Rewarding Teams
Encourage Collaboration and Cooperation

    Managers who reward teams rather than individuals are on the horns of a dilemma:  On the one hand, they understand the benefits that come from rewarding team efforts; on the other, they're often in conflict with ancient compensation policies.  For the past century, compensation has rewarded individuals based on their productivity, and that's become enshrined in most corporate policies as the norm.

    It's well known that rewards (although not always cash rewards) drive performance.  People respond to rewards.  If the rewards are not well thought-out, however, they may produce undesirable side-effects and even, sometimes, undesirable results.

    Individual rewards and compensation are best in some settings:  Where field sales people have clearly-defined territories, contests that encourage superior performance can be used to reward those who increase sales the most.

    More often, people in teams are all working together to achieve some desirable outcome.  Different people bring different skills, different motivations, different understandings.  In the past, the teams' manager has been responsible for assessing each person's contribution and creating rewards accordingly, which could sometimes lead to favoritism or other injustices.

    Rewards will produce results, but they may also expose problems.  If you provide an award for maximizing sales, for instance, you may have inadvertently encouraged salespeople to book sales from customers with marginal credit histories, leading to future collection problems.

    Even in apparently clear examples, there are special situations where the wrong rewards could lead to disaster.  One of the most common is the customer who spans two or more territories:  The design engineer is in one territory, the purchasing agent another, and manufacturing operations in yet a third.  The design engineer's decision to adopt your product is crucial, but the actual dollars get committed by the purchasing agent, while all the post-sales support demands will come from manufacturing.  Here's a case where three different sales people need to operate as a collaborative team to satisfy the customer.  Every team member must be compensated fairly, or one of them may undermine the entire process, leading to reduced sales.

    People who work cooperatively together can produce more than people who work only on their own piece.  Even if everyone is performing essentially the same job, the skills of the experienced can be transferred to the newly-hired, resulting in quicker learning.  More typically, however, the individual members bring different skill sets:  A new-product launch team needs people who know the product, manufacturing, marketing, sales, finance, etc.  Determining who's done the most (and, therefore, deserves more reward) is difficult, and risks angering some who see the process as unfair.

    People who work together in a collaborative and mutually-supportive environment create a "can do" atmosphere.  Individuals who are stuck find it easier to ask for help when they know others are willing and ready to help.  On the other hand, people busy protecting their "turf" to maximize personal rewards waste time, time that could have been spent getting the job done by working with others.

    Rewards influence these mindsets:  When each individual is working toward their own raise or bonus, then they have every incentive to make sure they're perceived as "more valuable" by management.  They'll stick to their assigned tasks, never looking up to see if anybody else needs help.  On the other hand, if people understand that the entire team will be rewarded, they have every incentive to make sure their peers are doing their best work, and to help them acquire the knowledge they need to do even better.

    When team rewards are instituted, it becomes in each individual's self-interest to make sure that others are productive, too.  That way, more junior contributors are brought along by more experienced mentors.  You can even formalize that with a policy of "each one teach one," in which you pair seasoned experts with apprentices.

    In traditional compensation and reward schemes, the manager is usually expected to decide who contributed most.  The problem:  Some managers are better at it than others.  Some have no skills in assessing real productivity, mistaking apparent activity for the real thing.  Others let their egos get in the way, and the employee who knows how to manipulate that can often receive unwarranted rewards.

    In a break with tradition policies, more and more managers and business owners are now encouraging entire teams to assess each others' performance, and rewarding in accordance with that assessment.  The results can be fair, and they can put rewards and compensation directly at the core of the team's values, ensuring even better performance in the future.

    Working from your measures of productivity, consider the increases you might be able to achieve...say, $100,000 per year.  Then, set (say) 20% of that aside as a pool to be shared with those responsible.  At year's end, compute the gains and share the wealth.

    How you share the wealth is important, too:  If everybody is rewarded based on their annual salary, you reward higher-paid people more...regardless of whether they actually contributed to more productivity or not.  It's attractive to a lot of senior people, because they get the lions' share of the reward.

    Another approach we've used:  Use a rating system in which all co-workers evaluate each other.  Each team member votes to distribute rewards to the parties they decide are most deserving, and then all those votes are averaged.  To start, each person is assigned an equitable share (for five people, for example, that means 20% each).  Each person then, independently, privately and anonymously, adjusts the numbers for each of their colleagues up or down based on how they value that person's contribution.

    The total in each row must remain 100%, so what's allocated to one person must be taken from another to keep the total the same.  Daniel might decide that, of five members on the team, Carrie deserves 33%, and so adjusts a couple of others downward, accordingly.  Daniel can't change his own allocation; that's for others to decide.

    Allocation to:

    Table: Example of Allocation

    We want people to be honest so we preserve anonymity.  That's assured by giving each team member a sheet of paper with a list of names (excluding their own) and nominal allocations (in this example, everyone would be allocated 20%).  Each person revises individual values upward and downward, as they judge appropriate, while making sure the total remains the same.  The completed form is placed in a sealed envelope and given to a trusted person for compilation.

    You might use the accounting department or an outside accountant to make sure that anonymity is preserved among the team members.  The trusted auditor assembles the data, ensures compliance with the rules, and publishes the final results to management.  It's management's job to decide how and what to share, with whom, and when.

    Depending on the culture of your team and the larger organization, you have to decide what's best to be shared and what's best to leave private.  The senior manager should probably have access to the full, final data because it can guide future team improvement.  It's a good tool for assessing the cohesiveness of the team; if everybody is very near the default mean (20% , in this example), you might have a pretty "tight" team who feel each other are contributing where it matters.

    When we average the results, we can see how each of us is assessed by the rest of the team.  Carrie is highest ranked in this example, and Daniel lowest.  It's probably worth sharing these rankings (but perhaps not the precise percentages) with the team, so they can learn who is most appreciated for their contribution, and to set role models for lower-ranked employees to learn from.

    It's also valuable to interview people who rated others highest, to find out what they found so valuable.  Then, management can publicize those virtues and increase the entire team's performance.  You might also want to engage in some personal coaching of the lowest performers, to ensure their improvement over time.

    If you have corporate policies on compensation, you'll have to find out whether this team reward option is possible, or if you need permission.  If putting the control of the reward system in the hands of your team doesn't yet seem appropriate, you can always start with a hybrid:  Commit, say, 25% of the reward pool to collaborative team allocation, and allocate the balance in the traditional way.  Then, when you see that it works, you can change the proportions next year.

This article was originally published in the newsletter, October, 2002
and is available to our subscribers on our website, http://www.net-working.com.