What are the advantages and disadvantages of team incentive plans?

Busch, whose remarks came at a recent BLR-sponsored webinar, is owner of HR Compensation Consultants, LLC. Here are her suggestions about team and individual incentives.

What Are Team-Driven Incentives?

Team-driven incentive are intended to foster a collaborative environment in which team members are focused on helping one another. They are:

• Based on a team’s performance.
• Place the focus on how a team comes together to drive the business.
• Types of plans:

• Gain-sharing plans
• Profit-sharing plans
• Earnings-at-risk plans

Types of Team-Driven Rewards

• Team incentive carve-out—A broadening of individual performance measures to include team performance.
• Team multiplier—Multiplies the individual’s incentive earning by a factor based on team performance.
• Team pool—Typically used in sales; allocates the incentive to team members based on each person’s role in the sales process.
• Unique team measures—Specifically created for a unique team; generally are customer-focused measures.

Individual Performance Measurements

• Quantity of work output
• Quality of work output
• Monthly sales
• Work safety records
• Work attendance

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Advantages and Disadvantages of Individual Incentives

Advantages

• Relate pay to performance of individual.
• Help retain best performers.
• Provide equitable distribution of compensation.
• Suitable for individualistic culture.

Disadvantages

• Factors not rewarded may be overlooked.
• Factors not in the employee’s control might impact outcomes.
• Establishing performance standards is time-consuming.
• Unrealistic standards can hamper motivation.
• Can lead to mistrust between workers and management.

Advantages and Disadvantages of Team Incentives

Advantages

• Improve organizational performance.
• Based on organizational measures.
• Periodically measured.

Disadvantages

• Line of sight may be lessened.
• May not be accepted by high-level individual performers.
• Increases to compensation at risk—lack of stability

Is there a time and place for both types?

• Yes, based on the organization’s compensation philosophy.
• Individual incentives are focused on achieving work-related performance standards.
• Team incentives reward collective performance.

Examples of when team-driven goals may be the way to go instead of individual rewards:

Team-Driven

• Use to build a sense of ownership.
• Use to recognize increases in performance measurements that move the business forward.
• Use to promote teamwork and collaborative efforts.

Individual

• Use when the contribution to the business was performed independently.
• Use to recognize that individual contributions are part of the organizational culture.
• Use if individual competitiveness is desired.

Team incentives, individual incentives, recalculation of overtime—just a few of the numerous wage and hour challenges all comp pros face. Wage and hour should be simple, but it’s just not. Complying with the Fair Labor Standards Act (FLSA) is one of the most confusing and challenging things comp managers have to do. How can you tell if they are doing it right?

There’s only one way to find out what sort of compensation shenanigans are going on—regular audits.

To accomplish a successful audit, BLR’s editors recommend a unique checklist-based program called the Wage & Hour Self-Audit Guide. Why are checklists so great? It’s because they’re completely impersonal, and they force you to jump through all the necessary hoops, one by one. They also ensure consistency in how operations are conducted. And that’s vital in compensation, where it’s all too easy to land in court if you discriminate in how you treat one employee over another.

Experts say that it’s always better to do your own audit and fix what needs fixing before authorities do their audit. Most employers agree, but they get bogged down in how to start, and in the end, they do nothing. There are, however, aids to making FLSA self-auditing relatively easy.

What our editors strongly recommend is BLR’s Wage & Hour Self-Audit Guide. It is both effective and easy to use, and it even won an award for those features. Here’s what customers like about it:

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You can examine BLR’s Wage & Hour Self-Audit Guide for up to 30 days at no cost or obligation. Go here and we’ll be glad to arrange it.