Work teams are a hot topic in the United States today. It is almost impossible to read a book or magazine on business and not see a story or case study that trumpets the advantages of work teams over traditional hierarchical organization structures. Teams have been successfully used to reduce product development time cycles, improve quality of services and solve difficult or complex technical problems by developing creative and innovative solutions.
But not every work team is designed the same. Work teams can be self-managed, temporary, permanent, organized around a specific project or time schedule, or in parallel for members who must also perform the duties of their regular jobs. They may also be multidisciplinary or cross-functional, representing different skills or disciplines across an organization which could be applied to developing new products or solving problems. Regardless of the type, little is reported about how to pay and reward different types of teams.
The focus of this article is to assist compensation professionals in developing effective pay and reward strategies for one particular type of work team--a multidisciplinary or cross-functional work team. Multidisciplinary teams are composed of a carefully selected array of specialists from different disciplines across the organization, and are typically used for developing new products such as automobiles and computers or for solving complex technical problems in research and development organizations. They are the direct opposites of traditional work groups or functional teams, which are formed around vertically oriented, "chimney-like" functional departments (that is, traditional engineering or manufacturing units) composed of specialists with similar disciplines and training.
At the Lawrence Berkeley National Laboratory, now known as the Berkeley Laboratory, multidiscipline teams have typically been used to work on large scale research projects, thereby providing an excellent example to compare pay and reward practices. Beginning with development and operation of large particle accelerators supporting the birth of modern physics, the Berkeley Laboratory has required physicists and engineers from a variety of specialties and academic backgrounds to work together on large, complex scientific programs.
Pay practices for multidiscipline teams can vary as much as the type of organizations that use them. For example, the Berkeley Laboratory--a typical R & D organization--has historically rewarded its scientists and engineers for achieving scientific breakthroughs through the use of peer recognition with non-cash awards; titles granted from professional or academic organizations; and annual pay increases. In the early 1990s, the laboratory introduced two new cash incentive awards for individuals and teams--a lump sum outstanding performance award ($500 to $5,000 per individual) and a spot award ($50 to $150 per individual) to reward and recognize successful efforts. Other high-tech or service-type organizations have traditionally used a combination of base and non-base pay components, such as profit sharing and stock options, to reward successful multidiscipline team results.
Before a compensation professional begins to select or design the actual team pay and reward components, it is recommended that several important preliminary steps be followed in order to develop a conceptual framework describing the overall organization. This framework will provide the blueprint or road map in developing and implementing a successful pay strategy.
Step 1: Assess The Culture
First, the compensation professional should conduct a cultural assessment of the organization that the multidiscipline teams must operate within. He or she should attempt to find out how things are done in the organization by addressing the following issues:
• What are the attitudes and values of the employees?
• Is there a high level of trust and open communication?
• Does the leadership actively support a team environment?
• Are decisions made by decree or consensus?
• Are employees committed to both the organizations and teams goals?
• Has high productivity and achievement been valued and rewarded in the past?
• Do individuals from diverse backgrounds collaborate well on projects or do silos exist between departments or disciplines?
• How is conflict resolved?
Understanding the organization's culture is essential in selecting the appropriate team rewards.
Step 2: Identify Team Performance Criteria
The second step in designing an appropriate pay and reward strategy is to find out what defines team success. Because many multidiscipline teams work on technology or knowledge-based projects (that is, hardware/software applications), it is difficult or seemingly impossible to objectively measure progress to pre-established schedules or milestones, especially if the project extends for several years. Occasionally scientific breakthroughs occur, but more often than not they happen on a random or spontaneous basis. At the Berkeley Laboratory, multidiscipline team progress is often gauged by peer reviews - a panel of highly qualified experts who are asked to provide their best judgments as to the amount of scientific progress achieved when compared to project goals.
Step 3: Assess Impact of Key Individuals
Some successful teams are composed of individuals who have not all contributed equally to the results. Some teams often have stars or "franchise players" whose performance is significantly more important to the team's success than that if its other members. Yet the paradox exists in that it is the collaboration and motivation within a work group that produces the synergy or results that are greater than the sum of the individual contributions. Should the star players, who possess critical skills and knowledge, be paid more more than the team players? Should some of the team members be recognized and rewarded, or should all of them? Although the literature on teams describes the growth of 360-degree performance appraisal systems (that is, multirater feedback from a variety of peers, supervisors, team leaders, subordinates, and even customers), in practice, most multidiscipline team members, such as at the Berkeley Laboratory, are evaluated on their individual performance by their line managers with only secondary consideration to their contributions to a team.
Step 4: Conduct A Market Analysis Of The Disciplines
The advantages of bringing individuals with different expertise and technical backgrounds to work on complex problems also creates the problem of how to pay each discipline in relationship to supply and demand, and market value. For example, in the current labor market software engineers, a high demand and relatively low-supply specialty in northern California, command a significant premium (as seen by their seemingly unlimited hiring bonuses and stock options) while theoretical physicists have difficulty finding employment after graduation. Not having market data from reliable salary surveys could cause turnover for critical disciplines regardless of the effectiveness of overall reward strategies. Certain scarce disciplines require a pay premium in a dynamic market which is important in determining the appropriate mix between base and non-base compensation.
After the compensation professional has completed the preliminary steps in developing a conceptual framework, the rest of the design process involves fitting or linking the various pay and reward components together into an integrated strategy designed to support successful multidiscipline teams' efforts. The following tips can help in customizing pay and reward components for specific teams and organizations.
Tip 1: determine the mix of individual to team rewards based on the amount of interdependence of members to the successful accomplishment of their mission or goal. If every member is highly dependent upon the efforts of all others, rewards should focus on team or shared rewards such as incentive awards granted to individuals on a more equal basis, or a bonus poolbased on team performance. When collaboration is essential to team success, minimize the competitive focus of individual performance by tying together the fates of team members who must work together.
Tip 2: allow teams to have a role in designing their own pay program based on the level of self-management or authority delegated. The more self-managed the team, the more it should be allowed to participate in the design of its pay program. This is consistent with the definition and intent of self-managed or self-directed teams. If only team leaders are allowed to participate in the design, then they should also be responsible for communicating the approved plan to the team.
Tip 3: do whatever is necessary to create a line of sight between the efforts of the team members and the successful team goals no matter how long the project is expected to last. Performance measures such as milestones, peer reviews and different versions of self assessments should be used to gauge success which can then be recognized with the appropriate reward mechanism (for example, providing spot awards for achieving critical milestones within the schedule and under cost).
Tip 4: if it is difficult to separate the results of multidiscipline team efforts from the overall business unit performance, traditional gain-sharing approaches should be tried. These plans, such as stock option and profit sharing programs, can cover all employees within the unit and can help avoid inter-team conflict when several teams are competing together and available resources are scarce.
Tip 5: compensation professionals should strive to create the appropriate balance between evaluating an individual's performance outside the team to that of his or her performance within a team. For this purpose, using a 360-degree type appraisal system for teams should be considered. As the use of multidiscipline or cross-functional teams continue to grow, so will the need to incorporate team members, stakeholders and customers input into the appraisal process.
Tip 6: with market sensitive disciplines, the compensation professional should attempt to create a mix of base and non-base or variable pay to provide a total compensation that is both competitive and tied to team results. Regardless of how democratically a team wants to treat its members, computer engineers are commanding a premium in the market, and in order to prevent costly turnover (which can also impact team performance) this fact cannot be ignored in the plan design.
Tip 7: pay and reward systems should be kept as simple and as consistent as possible across an organization. Several high technology organizations using multidiscipline teams have designed complex systems that have been "over engineered" to the point that the line-of-sight has been lost between team results or efforts, and rewards. Inconsistent systems can lead to conflict over which behaviors are being rewarded, making goal setting and collaboration between team members more difficult.
Tip 8: lastly, after developing an initial pay strategy, the compensation professional should review all the pay components to see if they are aligned with both the organization's culture and overall vision and mission. Any potential misalignment could cause even the most carefully prepared design to fail or be ineffective. For example, it may be possible that an organization's culture is incompatible with supporting a team-based structure. In this case, reshaping the culture would take priority over the pay strategy.
If there is one important lesson for a compensation professional to learn from this article, it is to first develop a sound conceptual framework of the multidiscipline team's organization which includes cultural factors, performance criteria, the impact of individuals, and discipline market data. This framework will then serve as the road map in customizing the various reward and pay components for specific teams and organizations. In light of the increased use of teams in technology-based organizations, compensation professionals will find increasing challenges on how to design pay and reward programs that support effective multidiscipline team results.
• While the use of teams is becoming more prevalent in the workplace, there are pay and reward issues involving multidiscipline teams that must be carefully addressed.
• Before designing the pay plan for a multidiscipline team, a conceptual framework describing the overall organization should be developed.
• An issue that must be dealt with for multidiscipline teams concerns how to pay or reward team members from professions that are in high demand, versus team members in professions for which demand is slack.
• Once the reward program is complete, it should be reviewed to ensure that it is in alignment with the organization's culture and its mission.
~~~~~~~~
By Tom Taylor
TOM TAYLOR, CEBS, CCP, is the manager for compensation and benefits at the Lawrence Berkeley National Laboratory, and a doctoral candidate at the University of San Francisco.