When designing rewards, it’s also important to look at the level of the behavior that you want to influence and what any worker can contribute at that level. People most often work at the individual level, doing their work within the appropriate schedule, budget, and work specifications. But many individuals working together as a team also have a significant impact on the company’s success and failure, and you should take teamwork into account when designing rewards.
For example, Bailey, a lawyer in a medium-sized litigation firm in Portland, Oregon, can exert effort on a case by doing all these lawyerly tasks: talking to the client to understand the complaint, doing the necessary legal research, filing the right court documents, and presenting the case in front of the judge. If she does all that well, she may achieve a favorable result by winning the case at trial. If the client pays the full cost of her work (and if she has priced her hourly rate correctly), it will yield a value-added outcome for the firm (and herself). If this was a contingency case where she gets a third of any settlement and she wins a big monetary judgment, then she might make a substantial outcome to the firm’s finances. On the other hand, even if she wins the case, but the client doesn’t pay her invoice, then she has no value-added critical-path outcome to show for her work (unless it helps her attract more profitable future work for tomorrow’s critical path).
In this example, Bailey’s firm must have some formula for attributing her compensation rewards to effort, results, and outcome. Perhaps she gets a baseline salary of $50,000 for her effort inputs and throughputs and, if she wins a case, the firm awards her a $15,000 bonus for winning. For her value-added outcomes, she receives 50% of everything collected from the case after her salary, bonus, and pro-rated overhead are subtracted. Thus, she might well double her base salary if she collects all her billable hours, and might even take home over a million dollars if her firm gets a third of a multi-million-dollar judgment.
Now let’s say that Bailey gets a case that is bigger and more complicated than she can do herself. For this, she needs to build a team that will do all the work required for a court victory. She may need to bring in lawyers with specialized skills, such as tax law or estate planning. Now success doesn’t depend just on Bailey’s individual-level skills. To win, a team effort is required, and individual-level rewards are not sufficient. Team rewards need to be in place. In other words, if you want people to work together, you need an additional reward layer above and beyond the individual-based ones. Or, you need to compensate everyone only at the team level.
Teams, just like individuals, can put forth effort, achieve results, and create value-added outcomes. Bailey’s team might do all the work necessary to prepare the case and to present it to the judge. They may win, lose, or reach a settlement outside the courtroom. The client may or may not pay the team’s entire invoice, and the team may or may not produce a windfall for the firm. These are all factors to be considered when designing team-based rewards.
We can also look at all the individual lawyers and all the teams within the context of the firm as a whole. Most firms do not want to be simply a collection of individual players or self-contained teams where the only thing that everyone has in common is the heating and air conditioning. Rather, most firms want everyone to have a vested interest in how the whole firm performs, not just their own self-interest. They want people to chip in to help when needed and root for the success of their colleagues’ cases in the firm. Even if Bailey loses a case or does not get paid in full for her work on that lost case, the firm wants her to be willing to help a colleague win his case because that win helps the firm offset Bailey’s loss.
The entire organization can put forth the collective input and throughput effort to get and represent clients. You can tally up the output results for the entire firm. The profit/loss statement will reveal the bottom line of the value-added outcomes. If the firm wants the latter to be positive, they need to have organizational rewards that they share with their employees.
The important point here is that if companies want people to perform at all three levels, they must have motivating rewards at each level to encourage it. Don’t expect people to perform on teams long-term unless substantial rewards support it. Sure, some good “citizens” will do it either because they believe it is the right thing to do or they like working on teams. But, as any psychologist will tell you, people’s self-interest will push towards the performance that gets rewarded. The same holds true at the organizational level. If you want people to look beyond their organizational silos and help out other silos, you better have rewards in place to make it worth their while.
The inverse is that with substantial rewards at each level, an employee who chooses to operate at only one level will miss out on the rewards given at the other levels. If each level provides 1/3 of the total rewards, then employees who contribute only at the individual level limit themselves to only 1/3 of the possible total, thus diminishing their total reward package considerably.
Critical Path Action Items
How does your organization reward team outcomes?
How does your organization reward organizational outcomes?
Are the above rewards sufficient to incentivize employees to contribute to team and organizational outcomes?