Optimizing the ROI of Team Rewards

Are you satisfied with the ROI (return on investment) you get from resources meant to improve team performance? If not, you may want to examine how you allocate team rewards.

Human beings are motivated by enlightened self-interest. Yet when many organizations changed to team structures but continued to reward individual performance, they didn't understand why they failed to get the results they expected. Now that many understand this point, they have gone to the other extreme of rewarding overall team performance. Unfortunately, rewarding only group performance is not the panacea they hoped it would be. A recent study¹ reveals how collective rewards can lead to unanticipated pitfalls in the form of "free riding" behaviors - i.e., a reduction in individuals' efforts and motivation to complete a group task.

Researchers who examined alternative ways of rewarding highly interdependent teams (defined as groups in which the successful achievement of a complex task depends on the coordinated efforts of all members) found that two aspects of collective rewards lead to undesirable free riding behavior: (1) reduced personal accountability and (2) perceptions that "my" efforts don't matter. Specifically, people who perceive that all team members will be rewarded regardless of their individual performance, and/or who believe that their contributions are immaterial to the group's success were not motivated to contribute to the collective goal. Results of this study indicate that hybrid forms of reward, which address both individual and group aspects of performance, are more successful in influencing performance than are those that focus only on individual or only on team performance.

Although the specific recommendations made by these researchers may apply only to highly interdependent teams, the larger issue is generalizable. That is, utilizing only collective rewards for team task performance has unintended consequences that encourage dysfunctional behaviors.

Here are five things management can do to optimize the effectiveness of rewards for team task performance:

  • Develop hybrid rewards that address both individual and group performance.
  • Ensure that each team member can articulate his/her contribution to team outcomes.
  • Establish clear links from individual efforts to team outcomes and rewards.
  • Establish clear links from team efforts to both outcomes and rewards.
  • Identify, communicate, and utilize both individual and team measures of accountability.

¹ Pearsall, M.J., Christian, M.S., & Ellis, A.P.J. (2010). Motivating interdependent teams: Individual rewards, shared rewards, or something in between? Journal of Applied Psychology.

Pat Lynch, Ph.D., is President of Business Alignment Strategies, Inc., a consulting firm that helps clients optimize business results by aligning people, programs, and processes with organizational goals. Pat can show you how to apply relevant research findings in practical ways to create immediate results in your organization. Contact us today to see how we can help you make a difference!

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