Recognition and Reward of Teams -
10 Basic Principles

David A. Boyle, C.M.C.
HR-on-Demand Inc.

Presented at the Innovations in Team Organization & Management Conference
Toronto, October 21 & 22, 1997

"…teams are a change introduced by managers that ultimately changes the role of management." Anne Donnellon, P.224 Team Talk

A moment of truth is reached when the reward system based on individual effort has to provide for pay based on team success, the recognition for achieving team member interdependence.

One of the clear conflicts existing within a corporation is the confusion created when an individual in a specific job, with a clear job mandate, is asked to become a team member on a significant project.

Several thoughts go through the new team member's mind:

• Wow! I have been recognized as a key player!
• How will I ever do my job and participate in the task force too?
• Oops, I was counting on my job bonus to pay for the kid's braces!
• How will this team membership affect my career, if the team fails?

Team pay, reward for team behaviours, team effectiveness and/or achieving project results, has many forms. It is important for the employer to decide what messages are to be communicated to employees about teams. Key decisions for the employer include:

• Will there be pay for team participation? Adjustments to compa-ratio or bonus?
• Will pay for individual effort continue?
• Will pay for team work be awarded to individual contribution or on a team wide basis?
• Does assignment to the project team change the job of the individual?
• Is team work now a job for which salary is paid?
• Are team behaviours worth additional recognition through incentives?

Team pay plans are investments. Like any investment the concept should be well researched and a plan of action set in place with a view to enhancing value in the context of corporate mission. Please recognize, however, that team pay plans are no guarantee that teams will be successful. The team pay choice for the corporation is an investment to increase the possibility of success and to emphasize team components of the corporate culture.

To ensure a return on team pay investments there are several principles which need to be followed:

TOP OF PAGE

The First Principle of Team Pay Is Role Clarity

Most teams start up with confusion of objectives, consequences, risks, and challenges. As an important first task, designated team leaders, or facilitators, should prepare a team mandate with parameters, goals, deliverables and schedules specified.

Early-on in the life of a team decisions are made as to whether teams members are part-time or full-time contributors. Decisions are also made as to the intensity of expected team efforts. Questions get asked in the background. Is the CEO taking a special interest in this team? Is there a hidden agenda, such as the best team performers will become candidates for the critical marketing role? Potential sources of confusion need to be addressed up front with clear mandates to avoid the following situation:

"What does accountability really mean when each team member is juggling too much work and trying to satisfy a demanding manager, needy direct reports, and nebulous team requirements? What's rewarding under such circumstances: a $500 bonus, a weekend in Florida, a step up the precarious middle-management ladder, or escape from team work?" P.6 Team Talk

One team of engineers tracked in the telecommunications business never did get their role properly targeted. Members kept close to their base jobs as their security blankets, until the President discussed the reward potential when certain key results should be achieved—in the sixth team meeting, some 18 hours into the project. It took an additional 12 hours of meeting for the President's message to sink in and by then the degree of personal risk became fully realized. The boss had raised the stakes considerably while the team continued to dither. Individual team members started to ask—what if this project fails? Will I still qualify for my job bonus? But I don't have enough time to do my own job anymore! Defensive self interest destroyed this team, group effort never did get a chance to become established.

For team pay to create value, the roles of the team and its members must become clarified and performance expectations made as clear as possible. Changes in expectations do occur, however, as the team process unfolds, creating the need for a tracking methodology within the reward system. If a more appropriate set of deliverables becomes evident during team deliberations, consistent with the best interests of the employer, then reward should be transferred to the achievement of the new set of deliverables.

One client has established a tracking methodology requiring major project teams to submit a periodic report, usually monthly, which tracks anticipated and actual changes to the project plan, from timing and resource requirements to deliverables. These tracking reports have a project-status information purpose within the specific department and are used to review and re-calculate incentive awards, if necessary, to keep the best interests of the corporation in focus.

TOP OF PAGE

The Second Principle of Team Pay Is Flexibility

Can your reward system stand up to the changing demands imposed by a team pay structure and process? The existence of team pay itself is problematic to many compensation policy makers who traditionally are supporters of individual effort, job role definitions, job evaluation measures, salary grids and performance standards. Teams, task forces, liaison committees or whatever they are called, frequently become the source of gray hair for the Compensation Manager or Human Resources Director.

The employer, corporation or otherwise, must make a firm decision to pay for team effort to realize value from the incentive investment. While not paying for team work appears simpler, such a decision sends conflicting messages to the employee population, potentially sabotaging co-operative efforts. Not paying for team work almost certainly reduces the productivity of those necessary co-operative efforts to get work done.

Paying for team work requires the employer to address the flexibility issue. Will we pay for individual demonstrations of team behaviour? Will all team members share the same potential for reward? What happens when individuals perform and teams don't meet expectations? Flexibility requires compensation policy to anticipate the many combinations and permutations of awards arising from team effort, tracking changes as well as coping with particular team styles.

Be prepared to answer at least the following questions:

• Will my salary continue, changed or unchanged?
• Will my compa-ratio be affected by team results?
• Will an incentive be paid for meeting team objectives?
• Will my efforts be recognized within the team?

The Third Principle of Team Pay Is to Pay Incentive for Team Risk Taking, Choosing Creative and Original Solutions Rather Than Opting for Traditional Control and Predictability

No team is totally immune from the culture in the base organization and its business strategy. If the team is set up to be an extension of organization function and process then it is likely that rewards will be loaded towards continuing good control and keeping the organization stable through predictable, traditional behaviours.

When a team is set up to initiate or implement change, the role of team pay becomes particularly important to support the courage of the team members to break beyond the box of tradition. The pressures of the existing organization are real, member careers are determined by their "managers", curious questions from fellow workers express concerns that team deliberations will negatively affect peers.

"Despite "team player" traits being included in formal performance reviews, teammates may exhibit only moderate degrees of interdependence because careers paths make them more dependent on their managers than on their peers." P.7 Team Talk

The conflict between the creativity arising from team work and the need for organization control creates the potential for many contradictions. Strategic goals often conflict when, for example, the team is charted to take the company in a new direction but the controllers department is not directed to release required resources. New ways may be developed to improve line-processing speeds but cost control prevents the investment.

Team pay is a valuable tool to break through culture and conflicts to reward interdependence of the team members when creative, constructive deliverables are expected, in spite of the saboteurs in the working environment. It is important to identify team vs. organization conflicts in advance by building such an identification process into the mandate development stage of team process. The decision to reward team effort is an important first step but it needs to be reinforced by a management commitment to recognize the risk team members take when "barrier-breaking" expectations are set at the mandate stage.

Team risk needs to be rewarded, openly.

TOP OF PAGE

The Fourth Principle of Team Pay Is to Reward in Ways Consistent with the Style of Team Operative on a Specific Mandate

There are many descriptions of team style in the literature. Essentially, for our purposes in discussing team pay, there are four team styles, each with a particular reward emphasis:

Team Type Primary Basis for Reward

Co-operative effort individuals demonstrate team behaviours

Goal focused group results shared

Project group achieves result within time expectation

Rotating skill acquisition, cross-training

Co-operative effort teams are usually part-time assignments while the employee continues in his or her job. The team usually is secondary to doing the employee's job. The purpose of this team can be either cross-functional or focused on group effort to get a task completed. A bit of conflict is created by having two bosses, one for the job and the other for the team. Examples of co-operative effort teams would be a safety committee or a steering committee. Pay for team effort is usually an extension of job performance with credit given for demonstrating team-supportive behaviours.

Goal focused teams are usually made up of full time members with similar or related skill sets where joint effort is dedicated to completing a process to maximize results and customer satisfaction. Examples include production work cells, self-directed units emphasizing team output and quality. Pay is usually based on achievement of group results and error or waste reduction.

Project teams are also made up of full time members, for the specified life of the project. Emphasis is on deadlines, time-phases, speed to get the project completed. Membership of the team changes with the project phase, adding or subtracting skill sets. By nature, project teams focus on collaboration of people with many skills getting direction from within the team and from the functional specialty a member represents. Examples include virtual teams to direct an acquisition or to start up a new manufacturing process. Team Canada is an example in hockey. Group achievement of results is usually rewarded on a shared basis if time expectations are met.

Rotating teams are indeed a mixture of full-time and part-time members. The team is as much focused on achieving expected results as on broadening the pool of employees trained in the skills needed for results completion. Rewards are usually focused on how many people and how well these people adjust to the skills and issues involved in completing the group task. Underwriting teams or corporate task forces to set new standards are good examples.

TOP OF PAGE

The Fifth Principle of Team Pay Is to Reward Those Teams Which Take the Initiative to Reshape Their Own Dynamics

"If a team will take this challenge to reshape its own dynamics and push the organization to create conditions for higher performance, its chances for success are better, because it is much harder for an organization to ignore or deny the demands of a team than the demands of individuals." P. 212 Team Talk

Some company cultures would view emphasizing the team's role in shaping of its own team dynamics as rewarding something like anarchy. We are not advocating anarchy with this principle. Rather, we are recognizing that some teams get a momentum, becoming living examples of a continuous improvement process and are worth keeping.

Before qualifying for an incentive for reshaping the team, the team and its members must have a track record of working to clearly defined goals, successful work allocation for the members, establishing team processes including good communication within the team and the client population.

The telecommunications team, mentioned above, did a terrific technical job of specifying project parameters but totally missed the President's expressed interest in the project and that the customer service group could provide the insight needed to zero in on customer demand. This team would fail to qualify for the "self-regeneration" award.

However, a team established to review and update agency contracts for an insurance company earns the right for an extended life and further incentive rewards because they have developed an expertise and a series of processes to complete the task, getting better with time and creating greater value through demonstrated agility in dealing with new competitive twists in agency contracts.

Team efforts that create new opportunities for the corporation are often the best examples of the appropriateness for "self-regeneration" awards.

The Sixth Principle of Team Pay Is Not Everyone Has the Same Opportunity

Team members are usually recruited for their ability to meet a mandate, often bringing to bear those different skills and experience sets needed to address the issues. Where skill sets within the team are identical then pay should be similar, although experience levels and seniority credits are difficult to match. Where skill sets are more diverse the market pressures we all face as employers dictate differential in pay levels, for example, software engineers in short supply are paid on a different market curve than human resource professionals which are in market surplus.

Teams members can get confused as to their personal contribution to the assigned project and begin to compare their personal importance to "peer" team members. It is important from the outset to clarify the pay policy for the team members. In most corporations individuals bring their market determined salary ranges with them while on a team assignment. Team pay is an additional component to the compensation package. Team incentives may be shared equally or proportionally to the population of base salaries represented by the team members. Whatever the policy, it needs to be communicated early and clearly. Incentive effect is maximized when there is healthy anticipation of what potential awards might be.

TOP OF PAGE

The Seventh Principle of Team Pay Is That Recognition Is Cost Effective

"People working together can achieve more than the aggregate of what they can do alone." Steven Gross, P. 170 Compensation for Teams

The primary reason for the cost effectiveness of recognition is that people love recognition in the context of their peers and their careers. The second reason is that recognition can be achieved without necessarily getting into major costs.

Team members like to work for incentives but the non-tangible aspects of recognition are very powerful tools too. In many of our employers feedback as to contribution is hard to come by because our bosses are not very expressive and we tend to work alone. Becoming a team member greatly heightens the visibility of our contribution amongst our peers and to the team leadership.

Industrial psychologists have recognized for years that employees have one role within the corporation and often a stronger more forceful one in private life. Legend are the quiet insurance clerks who become mayors, computer nerds who become church leaders. Team membership often presents the same opportunity to blossom. Why? Because the basic dynamic of a team is to work together, with individual efforts recognized and noticed.

The dynamic power of feedback, of recognition, is not something you pay for, it happens! Smart employers will train team leaders to be expressive and empower them with the encouragement to coach and develop team members. Smart employers also are not shy of enhancing recognition by occasionally attaching attractive perquisites to it. If the team leader has expressed satisfaction with a team member's performance and matches it with a free weekend at a resort for the member's family, you have a person who is motivated, with a family cheering committee to bout! The critical point is you achieve buy-in!

Another suggestion from the psychologist is to give the free weekend type of award infrequently, once or twice over the life of a team. However, the person receiving the award must clearly and visibly deserve being designated.

Verbal feedback should be more frequent and again the person receiving the commendation should visibly deserve it. "Thank you" as a phrase is a powerful tool even for the quiet contributors in the team. This phrase is greatly underutilized in today's business environment.

TOP OF PAGE  

The Eighth Principle of Team Pay Is the Employer Should Have a Clearly Stated Team Pay Policy in Place, Ready for Use at Short Notice

Employers don't usually understand the messages they communicate when setting up pay policies and benefit plans. What message is communicated to you when asked to chair an important re-engineering task force but you are told that compensation arrangements will be negotiated later? Employee reaction to this situation is quite forgiving but question that if the task is so important why hasn't the homework been completed. Will they really negotiate compensation or will management forget their promise?

Having a team pay plan ready, front and center, confirms the importance of team assignments and indicates with clarity that the company is serious about getting results and reinforcing team behaviours.

What should a team pay plan consist of? Steven Gross of the Hay Group talks about setting up a pay architecture for teams based on the following:

Focus On Rewarded For Type of Reward

Value Opportunity Initial Pay

Process How the job is done Base pay increases

Efforts & Activities One-time achievement Recognition awards

Results What is accomplished Incentive compensation

Having supportive architecture enables and reinforces team effectiveness. Poor architecture or no architecture interferes with team effectiveness by communicating the "we are not serious" message before the team even starts.

In emphasizing value, Mr. Gross is stating the obvious, a solid market-driven job contribution pay system is fundamental to good management. Employees are most effective when they know that their job is properly evaluated by its contribution and that the company has a process to monitor market rates.

His use of the term "process" covers pay-for-performance components of the pay policy. Employees should have their performance rated from time to time and base pay adjusted to reflect personal improvements. This performance measurement system should include a team behaviours component to high light the importance of teams and co-operative spirit to getting the job done.

Efforts and activities are emphasized to recognize one-time demonstrations of achievement, encouraging continued effort. As mentioned above, free weekends don't cost much but have high reinforcement value.

Results achievement should be the most visible expectation for the team and be the center piece for the team pay policy. The achievement of results should be celebrated with incentive payments that can only be received when the results are present.

The team pay policy should also be flexible enough to reflect the different pay emphasis for each type of team:

Co-operative effort teams are best rewarded after the fact with merit increases, recognition and use of spot cash awards.

Goal focused teams are best rewarded before the fact based on skill sets, team competencies, peer evaluations and pre-determined incentives.

Project teams should be rewarded both before and after the fact with merit increases, spot cash awards and a longer term incentive to maintain continued project interest.

Rotating teams don't necessarily need special awards but recognition for cross-training achievements and spot cash awards are useful.

The point is that architecture of team pay should anticipate flexibility to focus team member efforts on behaviours and results that count.

TOP OF PAGE  

The Ninth Principle of Team Pay Is to Test Out Your Compensation Policy Design Before You Implement It

Speaking of messages, imagine the members of the organization re-engineering team that were promised a bonus based on the savings generated from their recommendations only to embark on a political war later as to whether or not ideas really originated with the team. Did the ideas come from non-team line managers interviewed during the re-engineering process?

Buy in to team pay concepts is fundamental. Unfulfilled promises sabotage established team pay policies.

It is important to deliver what you promise. The developer of pay policy should do, at the very least, a spreadsheet exercise for each team covered by the team pay policy asking the questions:

• What is the team member paid today?

• What is the budget for spot awards for this team?

• What type of team is it?

• What is the incentive allocation for meeting the expected results?

• Will the performance of the team member be assessed during the project period?

• Will annual adjustments occur during the project life span?

• What will the team member pay be after the project is successfully concluded?

• What are the transition steps to implementation?

Based on the reality check of the testing exercise, should the company emphasize team pay? Would the effect be better if team pay opportunities were known? Pay adjustments occur for a number of reasons. For team pay to be visible it must stand out based on the size of the award, the timing of the award or the credibility of the award. Better still all three to maximize buy in!

TOP OF PAGE 

The Tenth Principle Is to Identify Team Competencies and Use Them to Sharpen the Precision of Team Pay Awards

With this tenth principle we are back to the beginning of this paper. Anything we can do to sharpen the clarity of what a team is, the expected team behaviours and the definition of the mandated results, the more effective the basis for team pay.

One of the fundamental reasons for team pay success or failure has to do with perceived trust. Visible investment in developing the team competencies operative in your own company shows that you are serious about teams and how they are to be compensated. Trust is built on clarity!

There are many lists of competencies in the literature but Steven Gross summarizes a list of 21 "team competencies":

For all members:

1. Developing others

2. Customer service orientation

3. Interpersonal understanding

4. Oral communications

5. Organizational awareness

6. Organizational commitment

7. Adaptability

8. Self-control

9. Teamwork and cooperation

10. Achievement orientation

11. Initiative

12. Analytical thinking

13. Continuous improvement

14. Influence

15. Personal growth

For leaders only:

16. Directing others

17. Empowerment

18. Team leadership

19. Self-confidence

20. Planning and organizing

21. Conceptual thinking

While these competencies can be debated it is especially important for each of them to be defined as they are visible and measurable in your specific working environment. Competencies are a useful language for analysing team effectiveness. With agreement on definition they can be precise tools for giving a member a pat on the back, dollars in their pocket or personal development advice. Clarity enhances team pay impact!

TOP OF PAGE 

Other Issues

Based on the experience gained from installing team pay plans as a part of good compensation policy design a number of questions have arisen. Answers to these questions may help you make your corporate team pay a valuable investment.

Is Recognition Worth Anything?

For recognition to be effective it must be viewed in the context of how a specific work environment operates. If management is trusted then recognition has impact. If management is inconsistent or lacks integrity, recognition is viewed suspiciously. When an employer is seen as people friendly, recognition programs work like a charm.

How Do We Define Rewards?

The basic rule is the greater the value to the company the greater the reward. A second rule is the more measurable the result the greater the reward. Events that are observed should be recognized. Results that have a tangible impact should receive incentive.

Do "Spirit", "Empowerment", "Collaboration" Qualify for Rewards?

Specifically these are words describing desirable team supportive behaviours or competencies. The more of these behaviours a person shows the higher he or she should be paid in the appropriate salary grid for the position. If special examples of these behaviours can be documented the person involved should receive recognition.

Does the Team Style Fit Your Business Today?… Tomorrow?

Yes and no! Teams should be considered when the skills of several people are needed to make a result happen. Teams should not be considered when individual effort is the key to success. Authoritarian or paternalistic organizations are generally not very supportive of teams.

TOP OF PAGE 

How "Flexible" Can Your Company Be?

Flexibility can be demonstrated when clarity of goals is the norm. The greater the clarity the more precise a company can be in giving awards. Where a company has trouble making decisions or difficulty finding clarity, a simple, more rigid team pay structure is recommended.

When Does Team Membership Become a "Reward-Eligible" Job?

When team membership becomes a significant portion of the job. A rule of thumb is when team membership uses over half of work time it becomes the job and the job evaluation and salary grid should reflect this event.

Can We Define the Value Created by Forming a Team?

Beauty is in the eye of the beholder. Value in the employer setting is created when an idea expressed enables a corporate strategy to be implemented, implemented faster, at less than expected cost or in greater demand from the customer.

Do Team Timelines Interfere With Reward-Planning Cycles?

Remember to be flexible. When team members are assigned to a significant project with an extended timetable it is quite possible for the person to be eligible for team incentives, corporate performance incentives and base pay adjustments. Communication is key, clarity as to how the pay adjustment or incentive is determined must be communicated.

Who Decides the Appropriateness and Value of the Reward?

Remember the concept of trust. Rewards for the job should be determined by the supervisor. Rewards for team behaviour should be determined on a peer rating basis led by the team leader. The closer the decision maker is to the action the greater the trust.

TOP OF PAGE 

Collateral Issues

Are Team Members in the Same Room, Intranet, Company, Industry or Country?

As many companies are discovering teams no longer have to be in the same room to be effective. However, it is becoming increasingly clear an additional competency needs to be defined, competence in the technology used to keep in communication.

How Are Team Deliverables Clarified in Context of Changing Organization?

We have recommended a tracking methodology be set up as part of the team pay policy. The test is to check whether the change is consistent with the best interests of the corporation and its strategies. Changes in expected deliverables should be documented and reviewed by the executive setting up the team or task force in the first place.

Is the Leader Really a Leader? Is There a "Boss"?

"Who is on first" tends to get defined as the team mandate is developed and clarified. If not, the mandate is not clear enough. It also depends on what type of team and how the leadership is established or rotated.

Is There Likely to Be a Breakthrough Created by Teaming?

Group dynamics have been known to generate the environment for extended thinking. Thinking beyond the box is a fundamental step to generate a breakthrough. Corporate culture, however, often dictates whether the new idea is welcomed or accepted.

Does Rapid Deployment Create Value?

The agility of a team in getting its mandate defined and the first results on the map definitely creates value to the employer. This value is especially apparent in project team environments where tangible results are time sensitive.

Are There Measurable Characteristics of a Team Beyond Its Membership?

Definitely yes, we mentioned competencies earlier in the article. Competencies, when practically defined, are observable behaviours which can be the target for reward or development depending on the circumstances.

References

Donnellon, Anne 1996. Team Talk. Boston, Harvard Business School Press

Gross, Steven E. 1995. Compensation for Teams, New York, American Management Association

Spencer, Lyle M. 1995. Reengineering Human Resources, New York, John Wiley & Sons, Inc.

"Organizational Performance & Rewards", 1994 Consortium for Alternative Reward Strategies Research, American Compensation Association

Montemayor, Edilberto F. 1994. "A model for Aligning Teamwork and Pay", ACA Journal, Summer

TOP OF PAGE