Putting the ROI in Team Incentives

Here in the U.S., we’ve always taken to the concept of individual success. From the ideal of the self-made man to the myth of the lone genius, there’s been something about “doing it yourself” that traditionally has seemed to make our success that much sweeter. Conversely, the very idea of getting help on the way to an achievement almost seems to cast a shadow of doubt over it, as if any assistance would somehow suggest that we were unable to do it on our own.

But then again, lately it’s also felt like there’s been a shift towards a more holistic view of success, at least in the world of American business. In fact, today, the modern knowledge worker spends more than three-quarters of their workday collaborating with others. So while there will always be a pedestal awaiting the Henry Fords, Steve Jobs, and Elon Musks of the world, more and more we’re seeing that the success of these great leaders requires a whole slew of executives, department heads, sales organizations, and marketing teams.

So, if we believe that no great leader or great business can succeed in the modern world without great teams, the question becomes how best to motivate. Traditionally, individual incentives have been the name of the game, often pitting salesperson against salesperson in a bid to drum up their competitive natures and thus drive performance.

But is this always the best strategy? What if your goal is a bit more complex than “sell more of this, get more of that”, or the people you’re looking to motivate don’t all perform the same functions? What if your organization is striving to cultivate a more team-oriented culture? Could a team-based incentive be the answer?

Team Incentives: The Nuances

First, what is a team incentive? When a team is incentivized, each member is pulling and contributing towards a shared goal. This could be a sales goal or a channel-based goal. It could also involve team members whose work isn’t tied directly to sales, such as a marketing or customer service unit. Obviously, this type of incentive also needs to promote teamwork, so any built-in competition will often function as the team competing against itself. When teams compete against one another, this can often have a negative effect on performance.

In addition, these incentives often work well in teams where the individual members may have different roles. For example, consider the way that a restaurant functions. Typically, there’s a head chef, line cooks, servers, bartenders, hosts, and bussers, all operating interdependently. In this situation, all members of the team serve different roles, but the success of the group is highly dependent on each member communicating effectively and functioning cohesively. This is precisely the type of team that a team incentive is designed for.

More specifically, according to the Incentive Research Foundation (IRF), team incentives are most effective when the teams they’re rewarding are small (10 or fewer members) and highly interdependent. This is because these types of teams often depend on efficient communication and strong cohesion—the IRF makes the comparison of a volleyball team versus a gymnastics team, with the former more team-oriented and the latter more individual-oriented.

The rewards for these types of incentives are also generally shared—in other words, when “we” succeed, “we” win. However, another important element of successful team incentives is the establishment of what the IRF refers to as “hybrid rewards”. This type of rewards’ structure recognizes team achievements, but also supplements these with individual rewards. Some studies have shown that a hybrid rewards structure produces superior results to one that is either solely team-focused or solely individual-focused.

Here’s an example:

• You have a team of 3 Business Development Reps, 2 marketing people, and yourself, a manager. You want to award your team with an award based on how many meetings they create for your sales team.

Recognition is an important part of any incentive strategy, not just a team based one. Although, recognition within a team can be extremely power as well. Check out more about the difference and the need for recognition here.

Team Incentives: Other Considerations

With all of that being said, there are a few issues to be aware of when it comes to structuring a team incentive. First off, understanding the geography of a team can help you think about the best approach to motivating its members.

For example, international employees may take more to a team-oriented approach, with the view that individual incentives tend to reward more “selfish” behavior. Domestic teams, on the other hand, may gravitate more towards individualistic incentives due to the psychology of traditional American business.

Furthermore, team incentives may be better suited for mid- or low-tier performers—think the middle 60%—as these employees may be less driven by individual competitiveness than their higher-performing peers. Higher performers may actually find team incentives to be demotivating in some instances. However, a team-oriented incentive could be an effective supplement for these top performers if they are simultaneously being rewarded for their own individual performances.

Finally, the other obvious consideration with a team incentive is that individual members may contribute to the team’s success to varying degrees. This can become especially problematic when it’s clear who is and who is not “pulling their weight” on the team. Making sure you’re incentivizing the right kind of team, with metrics and roles that are clearly defined and communicated, can help avoid this kind of problem. And again, hybrid incentives can also appease those members who feel like they may be contributing more to a sale or project.

Conclusion

Although organizations seem to be becoming more team-oriented, still only 25% of employees prefer working in teams versus working alone, with nearly three-quarters of employees stating that the teams they’re a part of are “dysfunctional”. As the IRF suggests, “this points to a critical disconnect. If a large part of organizational success hinges on teams, yet teams are broken, intervention is essential.”

An obvious choice for this intervention would be team incentives. Of course, in the end, there are going to be different scenarios that are befitting of different incentive strategies. And while the traditional vision of incentives—sell this, get that—has often been geared toward individuals, the fact is that more and more traditional sales are being turned over to multidimensional teams consisting of inside and outside salespeople, business development units, and even marketing teams.

In cases such as these, team incentives have proven effective, increasing overall team performance by as much as 45%. The key, then, is to identify the right types of teams—small, highly interdependent, and built on trust—and to feature a hybrid rewards structure that recognizes both team and individual achievements. Done the right way, such an incentive may prove to be well worth the investment.