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Making Team Incentives Work

Dangle a carrot in front of a horse and he’ll pull the cart faster. Set down a bag of oats and a team of horses will come running. It doesn’t take more than a month in an HR office to figure out that incentives work pretty well on humans, too.

If HR professionals want to change and sustain employee behavior, they need an incentive plan. Nearly every company can benefit by providing workers with recognition, bonuses or gifts in return for increased productivity. What makes this challenging is that HR managers have to create a system that works with the company culture they already have, so they can move toward the culture they want.

Collaboration Leads to Innovation

Individual incentives are good in situations where there are clear performance expectations, such as production environments where minimal interaction among teams is required and tasks are autonomous and repetitive. But successful organizations are highly innovative, and innovation requires teamwork for the development of new ideas. Team-based incentives create, as well as emphasize, the need for collaboration across the company.

Such incentives benefit organizations by being:

  • Achievement-oriented. Focusing on shared goals drives performance and creates a greater impact on organizations in a shorter time.

  • Self-actualizing. Group decision-making and problem-solving encourages teams to grow and develop the capacity to meet evolving customer and company needs.

  • Humanisticencouraging. Team incentives reinforce the necessity of working together and supporting one another.

  • Affiliate building. Group incentives inspire collaborative and cooperative behaviors, which support cross-organizational performance and deliver shared company goals.

Moreover, group incentives create stronger bonds among teams. Individuals have less desire to work the system when rewards primarily come from working together. Teams will want to keep their eyes peeled for recognition opportunities via performance, and that makes stretch goals more likely to be reached.

For a look at the numbers, a joint study by the International Society for Performance Improvement and The Incentive Research Foundation found that “Incentivized teams increased their performance by 45 percent; incentivized individuals increased performance an average of 27 percent.”

Incentivized teams increased performance by 45%;
incentivized individuals by 27%.


The increase in team performance is thought to result in part from decreased “social loafing” that occurs in teams, the researchers concluded, noting that “Clearly, peer pressure has significant value.”

Beware the Red Flags

Although team incentives can lead to heightened performance, the HR department needs to make sure they’re properly implemented to avoid the following hurdles:

  • Competition among teams. Competition among teams can create an unhealthy company dynamic, leading to infighting at best and sabotage at worst. Make sure incentives are designed to reward the team when it competes against itself (a new “personal team best”), or have the competition’s focus be external, such as making more sales than your top competitor.

  • Talent management issues. Team members may get frustrated if they feel they’ve peaked, allowing their productivity to slacken. Avoid this by devising methods for personal growth that don’t rely solely on upward mobility. Widen team members' scope of responsibility and create new opportunities for lateral development.

Remember, team incentives fail if individual incentives are layered like a cake. Most people prioritize the individual incentive over the team one every time, if only because they have more control over the outcome. The point is collaboration; so incentives must be designed to reward the group.

HR managers must be vigilant in making sure that what they want is supported by the incentives they offer. Seek and evaluate feedback from team members to check that your rewards are working to unify the team and that they remain directly and visibly linked to the company’s strategic intent.

Andrew “Drew” C. Marshall is the principal of Primed Associates, an innovation consultancy, and a contributor to the Innovation Excellence blog.

Related SHRM Articles:

Use Compensation to Inspire Innovation, SHRM Online Compensation, December 2012

Incentive Compensation Tips and Pitfalls, SHRM Online Compensation, June 2012

Rewarding the Team, HR Magazine, February 2007

Finding the Right Method for Team Compensation, SHRM Online Compensation, December 2004

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