Section: Teams
An extra bonus or incentive? Noncash recognition? Whatever you choose, follow some simple recommendations.
PROJECT TEAMS are everywhere these days, and companies depend on them more and more. If a team's work is added to members' regular jobs--or if it's unusually demanding for some other reason, such as a deadline requiring nights and weekends at the office--managers naturally want to find some way of rewarding participants.
But it isn't easy. Give them a bonus? A poorly conceived cash-award program can engender as much resentment as enthusiasm. Then again, noncash rewards--plaques, celebrations, gifts, and so forth--may ring hollow. "They motivate some people and not others," says Gerry Ledford, a principal with Sibson & Co.'s Los Angeles office.
To be sure, there's no perfect solution to the problem. But compensation experts offer tips for project-team compensation that can help you maximize the benefits and minimize potential damages.
Cash payments
Make 'em big. To be meaningful, a cash award has to be generous enough to get team members' attention. You may not want to go as far as Mike Armstrong, then-CEO of Hughes Electronics, who a few years ago divided up $20 million among 900 project engineers when they finished a Saudi Arabian air-defense system on schedule. But if you can't pay more than a token amount, choose the noncash route instead. A $50 check for (say) two months of hard work may be regarded more as an insult than as a reward.
Peg the awards to measurable outcomes. Project-team bonuses are often pegged to milestones, says Steven E. Gross, a Philadelphia-based principal and director of employee pay practice for William M. Mercer. "The first milestone might be getting a design approved. A second could be planning the implementation. Third is getting some of the implementation done, and so forth. These are events that can be tracked and managed." Bringing in a project on time and on budget is another "milestone" that can be rewarded, adds Gross.
But stay focused on the ultimate goal. A milestone bonus must be vested when earned--but you may decide against paying it out right away. In a case reported in the new book Rewarding Teams: Lessons from the Trenches, Lotus Development Corp. (Cambridge, Mass.) gave a team a bonus for making an April 27 interim deadline, but didn't pay it out until July 1. "We did it to make sure people didn't see April 27 as an end point," said team leader Larry Raymond. "There's a lot of emotional release upon hitting a major milestone, but we needed to keep pushing ahead."
Source of funds? Get creative. If a team's project involves a new product or revenue stream, Gross suggests rewarding members with a royalty arrangement or an award of additional stock. That way they're getting a "share of the potential gain for the future," rather than just a one-shot payout--and with a royalty arrangement they are rewarded only if their venture is successful. If the team's task involves cost saving, the award can be pegged to the costs that are saved, and it can be paid out as the savings are realized.
Let members divvy up the proceeds. While a manager at DuPont Co., Robert P. McNutt watched a team make difficult decisions about dividing up a bonus pool. "The team decided who was most deserving, who was the unofficial leader who made things happen," says McNutt, now a senior VP of HR at All First Financial in Baltimore. "That person might have gotten $3,000$5,000, while maybe others got $500-$1,000. The team managed to come to an agreement, even though it meant that members "were deciding their own fate as well. They worked it through in an open, high-performance environment."
Watch for undue complexity--and gaming. Cash awards are manageable when people in an organization participate in only one or two teams. But employees at some companies may serve on a dozen or more project groups. That can make an award system impossibly complex, since it has to take into account markedly different levels of participation among the members. It can also lead to political maneuvering. "You get people game playing--bagging the teams that look like they won't meet their goals and get an award, and fighting over who gets to be on the team that looks like it'll be successful," says Ledford.
Noncash awards
"Noncash" doesn't always mean "no money." At Utilicorp United, an energy company based in Kansas City, Mo., project teams that came up with cost-saving proposals were rewarded with monetary awards according to a predetermined schedule. But rather than writing an extra check to team members, the company gave them "UtiliBucks" to spend on merchandise chosen from a catalog. The rationale? Cash awards tend to go toward employees' everyday needs, while a directed-spending program like UtiliBucks forces them to buy something special. People "remember how they earned the video camera a lot longer than what they did with the same number of cash dollars," say the authors of Rewarding Teams.
Give employees a choice. Another advantage of a catalog-purchase program is that it lets employees choose their own rewards. That's a big issue in all kinds of noncash recognition plans, because it's so hard to create a one-size-fits-all program. "Any one award that you can come up with, some people will like and others won't," says Sibson's Ledford. Offering a choice doesn't require that you use a merchandise catalog of the UtiliBucks variety, only that you create a list of options. "Often companies will have a menu of ten choices--anything ranging from paying for maid service to movie tickets to dinner on the town."
Combine cash and noncash awards. The drawback of a noncash award: if it's a token of recognition such as a plaque, it can be perceived as inadequate. But a cash award doesn't celebrate a team's accomplishments publicly. By all means pay a bonus or incentive, advises Robert McNutt, who is currently a faculty cadre leader on variable compensation at WorldatWork (formerly American Compensation Association). But couple it with a public "thank you" to the team. "If your boss says what a heck of a job you did, you feel pretty good walking out the door on a Friday."
Rewarding Teams: Lessons from the Trenches by Glenn Parker, Jerry McAdams, and David Zielinski 2000 * Jossey Bass