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TEAM BASED REWARDS

    MAJOR PROBLEM AND SUGGESTIONS


Shashi Pingolia

Executive Trainee- Human Resource (2009)

NTPC-VI...
1. Introduction

Research has identified the important role of reward and recognition in an

organizational        setup  ...
creation of an overall         positive environment in which both                 employees and

employer can thrive.

App...
salary. In this way organizations can prevent committing to long – running

contracts. The reward is closely related to th...
this study. The main implications that Herzberg did were that one can divide

the wants of all employees into two differen...
will also have negative effects on the other co-workers in the group as

irritation easily can build up against the indivi...
•     Success depends on having a clear purpose, effective leadership, the

         trust of staff in the integrity and c...
5.2 Use of combination of financial and non financial rewards

Mix use of monetary and non monetary rewards and communicat...
they can relate and compare their contribution with other team members and

with the organization goal achievement as a wh...
Because of the fast-changing environment, companies utilizing TBR must create

continuous links to that environment. They ...
organizational goals. The two sources of control must be in alignment or they

will undermine each other.



5.12 Foster a...
References

[1] Anthony, R.N. and Govindarajan, V. Management control systems. : Irwin

McGraw-Hill

[2] Armstrong, M (200...
[13] E-reward (2004) Survey of Contingent Pay, e-reward.co.uk, Stockport [14]

Gross, S. E. 2000 Team-based pay.          ...
[26] Reward and Recognition Systems Creating An Environment That Reenergizes

People and Creates Value-Added Behaviors By ...
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Team Based Rewards

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an article on merits and limitation of team based rewards, it also includes suggestions and recommendation to make it more effective.

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Team Based Rewards

  1. 1. TEAM BASED REWARDS MAJOR PROBLEM AND SUGGESTIONS Shashi Pingolia Executive Trainee- Human Resource (2009) NTPC-VINDHYACHAL
  2. 2. 1. Introduction Research has identified the important role of reward and recognition in an organizational setup in motivating and reinforcing preferred behavior at workplace. In informal terms, reward can be explained as the recognition of the effort and contribution made by the employee in achieving organizational objectives. Reward system can be identified either on group basis or on individual basis. The two systems result in both advantages and disadvantages. The decision of selecting reward system based on individuals or group often depends on one hand the assumption that individual rewards will restrain group activities and on the other hand the assumption that group rewards restrain individual motivation mainly because the individual can easily loose the sense of how his or her performance will contribute to the organization's performance. Today many organizations see that team based pay can be used as an alternative to the individualized reward system which many times mainly consists of individual salaries; this has been widely accepted and appreciated many time more by the employees as it will not only shine light on the effort of manager but also on employees on lower positions. (Reilly, P2003). 2 Necessity of Team Based Rewards There is a clear link between the intentions of people to stay at their place of employment and the reward and recognition system. People enjoy working, and thrive in organizations that create positive work environments; environments where they feel they are making a difference and where most people in the organization are competent and pulling together to move the organization forward. Reward and recognition is an important component in the
  3. 3. creation of an overall positive environment in which both employees and employer can thrive. Appropriately structured reward and recognition programs are important in reenergizing people, creating the kind of environment that makes them want to stay, and in reinforcing value-added behaviors throughout the organization that will ensure its success. Designing rewards that align with and support the work of a team-based organization is well worth the investment in time and resources -despite the difficulties and challenge. After all, implementing a reward program that supports the organization's objectives and work system sends a powerful signal about what is important to the company and what it takes for it to achieve success.(Anne M. Saunier and Elizabeth J. Hawk ). The traditional compensation systems structure was built on the old industries with high focus on being internally legitimate. Today many companies reward jobs accomplished instead of rewarding people. In many cases this leads to rewarding a group of people instead of one individual. As the action of people are often influenced by how they are compensated this type of reward will encourage people to work in groups instead of trying to achieve things as a single person who the individualized reward system encourages (Gross, S. E. 2000). There are many arguments today that suggest team based pay. Team based pay has shown to be effective for organizations with many employees performing the same or similar tasks. These groups of employees seldom have individual goals to strive for. Instead they are working for the same goals as their coworkers. These reward programs are also easier to measure and therefore also easier to evaluate, obviously of high importance for the organization Team based reward systems are often designed so that the reward is paid on top of employee’s
  4. 4. salary. In this way organizations can prevent committing to long – running contracts. The reward is closely related to the organizations outcome and results during the fiscal year. (Roethlisberger, F.J. and Dickson, W.J 1934). Organizations have adopted team-based work systems, at least in part, because of the flexibility they offer. As companies embrace team-based work design to improve customer focus, productivity, and quality, among other key factors, they also must be prepared to reinforce those changes through their reward systems. Early motivational theories and similar studies examined the ability of rewards to identify factors that increases productivity and profitability of an organization. A summary of some of the significant theories and studies is explained as follows. 3.Theories Some factors function as motivators and others do not, these may depend on personal preferences, or as Herzberg claimed they are the same for everyone. Frederick Herzberg developed the famous Two-Factor Theory. The theory is based on a study on the sources to satisfaction and dissatisfaction at work. The study was carried out by interviewing people that worked as either engineers or accountants. The employees were asked about when, more precisely, in which periods of time, they felt very good about their jobs and respectively when they felt dissatisfaction with their jobs. The study showed that the periods when the employees felt good about their jobs were in most cases connected with the content of the job such as achievement, recognition, advancement, responsibility and the work itself. On the other hand, the periods when the employees felt bad about their jobs mostly concerned the context of the work, like for example supervision, salary and working conditions. According to Herzberg one could make several implications from
  5. 5. this study. The main implications that Herzberg did were that one can divide the wants of all employees into two different groups. The first group is associated with the needs for an employee to develop in his or her position. He called this group for the motivation factors, according to Herzberg these factors can work as motivators for the employee. The other group was connected with things as fairness supervision and the conditions in which one work and this group he called the hygiene factors. The hygiene factors do not serve as motivators but they can lead to dissatisfaction if they are not pleased in the eyes of the employee. According to Herzberg salary is such a hygiene factor. One needs to feel an acceptance of the other group members and also to create ones own identity within the group to be able to perform well. (Reilly, P. 2003) According to Duncan Ian Brown, group incentive plan and team working can interact in a mutually reinforcing relationship to produce spectacular performance results that even in a relatively unfavorable closure situation. (Duncan Ian Brown 2000) If motivation is reduced when working collectively, one often refers to two mechanisms, namely; the free-rider mechanism and the sucker mechanism. Whenever there is an understood unfairness, individuals have the tendency to loaf. The free-rider phenomenon is one of the most discussed difficulties with having incentive programs on group levels. This problem involves issues where individuals in a group do not perform or struggle as hard as the rest of the group to reach goals in the organization. If the group reaches the goals for being rewarded, these mentioned individuals will still get the reward, and therefore get a so called free-ride to receiving the reward. This
  6. 6. will also have negative effects on the other co-workers in the group as irritation easily can build up against the individuals who do not perform well enough. Another mechanism, which one can say is the outcome of the free- rider phenomenon, is the so called sucker mechanism. The sucker mechanism can be described as a phenomenon that occurs when group members feel as if they contribute and work more than other members but still profits as much or little as the other members do. The suckers are those who free-riders benefit from. Both these mechanisms have the effect of reducing motivation of individuals working collectively, which can result in a great loss for the company. In idealistic cases, when a group member is performing less then others, the natural effect will be for the others to contribute a little more with a higher effort, but the free-rider and the sucker mechanisms show differently and instead the group members tend to decrease their efforts. (Rutte, C. G. 2003) 4. Empirical Studies Over a period of five years (1927-32), a study was carried out at the Hawthorne plant of the Western Electric Company in Chicago. The researchers chose to call the study the Relay Assembly Test Room. It was a study of the behavior and attitudes of a group consisting of five girls. The conclusion drawn from the study was that Productivity rose as a consequence of the special attention that was given to the girls by placing them all in an experiment. It was the work satisfaction of the informal social pattern of the group and the fact that they had become a team that made them work harder. (Kahn, R. L 1974 and Jacobsen, D. I.and Thorsvik, J. 2002.) In one of the recent studies on team based rewards conducted at NHS, many positive results were achieved. The main conclusions reached by the researchers were that
  7. 7. • Success depends on having a clear purpose, effective leadership, the trust of staff in the integrity and competence of management, good communications and efficient project management; • The right size of team depended on the objectives of the exercise. For example, bigger teams may be necessary to cope with complex processes and multiple targets; • Targets needed to be clear, simple, easy to communicate and evaluate, and relate to the work people do, and people needed to believe the targets were achievable and within their control; • As with all schemes, team-based pay will only operate successfully for a limited period because employees fear that the performance bar will be continuously raised and the discretionary effort that schemes tap into may not always be there to exploit. 5. Recommendations On the basis of various past researches done in the similar field that has been taken as input in the research, following key suggestion are proposed. 5.1 Clear criteria and strategy Successful plans are not introduced as isolated initiatives, purely in response to what other companies are doing. Rather as Schuster describes it, ‘with clear objectives’, as part of a comprehensive management strategy to engage employees in a collective effort to achieve key business goals. The successful companies operated them as part of a total approach, involving senior management support, and a wide range of other team- building, performance management and communications initiatives. Yet clarity of objectives is not everything. Involvement of Employees in plan design should be taken care of as it ensures their commitment to the operations
  8. 8. 5.2 Use of combination of financial and non financial rewards Mix use of monetary and non monetary rewards and communication of the clear criteria to the team is identified as the more preferred recommendation by all levels of employees to improve effective reward structure of team. As they believe it can help in meeting individual expectations and then using them as a source of improving team performance also. Almost all employees are satisfied with the monthly payment system existing in their organization and they do not want a shorter or a longer period of payment 5.3 Involvement and participation As per various studies, involvement is identified at the crux of the mutually reinforcing linkages between effective team working and successful team-based pay plans. It operates through a number of channels: 1. Developing understanding and buy {in to the goals of the plan and the team relationships and performance goals it embodies; 2. Generating its own Hawthorne effect; Cooper et al. reported that when people work under a self-selected rule for distributing team rewards, they realize significant productivity gains; working under the same rules imposed on them does not produce the same effect. 3. Improving the quality of plan design, and directly generating suggestions and improvements in line with plan performance goals; 4. Addressing the full range of employee motivations beyond simple monetary needs 5.4 Effective Communication Communication is the key to bring success in implementing team based reward systems. it facilitates establishing trust factor among team members and helps fair perception of rewards given to team members . It is because now
  9. 9. they can relate and compare their contribution with other team members and with the organization goal achievement as a whole. 5.5 Craft a culture of collaboration and cooperation Culture can be defined as a pattern of shared organizational values, basic underlying assumptions, and informal norms that guide the way work is accomplished in an organization. For teams to be most effective, the organization's values, assumptions, and norms must support collaboration and cooperation. 5.6 Align the organization in multiple ways Alignment across teams is crucial for performance leaps. After interviewing managers in major corporations, Steve Jones (1999) concluded that 80 percent of the payoff from using teams occurred between the teams. Improvements in the flow of work occurred because the teams aligned with each other through direct communications. 5.7 The work must be conducive to teams For team-based organizing to be successful, the organization must have work that is appropriate for teams, that is, interdependent tasks that require more than one person to complete them. However, today, because of the increasingly complex work environment, most work is interdependent, especially over the long term, so teams are appropriate in many situations. For companies involved with team-based organizing, the majority of the work should be team appropriate. 5.8 Team work must fit and connect to environment The environment includes the forces outside the organization, for example, government regulations, communities, competitors, customers, and suppliers.
  10. 10. Because of the fast-changing environment, companies utilizing TBR must create continuous links to that environment. They must have mechanisms to create awareness of the environment and build in ways to change accordingly in order to survive and thrive 5.9 Structure the organization with an array of teams Successful team-based organizing requires using a variety of team types to support different types of work. Because the environment shifts constantly, the organization must be able to use different types of teams to meet the needs of varying situations quickly. 5.10 Reinforce cooperation and collaboration with organizational systems Organizational systems form the infrastructure created to support the work and the people doing the work within the organization. Through modifying and creating systems, team-based organizing enables cooperation and collaboration within the organizational context. Because of the need to align with the work and the rapidly changing environment, flexibility in organizational systems is the key. As the work processes and structures change, support systems in the form of reward and incentives must change to maintain alignment. 5.11 Create empowerment and authority at all levels Empowerment represents the shift from external control of work decisions to internal control. It consists of a redistribution of the power to make decisions within the organization {pushing decision making down to the level where the work is done. Both external and internal influences are present all of the time, but the formal shift toward a balance increases involvement and commitment while keeping individual and team decisions in alignment with
  11. 11. organizational goals. The two sources of control must be in alignment or they will undermine each other. 5.12 Foster an atmosphere of entrepreneurship An effective team provides the best incubator for new ideas. When a member shares a new idea, the team can ask, How do we do this?. The team can also ask What if . . .?, What is . . . ? and What should. . ?. The idea is protected at conception, receives refining inputs from members with diverse perspectives, and gains momentum before being taken to management. Relationships with customers can benefit in similar ways. 5.13 Achieving Integration The management must ensure that the plan is designed and perceived as an integral part of a much broader operating and HR strategy at the organizations. Efforts have been made to consider each and every detail in a through manner while selecting the methodology, statistical techniques etc. however in spite of the best effort that has been made in the research process some faults and mistakes might still exists. 6 Final Note The keys to a successful and sustainable implementation of a team-based reward system include a focus on employee involvements, fair perception , the alignment of systems, and a leadership change, it also include teams with a balance of accountability, responsibility, authority, and empowerment. It is a challenge to do all of these things well, but the option is failure.
  12. 12. References [1] Anthony, R.N. and Govindarajan, V. Management control systems. : Irwin McGraw-Hill [2] Armstrong, M (2000) Rewarding Teams, Chartered Institute of Personnel and Development, London [3] Armstrong, M (2005). A Handbook of Employee Reward Management and Practice 0749449624.london [4] Armstrong, M. (1996). A handbook of personnel management practise. London:Kogan page limited. [5] Armstrong, M. (1993).Managing reward systems. Buckingham: Open University Press. [6] Arvidsson, P. (2004) Styrning med belnings system. In Samuelsson, L. A. (Eds.), Controller handboken.P.135-173. Uppsala: Industrial littérateur AB. [7] Baron, J. N. and Kreps, D.M. (1999).Strategic human resources. New York: John Wiley & Sons. [8] Berger, D. R. (2000). Millenium compensation trends. In Berger, L. A. & Berger, D. R. The compensation handbook. New York: McGraw-Hill. [9] BERND IRLENBUSCH and GABRIELE K. RUCHALA December 2006 Relative Rewards within Team-Based Compensation [10] B. Holmstrm,Moral hazard in teams, Bell Journal of Economics, 13, 1982, 324-340. [11] CMPO Working Paper Series No. 01/37 Team-Based Incentives in the NHS:An Economic Analysis Marisa Ratto1 with Simon Burgess2, Bronwyn Croxson1, Ian Jewitt3 and Carol Propper4 1 CMPO, University of Bristol 2 CMPO, University of Bristol, and CEPR 3 Nueld College, University of Oxford and CEPR 4 CMPO, University of Bristol, and CEPR [12] Critical Success Factors in Team-Based Organizing A Top Ten List Michael M Beyerlein and Cheryl L. Harris
  13. 13. [13] E-reward (2004) Survey of Contingent Pay, e-reward.co.uk, Stockport [14] Gross, S. E. 2000 Team-based pay. In Berger, L. A. & Berger, D. R.The compensation handbook. New York: McGraw-Hill. [15] Hume, D.A. (1995)Reward management. Employee Performance, Motivation and Pay.Blackwell Publishers Inc. [16] Ilgen, D. R. and Shephard, L. (2001) Motivation in work teams. In Erez, M., leinbeck, U. and Thierry, H.Work motivation in the context of a globalizing economy.P. 169-179 Lindon:LEA. [17] Jacobsen, D.I. (2002).Vad hur och varfr Om metodval i fretagsekonomi och andrasamhllsvetenskapliga mnen.Lund: Studentlitteratur. [18] Jacobsen, D. I. & Thorsvik, J. (2002).Hur moderna organizationer fungerar.Lund:Studentlitteratur. [19] Johnson, D. W. & Johnson, R. T. (2003). Training for cooperative group work. In West, M.A., Tjosvold,D. & Smith, K. G.International handbook of organizational teamwork and cooperative working. West Sussex: Wiley [20] Katzenbach, J and Smith, D (1993) The Magic of Teams, Harvard Business School [21] M. Freeman et al., The impact of individual philosophies of teamwork on multi professional practice and the importance [22] Merchant, K.A. & Van der Stede, W.A.(2003).Managing reward systems. Performance measurement,evaluation and incentives. Essex: Pearson Educated Limited [23] Michael M.Beyerlein and Cheryl L. Harris (2003). Critical Success Factors in Team-Based Organizing A Top Ten List [24] Performance Based Compensation and Direct Earnings Management, Oklahoma State University Vicky Henderson Warwick Business School January 12, 2008 [25] Reilly, P, Phillipson, J and Smith, P (2005) Team-based pay in the United Kingdom,Compensation and Bene_ts Review, July-August, pp54{60.
  14. 14. [26] Reward and Recognition Systems Creating An Environment That Reenergizes People and Creates Value-Added Behaviors By Wayne Milroy, Principal, Thru- the-Mill Associates [27] Rocine, V., and Irwin, D. (1994). Make team members responsible for team effectiveness. Cost and Management, 68(8), 28. [28] Roethlisberger, F.J. & Dickson, W.J. (1934)Management and the worker { technical vs.social organization in an industrial plant.Boston:Harvard University Graduate School ofBusiness Administration. [29] Rutte, C. G. (2003). Social loafing in teams. In West, M. A., Tjosvold,D. & Smith, K. G.International handbook of organizational teamwork and cooperative working.West Sussex:Wiley [30] Wayne Milroy Principal, Thru-the-Mill Associates, Reward and Recognition Systems Creating An Environment That Re-energizes People and Creates Value- Added Behaviours [31] Wolf, M. G. (1999). Compensation: an overview. In Berger, L. A. & Berger, D. R.The compensation handbook. New York: McGraw-Hill.

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