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Team-Based Compensation Vs.

Individual
Compensation
Facilitating individual and team performance is a primary goal of any manager. One of the
most challenging parts of management is deciding which methods of compensating
employees most enhances individual performance without hindering group performance.
Group( Team) compensation can be a way to increase productivity while attempting to
monitor and improve individual performance at the same time. There are significant
differences between team and individual compensation.

Team Compensation
Team compensation is typically used when teamwork is mission critical. In technical fields
such as software development, there may be several interdependent teams creating a final
deliverable. These teams are judged corporately as to speed and accuracy, assuming each
member of the team is required to complete the task on time and at budget. The
compensation of the group is typically scaled in percentages of the maximum pay scale
depending on when or how well the team completes the task.

Advantages
In team compensation, employees may perform better in hopes of not letting down the team.
This is especially so in project-based jobs which require every team member to complete a
task before the rest of the team can advance to the next stage of work. Information is shared
more freely when teams are reviewed and compensated as a group because the incentive to
withhold information for personal gain is reduced.

Disadvantages
Team compensation can lead to individual employees carrying too much burden and others
being compensated for poor performance. Arguments among the team in these cases may
diminish morale and harm the quality of the deliverable. Power struggles for credit when a
task goes well or blame when it goes poorly can arise in a group compensation model.

Individual Compensation
Individual compensation, the norm in many industries, pays wages strictly based on
individual performance. It can be comprised of hourly wages, sales commissions and
subjective periodic reviews. While tasks may be intertwined among the members of a team,
every employee is typically measured and compensated based on his contribution to the team,
not the team's final deliverable. The positions most likely to receive this kind of
compensation are commission sales, assembly and non-technical labor positions among many
others.
Advantages
Individual compensation pays specifically based on individual performance regardless of
team performance. This provides more pay to higher-achieving employees and less pay to
lower-achieving ones. It allows for competition among employees for prestige and pay which
provides a strong incentive to perform. It also avoids punishing employees based on the poor
performance of fellow team members, resulting in better morale for the individuals. This
compensation may also seem more personal, especially to higher-performing employees.

Disadvantages
Individual compensation can breed unethical competition as in commission sales when staff
members fight over a customer or a sale. Employees posturing for a better positions or
rankings at the exclusion of teamwork can come from this method. Information and work
techniques may pool with motivated employees to the exclusion of those who need to be
trained.

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