MANAGEMENT ARTICLES

 

Team-based Incentive Programs

(Peter Frans - Managing Partner of Trimitra Consultants)

 

More and more companies are now applying team-based incentive programs. Here are some factors that need to be considered when applying team-based incentives
 
Team-based incentive programs are a meaningful way to link team performance and pay. Ultimately, a program of this nature can be successful, given the proper culture and environment. The challenge lies in properly defining, designing, implementing, and communicating the plan.
 
Like any compensation plan, it needs to be developed in support of a company’s business, HR and compensation strategies. Companies also must be aware of competitive norms within their industries and internally whether a plan is applicable and economically viable. In the process of designing such an incentive plan, some basic elements need to be considered in the design process.

 

These include, but are not limited to: determination of employee eligibility, desired results and expected behaviors, types of measurement and the ease with which these can be measured and understood, method of performance evaluation, extent to which individual performance is considered in determining the final award, schedule/format of plan pay out, and employee buy-in. The last of these, employee buy-in, cannot be underestimated.
 
Employees' belief and support in a team-based incentive plan is critical to the success of the plan. Employees need to believe that they can control meeting the deadlines and quality. If other factors will play a greater role in determining the outcome, this plan will not be as successful.
 
Additionally, employees must believe that the rewards are appropriately distributed. For example, if awards are equally allocated, members of the team may feel one member is not contributing his/her share and be dissatisfied with the plan results.
 
The same is true when an employee feels his or her contribution deserves a greater reward than another team member with lesser responsibilities.

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