Strategic Human Resource Management

Section Four

Team-Based Pay

With the growing importance of work teams noted earlier,
compensation systems are needed to reward team members
for behavior that facilitates strategy implementation. Team-
based pay is being used more frequently in such settings.
Typically, team-based pay is operationalized by specifying a
goal or desired outcome and then allocating to all team
members a reward for its accomplishment. Objective goals or
outcomes are commonly specified, such as production levels,
cost savings, or project completions, although goals also may
be some form of subjective executive assessment. A wide
variety of rewards may be used, cash as bonuses, stock
ownership, trips, and time off from work.^31

Team-based pay offers a number of advantages, one of
which is that it overcomes the difficult problem of measuring
individual contributions. Another advantage is that it is likely to
facilitate cooperation. Further, bonuses to teams, such as for
the completion of a major project, can be given very shortly
after the event, thereby strongly linking desired behaviors with
desired rewards. A further advantage of team approaches to
compensation may occur where team rewards are linked to the
development of skills. In situations in which the team reward is
not given until all team members are cross-trained, the team