MGMT Managing Employee Reward Systems Team-based Pay Team Definition (Katzenbach & Smith, 1993) Group of employees whose members are mutually accountable to each other for common goals. Team members interact on a regular basis. There is the possibility of synergy between team members. Size of team is between 2 and 25 members.

MGMT Managing Employee Reward Systems Types of Teams (Cohen & Bailey, 1997) Work Team –Controls a business process such as customer service or manufacturing. Product or service quality is a key criteria. –Permanent work assignment and full-time commitment. Project Team –Project is limited by completion time such as new product design or construction project. Delivery time, budget variance and design quality are some criteria. –Full-time commitment; after project team members are reassigned to different projects.

MGMT Managing Employee Reward Systems Types of Teams (Cont’d) Parallel Teams –Used to solve specific problems such as quality, safety, employee grievances or impact of technology change. –Used in parallel to functional units where employees spend most of their work time. –Requires only a part-time commitment as team member.

MGMT Managing Employee Reward Systems Why Use Team Pay? To Encourage Behaviors such as… Peer Cooperation Information Sharing Unselfish behavior supportive of team –Sacrifice personal interest for good of team such as giving up leisure time on weekend to work for an important team goal. Mutual Monitoring –Provide performance feedback to team members.

MGMT Managing Employee Reward Systems Monetary Team Rewards (Gomez-Mejia & Balkin, 1992) Team Bonus - Cash payment to tied to achieving major team performance outcome and allocated on non-recurring basis. Team Merit Pay - Cash adjustment to salary tied to achieving team behavioral and performance outcomes. Skill-based Pay - Adjustment to base pay rate of team members tied to team competence level. Gainsharing - Share gains of unit/department with interdependent teams. Spot Cash Rewards - Discretionary basis.

MGMT Managing Employee Reward Systems Non-monetary Team Rewards Team Recognition Reward - Public ceremony or announcement in company newsletter. Team Celebration - Celebrate team “win”; includes special dinner, ticket to sports event,etc. Merchandise - Team jacket, pin, emblem to build team identity and “espirit de corps.” Travel - Team members (and possibly spouses) travel to resort for relaxation and fun - often used for sales teams after successful marketing “push.”

MGMT Managing Employee Reward Systems Team Pay: Design Issues Eligibility - full or part time? managers? Newcomers? Size of Reward - large or small? Individual’s shares - equal or equitable shares? Frequency of rewards - one time only? recurring? Criteria for Reward - performance metric? Outcome? Milestone? Behavior/ Funding the reward - self-funding: costs savings, profits, customer goodwill. Administration of rewards - team? managers? HR? customers?

MGMT Managing Employee Reward Systems Team Pay: Controversies Dealing with Free Riders Inhibiting High Individual Performers Interdependent Teams may Compete rather than Cooperate with each other.

MGMT Managing Employee Reward Systems Team Pay Case Develop a Team pay Strategy for one of the 3 cases your team is assigned to analyze. Be prepared to present it to the class.