In brief, teams are not very compatible with the traditional notion of supervisors conducting annual performance appraisals for individuals. This is because supervisors often have limited information about individuals working in self-managed teams. Also, some employees work in multiple teams. So when you need to assess the contributions that individuals make to a team, a 360-degree review system is worth considering. Remuneration is a communication device that sends a message to employees about where they should place their priorities for time and effort. Thus remuneration can be used to encourage teamwork. However, it is not easy to achieve the right mix. For example, profit-sharing schemes tell employees that the efforts of everyone in the organisation are recognised, but the organisation's profit level may be too far removed from an employee's control to influence his/her work performance. One-off recognition and spot rewards for teams that have performed above expectations are easy to implement. However, these are rewards after the event, so they do not provide a strong incentive to work more effectively. And some employees may feel that they won't be recognised for their individual contributions.
According to Gross (1995), the most effective forms of remuneration to motivate teamwork are team incentives received as variable pay on top of base pay. However, team incentives are the most difficult to design and implement equitably, and therefore many organisations resort to recognition and spot reward. Gross recommends the following:
- Plan for the future; the remuneration plan needs to be aligned with the organisation's strategy.
- Goals should cover areas that team members can affect directly.
- Balance the mix of individual and team-based pay.
- Consult with the team members who will be affected.
- Explain the criteria that will be used to determine payout. For example, will it be based on financial results or productivity? Note that financial results are more influenced by corporate-level decisions than team-level decisions.
- Determine how goals are established and updated.