Businesses can use a variety of ways to motivate and inspire their employees. One of the most effective tools is offering an incentive for performance. In a team-focused environment, offering a team-based reward has pros and cons.
What Is a Team-Based Reward System?
A team-based reward system is a way to compensate a group of people based on the combined contribution to a project or the organization. It has become a widespread and motivating way to reward a group of people for their efforts to achieve a common goal. As more companies utilize work groups to complete projects and create a team environment, offering an incentive to the members based on the group’s performance has become a more common and acceptable way to encourage team members to collaborate.Let’s imagine you’ve been added to a team to create a new, innovative countertop cooker that keeps food cold until the delayed cook time feature kicks in.
It’s a large project that will likely take about a year to complete. Your company is taking a new approach to project management. Rather than the project moving through departments, representatives from each department will work exclusively on the team to create, test, launch, and sell the new appliance. Incentives have been created to offer encouragement and support to ensure the project stays on schedule.
If each of the deadlines is met, each member of the team will earn a bonus. Once the project is complete and the new appliance is released for sale, additional bonuses will be offered when the appliance hits sales targets.
Types of Team-Based Reward Systems
There are three common systems that are used to offer team-based rewards: these are deadline-driven targets, incentive bonuses, and profit sharing.
- Deadline-driven targets, sometimes called recognition pay, are a reward system based on hitting specific goals by a definite due date. If a team reaches the objective on time, the team earns a bonus. In the previous example, your team is assigned to create a working prototype for the new appliance within three months of project start. If this target is met, each member will receive a $500 bonus.
This bonus encourages the team to work together, accomplish the goals together, and meet the three-month deadline.
- An incentive bonus is a plan that allows for an extra payment for increasing performance. Sales groups frequently use this form of reward. If the team reaches a pre-determined number of sales, they receive a bonus or commission on those sales. In the countertop cooker example, your team goal was to sell 10,000 units of the new appliance in the first three months. The marketing and sales professionals on your team have worked very hard to place the appliance in national chain stores and online, while the rest of the team helped support those activities.
As a result, there were 15,000 units sold in the first three months. This allowed the team to earn an extra $5,000 each as an incentive bonus.
- Profit sharing is a type of team-based reward that offers employees a small portion of the profit from the performance of the company.
It encourages the entire staff to work together, reach common goals, minimize expenses, and reach targets that will help the company achieve the greatest profit. An increase to the bottom line equals an increase in each employee’s compensation.
What Are the Advantages?
There are advantages of using team-based reward systems. We’ll now look at three of them.One benefit is that it motivates people to work together. When a financial reward is offered, a team can be more driven and focused on reaching the group goals.
A team-reward system can encourage individuals to work together and support the team objectives to earn a reward.Second, it provides a benefit for reaching a common goal. Working together creates more synergy to achieve a common goal. When teams are struggling to work together, a financial reward can often encourage each member to work harder and focus on the end result.Lastly, It helps everyone work toward company objectives. In a work group, it is possible that each person has his or her own goals or objectives.
A disjointed and unorganized team is the result. However, if the members can put their personal agendas aside and support the company objectives, the team will be much stronger and successful. Offering a reward can help motivate each individual to commit to the group plan.
What Are the Disadvantages?
There are also some disadvantages of using team-based reward systems. Let’s look at those now.One of these disadvantages is that not all members of the team may contribute equally. In a team environment, there are some members who may put more effort and time into a project than other members.
Your project team has three developers who are responsible for creating the new appliance. However, it seems one person doesn’t work as hard as the other two. The third person comes to work late, takes long lunches, and spends time on personal calls. The other two developers are frustrated that they must carry the weight of the design of the cooker without the third person carrying their fair share of the work. This can create resentment or problems if everyone earns the same bonus but does not exert the same effort.Another disadvantage is that if the goal is not met, the bonus is not earned. Members of the team may work hard, put in extra hours, and sacrifice their time only to have problems or obstacles that cause the goal to be missed.
They may be frustrated or angry that they put in the extra effort and didn’t get a bonus or extra compensation. After months of hard work, several problems have erupted in developing the new cooker. This has put the appliance behind schedule and made the team miss several of the dates on the timeline. Unfortunately, that means several of the bonuses were not earned, and the team has become very unmotivated. In the end, the possible team reward may actually cause a loss in job satisfaction.A third disadvantage is that individuals may not feel they can control the result. In a team setting, some individuals may feel they have no personal control over what happens to the group.
That can be frustrating and cause some team members not to participate fully. Additionally, it may make other members take over and try to regulate the project, angering their colleagues.The last disadvantage is that some teams just do not work together well. Within work groups, there can be problems with some people being bossy, people not getting along, and others being angry if they think others are not working hard enough.
If the project has experienced setbacks or delays, the team members may blame each other and resent other participants. In your team, the developers of the product may feel they contribute more than the sales and marketing team. At the same time, the sales and marketing team may feel they have to carry the project to make sure it sells. Meanwhile, the product testing people may miss meetings and not fully participate. As a result, the team can become segmented and fight amongst themselves. This may cause even more problems and delays.
A team-based reward system is a way to compensate a group of people based on the combined contribution to a project or the organization. Types of these systems include deadline-driven targets, which offer rewards based on hitting specific goals by a definite due date; an incentive bonus, which involves an extra payment for increasing performance; and profit sharing, which offers employees a small portion of the profit from the performance of the company.There are pros and cons to a team-based reward system that must be considered when using this type of bonus program. Some of the advantages include increasing motivation, working towards a common goal, and employees supporting company objectives.
The disadvantages include team members feeling that everyone is not contributing equally, the reward possibly being at risk due to setbacks, individuals possibly not feeling they make an impact, and some teams not working together well.