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

1. TEAM BASED REWARDS
MAJOR PROBLEM AND SUGGESTIONS
Shashi Pingolia
Executive Trainee- Human Resource (2009)
NTPC-VINDHYACHAL

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. 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. 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. 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. 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. • 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. 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. 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. 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. 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.

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