TRENDS Steve Gross, Philadelphia-based employee compensation practice leader for consulting firm William M. Mercer, Inc., was recently hired by an insurance company that was having trouble getting its underwriters to function as a team. What Gross discovered was that whenever an underwriter asked his colleagues for help, they would invariably reply that they were too busy. He soon realized that the problem was with the incentive structure: The team's incentives were based on individual performance.
"In this case, individual incentives were lowering overall productivity," Gross says. "If you're being rewarded only for the policies you underwrite, then you'll always be too busy to help someone else out." The solution: incentives based on team performance.
There's no question that team incentives are spreading throughout the corporate world. According to a recent Mercer survey, the number of U.S. companies with incentive programs for teams or small groups has doubled in the last five years. Twenty-four percent of the 2,000 large and mid-sized corporations surveyed have such programs, and another 23 percent are considering them.
"If companies want people to work together, they need to be rewarded together," says Gross, adding that companies also need to consider the personality of the recipients. "For example, people in sales respond to external motivations. They want to be able to say to their neighbors, 'Guess what? I just won a trip to Hawaii.' They can't say, 'Hey, come on over and see this $5,000 bonus check.' "
Also key is that team members feel they can influence the results being measured. Gross urges, "Don't base incentives on world-wide profits. We tell firms to develop 'line-of-sight goals,' where people can see the impact of their work."