the Houston Chronicle’s website, mentioned that employees are often motivated by the fear of letting down their team members. While each team member brings his / her own unique skill set and experience, these differences can possibly balance a team and motivate everyone to do their best in their assigned roles.

In the best case scenario, group incentives will cause employees to work harmoniously. In the worst case scenario, the exact opposite could happen. Possible infighting with unmotivated or outright defiant employees can cause a hostile work environment to develop. Low performing employees can possibly feel overwhelmed with pressure to perform at levels for which they are not ready. A potential solution to combat these possible negative outcomes is to implement individual and group progress reports. These reports can serve as a tool for troubleshooting, allowing time to remove potential issues before they become larger concerns.  As discussed earlier, other organizations have considered hybrid incentive plans that include an overall group incentive as well as individual incentives for top performers.

When it comes to incentives, organizations want to strike the right balance. The incentive should be one that encourages work-friendly competition in order to motivate the employee to do his / her best. Every organization is different, so it is important to spend time auditing and observing the type of work environment your organization possesses. Depending on the industry, installing a performance management program can be helpful in managing performance tied to incentives.

Astronology® asked Michael Maciekowich, Astron Solutions’ National Director, for his take on the difference between the two types of plans.  Mike shares with us that the difference between “individual and team-based incentives relates to defining the outcomes and ensuring there is clear ‘line of sight’ regarding controlling the achievement of those outcomes. Individual incentives focus on each employee in his / her efforts to meet job related outcomes and / or special projects. Individual incentives tend to use goals that follow the SMART acronym (Specific, Measurable, Achievable, Realistic, and Time-Bound).  Success in achieving team-based goals is dependent upon accurately defining the team that will be included in the plan, such as a unit, department, or organization.  In this case, the focus is on defining outcomes that require collective efforts to achieve. Rewards are often shared equally among the team members. The most successful hybrid plans are those that are established as a team-based plan with outcomes requiring collective efforts, and with the distribution of awards based on individual performance in contributing to that collective effort.”

Does your organization use individual or group-based incentives? If so, do you think it helps the work environment and achieves the organization’s overall goals? Please share your thoughts with us and we may feature your insights in a future Astronology® issue!

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