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I pulled this book from M&M's list. I liked it pretty well, but he seems to get more evangelical as the book progresses.

One important topic he's adamant about, in direct contradiction to something M&M seem adamant about is incentives. M&M have said not to do team bonuses as this demotivates your top performers while authorizing your underperformers to continue their behavior. Pfeffer says that this is a common concern, but not supported by empirical data.

Has anyone tried both ways and have an opinion they want to share? My instinct is to do a little of both.

akinsgre's picture

I don't have enough experience with team vs individual to provide an answer. However, I've been asked to provide some "individual" metrics for my boss (cause he couldn't think of any).

Of course, I can't either. As part of a software development team, I feel like everything we "produce" is a function of how the team performs.

I'm thinking that until there is something specific that I can accomplish, there isn't much point in individual metrics that are based on generalizations about the software development activities.

On another note, I really like Pfeffer, and would give a lot of weight to anything he writes.

ccleveland's picture

Great topic, Will. I'm sure there's bound be a number of great points of view.

I believe that it depends on the organization and that some mix of the two is best.

In a collaborative environment, a top performer's effectiveness can be multiplied if she shares her know-how with her team. This is very difficult in an individual ranking incentive system.

On the other hand, it's also important to have some individual recognition. A top performer may feel that it's unfair to give the same exact bonus to everyone else, when she came up with a great idea.

Also, the way performance is measured is important as well. We have a group of technical people who all do essentially the same work: automate software installs. Each software application is different in the level of effort and difficulty. We measure based on the work effort spent and calendar time it took to deliver the app to our clients. The more capable technicians typically get the more difficult (and longer) apps in order to keep the overall team time down. In this case, it isn't "fair" to base individual performance completely on individual metrics.

I hope that adds another perspective. Unfortunately, I don't think there's a simple answer.

CC

US41's picture

Team bonuses seem like communism: Rewarding failure and punishing success. I personally don't want any sort of team-based incentive unless I am on very small team that is 100% top performers. If I'm on a team with some folks who should have been let go last year, I'm demotivated by team incentives.

James Gutherson's picture

What sort of 'team' are you talking about?

If it is a collection of say, sales people, who all do a similar role with some sort of group goal, then I would agree that individual incentives are better. I would also not call that a team. :roll:

A team in my head is (generally) cross functional and each member needs the individual skills of the others in order to reach a team based goal. In this sort of environment I would look at team based incentives.

All that said 99.99% of the world is grey and reality will fall somewhere in between.

US41's picture

Jim, what a great point! The folks that work for me are only sort of a team. My directs are just beginning to become something resembling a team. They are finding that as I delegate more and more, they are more reliant upon each other's cooperation to succeed at handling bigger and bigger tasks.

However, my peers and I are a real team. Each of us handles a different function and we are reliant on each other. We are brutally honest with one another, regularly debate with passion, and always end up choosing a path. We meet separately without our boss present to strategize on how to bring him what he needs to get his job done before he can ask us for it.

There's a big difference between a group of individuals with the same manager and a team. In fact, there is a huge difference.

I like what Mark said in a previous cast about team building. He said that trust is when you know someone else can perform. It's interesting to see my reports' idea of who the team is. They all see the same group of people as being competent enough to cover their stuff while they are out, and then they add themselves to that group.

However, it is only a two-way street between certain individuals. It really shows who really trusts who, and where the real team is (based on getting results being the trust-building method) compared to where I wish it was.

WillDuke's picture

In an effort to wander back on topic, can individual incentives damage a team? If I'm being compensated for my performance in relation to the rest of the team, I don't want the team to perform well. I'll look better and be compensated better.
If, on the other hand, I'm receiving team compensation, then I want the whole team to do well. I'll be more likely to share my knowledge and skills as I will benefit from doing so.

ccleveland's picture

US41 - If you don't mind sharing, what is the incentive system for your peers? Is it different than your directs?

For us, we have a combined system: Each person's bonus is based on a ranking of peers. Top performers get a higher % bonus. Our bonuses are also affected by divisional and company metrics as a whole. The better our division and company does, the better everyone's bonus.

While a lot of effort is put in to encourage teamwork and collaboration, I have seen cases where people put their individual objectives first without looking at what may be best for the whole organization.

Also, setting "team" incentives at a very high level, like the company level, causes people to feel like they can't really make a difference because they are so far removed from what's being measured. With department level (manager & DR's) incentives, top performers can see how they can further contribute to the overall team success by helping others along. It's not communism...it's having each contribute to the level they are capable as effectively as possible.

CC

cwatine's picture

Great Topic Will.

I use both :
- everyone in the company gets a year end bonus which is related to the company cashflow
- individuals get a semester bonus :
* related to some pure figure indicators (like sales, margin, inventory, etc.)
* related to missions or points of improvement (more qualitative)

My feelling is you can only pay a team strictly on pure results (metrics).
For individual, you can reward on results, attitude, and on improvement (not relative to peers, but relative to themselves).

But I still think that money is rarely the best way to really motivate people.

Cédric.

MattJBeckwith's picture

Great question. My experience comes from managing in the call center environment.

I have found that the best approach in my operations is, as many have already mentioned, a little of both.

Individual incentives are crucial in my world (not always cash) but we've found that peppering in team, group or site goals can, if done in conjunction with individual incentives, can help motivate those that are just south of the middle of the pack (by peer pressure).

CC hit the nail on the head for me. The most valuable lesson I've learned is that team goals can't be so high that the individuals don't actually believe they can affect it. Team incentives work best if tied to the performance of that group alone.

rthibode's picture

One idea is to tie the team incentive to having each team member achieve a certain standard.

For example, a team goal might be every member of the team getting 75% on a test. It's not a competition among teams; every team that meets the standard is rewarded. The incentive is not a moving target, and everyone knows what they have to do to succeed.

I've found that this structure promotes team-building because the team has to work together to ensure that every member can meet the standard. Individuals who might not be motivated by the external reward usually respond well to the peer pressure (and support) of team mates.

I'm not sure if this sort of structure would work well in other settings. Any thoughts?

FlatFeeKing's picture

that is a great question, and I appreciate your responses. but I need to twist it a little bit, how would the response change if all of the members of a team were on a commission basis, and it doesnt really matter to them how the other members of the team do, because it doesnt affect their pocketbooks?

juliahhavener's picture

How can you make it beneficial to them to help support the team? Individual goals make the world go 'round, but concentrated efforts from a group of people can be *much* more powerful.

dbobke's picture

I am with M&M on this one - individual recognition/bonuses are the way to go. While the total may be greater than the sum of its parts for a team, you still can't have a team without the individuals functioning at their best. If I have a group of employees who are all getting bonuses, it is because individually and corporately they are firing on all cylinders.

jhack's picture

Bonuses may be decided a number of ways, but the checks are made out to individuals, and each person is going to interpret their bonus as a reward (or punishment) for their own behavior.

The key is to make sure you connect what the person does on the job with the rewards of the job. As long as each person sees a connection between their actions and their pay (or peer respect, or whatever motivates them personally) then the system will work.

John

stephenbooth_uk's picture

[quote="WillDuke"]One important topic he's adamant about, in direct contradiction to something M&M seem adamant about is incentives. M&M have said not to do team bonuses as this demotivates your top performers while authorizing your underperformers to continue their behavior. [/quote]

I was talking to one of our C-level executives (I think that's right, two levels below the CEO) a few weeks back and we talked about incentives for performance. He said that he always paid incentives and bonuses (this is in the parent company of the joint venture I work in, we don't get bonuses in the JV) on a team basis, based on the average performance of the team and he makes the performance stats on all team members available to everyone on the team. That way if you're an above average performer you know who it was that dragged your bonus down this quarter. Not suprisingly poor performers get put under a certain amount of pressure by their team mates to shape up or ship out. He describes the culture of the company as "Macho" and "Brash and arrogant".

Stephen

TomW's picture

[quote="stephenbooth_uk"][I was talking to one of our C-level executives (I think that's right, two levels below the CEO) [/quote]

A C-level is anyone who has "C" (as in "chief") in their title, like CEO, CIO, COO, CTO, etc.

WillDuke's picture

Stephen - that's interesting. I hadn't thought about getting motivation for the below average performers by peer pressure. Much as I don't care for 20-70-10, this seems to point to the 20 bouncing the 10 for you. :wink:

I think I'm still leaning towards a combo method. I have definitely noticed that some top performers aren't much interested in increasing the effectiveness of the rest of the team, so a team motivation could help with that. But the top performer deserves more compensation too.

stephenbooth_uk's picture

[quote="TomW"][quote="stephenbooth_uk"][I was talking to one of our C-level executives (I think that's right, two levels below the CEO) [/quote]

A C-level is anyone who has "C" (as in "chief") in their title, like CEO, CIO, COO, CTO, etc.[/quote]

Ah! When I Googled "C Level Executive" most of the definitions came back as someone two levels below the CEO/President (who were defined as A level executives) and one below the B level.

One example is:[quote]What or who is an A-level, B-level and C-level executive?
Unfortunatelly the definition of the A, B, and C level executives is a bit muddled. In general the letter rankings refer to how high an executive is within its organization. The problem is there is no agreement yet if "A" is the highest or "C". From our point of view, "A" being the highest would make perfect sense because we can always have subordinates (B, C, D...Z) to A, but never a superior (there are no letters before A).

Chief Officer's executive community is mostly consist of A-level and B-level (if A is the highest) senior executives.

The simples way for us to define it is as follows using A as the highest in the leadership ranks:

* An A-level executive is the single, most senior full-time salaried executive of the organization who reports directly to the Board of Directors. (Common Titles: Chief Executive Officer, CEO, President, Executive Director, Executive Vice President, General Manager).
* A B-level executive is the single, full-time salaried executive who reports to "A" and deputizes in the absence of "A". Many associations do not have a "B" level executive. (Common Titles: Vice President, Assistant Executive Director, Assistant General Manager).
* C-level executives are the full-time salaried directors or managers who report to either "A" or "B" and are the senior person responsible for a particular area of activity. "C" level managers/directors typically advise "A" and "B" with respect to the particular area of expertise, and have responsibility for budgets and planning for their area. "C" level managers/directors should have at least one staff member reporting directly to them. (Common Titles: Director of Public Affairs, Vice President - Marketing, Director of Finance and/or Administration).
* The source for the descriptions is the "Canadian Society of Association Executives" [/quote]
(from http://www.chiefofficer.com/faq.php)

Thanks for the correction.

Stephen

bflynn's picture

[quote="WillDuke"]Has anyone tried both ways and have an opinion they want to share? My instinct is to do a little of both.[/quote]

I've seen it both ways. My experience is that most people who are evangelizing one way or the other do not understand all the dynamics. People who dislike team incentives seem to forget or discount peer pressure. Thos who knock individual incentives dislike them because they've seen them applied to team positions.

Which one you should do depends on the organization of your people and how they contribute to the bottom line. If success and more dollars come from people pushing the extra mile, then individual incentives is the way to go. If the organization is such that it takes everyone hitting their own goals to optimize results, then a team incentive is the correct way. I believe the classic examples are Sales and Production Lines.

Individual incentives usually get a bad wrap, but a team incentive can be equally destructive if applied to the wrong environment. Think of what a team incentive would do to a Sales team and what individual incentives would do to a production floor. Apply the correct one based on what you need people to do to drive results.

Brian

Mark's picture

We did not intend to say to not do team bonuses. We tried to get across that team bonuses alone aren't as effective as people think they are, and team pay is often just a small thing relative to the fact that pay is still individualized.

Compensation is decidedly complex!

Mark

tlhausmann's picture

> Compensation is decidedly complex!

Indeed. Recently I was told "...be more aggressive in advocating performance increases for my team"

Working at a non-profit means you work in service to others; resources are constrained but I could use some guidance on selling this notion to the CFO and others.

tlhausmann

misstenacity's picture

I'm wrangling with the individual vs. team bonus incentives myself. The whole "top performers" and "slackers" dichotomy is much less pronounced when your team is a whole 2 people. :?

These are our most critical employees in the company, despite being at the bottom rung in the heirarchy - because they are the front line with our clients and everything hinges on great customer service.

As a result of that, the incentive that my boss has floated (outside of my own impetus, but that's another story) could sail my people's end of year net salaries above my own, which is weird. And frankly, I am a little apprehensive about rewarding at that high of a level for "just" being very good instead of decent at their particular jobs. To make it more concrete without using numbers, if the "high" metric targets are reached, which are possible but difficult, the total bonuses would equal about 50% of each persons' base salary. Yeah, you read that right.

I'm really mashing this over in my head, over and over the last few days, and haven't come up with many great new ideas or other solutions.

jhack's picture

What, exactly, is the problem for which you can't find a solution?

Why would you be uncomfortable if the two "most critical employees in the company" were paid more than you?

I highly recommend reading the following thread in its entirety.

http://www.manager-tools.com/forums/viewtopic.php?t=1771

John

ashdenver's picture

[u]can individual incentives damage a team?[/u]

In my experience, it can to a degree.

Our core incentive structure is based on client survey scores and productivity. If an individual gets at least 3 surveys, their personal score is used. If they get less than 3 surveys, the team score is used. Incentive payment is based on individual productivity.

As such, most people are focused on getting their own surveys and making their own numbers. If someone wants or needs help, screw 'em cuz if I take time to help you, I'm losing out on meeting my own numbers so you're on your own - sink or swim.

[u]But team incentives can also damage an individual's performance![/u]

The team I'm on now has a tweak to it since our work doesn't generate client surveys. This means we're reliant on the team score. For 3rd Q, the other team members (who get surveys) tanked the team score overall - like 10 pts low - so it didn't really make a whit of difference if we busted our butts to get our productivity numbers: we'd get no bonus regardless so why bother putting in the extra effort?

Back in the days when I was getting 3 surveys returned each week (nevermind per quarter!), you bet I was kicking butt on the productivity and thoroughly enjoying my incentive payments. I had both the highest productivity AND the highest survey scores. (Several awards, in fact.)

Then again, I suck as a team player for the most part. I'm in it for me. Any help I give the team is for my own benefit. (I've got a whole life philosophy on selfishness but that's another topic entirely.) While my top-notch surveys and stratospheric productivity helped the team, I really didn't give a rat's patootie, ya know?

Whoever said that team bonuses were similar to communism hit the nail on the head for me. Everything is measurable and quantifiable and quantitative. Every single job can be subject to an individual, customized incentive program.

The worst experience I ever had was my first incentive at this company. I was fresh on the floor and earned a whopping $85 gross bonus. A coworker (three levels below me) in a support staff role as new to her position as I was to mine, with zero client contact, somehow earned a $600 gross bonus. Talk about de-motivating. Then again, I did manage to get a few bonuses when no one else did - because of my individual performance.

Yeah, team bonus stinks, IMO.

dhkramer's picture

Stock options are very powerful.

Number of options granted is based on individual performance, but they're worth nothing if the company doesn't fare well.

So, make the bonus pool total based on team performance, and the percentage split based on individual performance. I like the idea of having the team members rank each other's performance.

d

juliahhavener's picture

Stock options aren't as powerful for some - I've been down that road.

While I saw people retired as multi-millionaires, others I know ended up with options they couldn't afford to option (same company, 6 month hire-in difference; in some cases, less than 6 month difference between profitable and not).

It's left me skeptical.

bflynn's picture

[quote="dhkramer"]Stock options are very powerful.

Number of options granted is based on individual performance, but they're worth nothing if the company doesn't fare well.

So, make the bonus pool total based on team performance, and the percentage split based on individual performance. I like the idea of having the team members rank each other's performance.[/quote]

I agree with Julia. There are too many games that are played with options for them to be motivational.

Brian

dhkramer's picture

The mix of team and individual incentives for options is still a good model.

Total pool - team.

Share of pool - individual.

dk

misstenacity's picture

[quote="jhack"]What, exactly, is the problem for which you can't find a solution?

Why would you be uncomfortable if the two "most critical employees in the company" were paid more than you?

I highly recommend reading the following thread in its entirety.

http://www.manager-tools.com/forums/viewtopic.php?t=1771

John[/quote]

John,
I'm not uncomfortable with my directs making more than me, especially not once I really took the time to think about it. I said in my original post that it "is weird", which at first it definitely did seem so!

We are still working on the details of this system, and now it is settling down to a range of numbers. Looking at what the typical range is for their positions, from low to high salaries, we will roughly work out the annual bonus amounts to enable them to achieve the high side of that bell curve when they are doing fabulously, regardless what their starting salary is.

I hope that makes sense. Thanks for everyone's input!