It surprises me how many times organizations, particularly businesses, overlook the potential for teams working together as a group. Too many times I see first- and second-line managers giving individual performance metrics and targets to each person on the team. Everyone is completely on their own – rugged individualism at its "best."
Let's break this concept into parts and look at how a Team Builder can employ a better approach.
Individual incentives may lead to poorer overall results
Most organizations have a cascade process for handing out targets and incentives. The original goal starts near the top of the organizational pyramid. At each level, the VP or Director or Executive or Manager divides the goal up among the next level of the team. Usually there are some pretty comprehensive mathematical formulas that are used to derive the specific amounts, but generally, if you have 100 performance units and 10 managers, each manager will get 10 units, adjusted a bit more or less.
If this cascade process rolls all the way down to the first level of the pyramid, you end up with individual metrics by default. But does it really have to be that way? Why can't someone intercept this process and do something different that makes more sense?
Some organizational leadership models work differently. Some teams hold a set of metrics and targets as a group rather than divide them up individually.
Manufacturers, for example, may have quality or volume metrics that are dependent on more than one individual. A manufacturing plant as a whole works toward a daily target – which may involve some people more than others on any given day, dependent on variables such as orders and product mix.
For a business involving food safety, many individuals are involved and the goal has to be 100%. There's no reason to try to break this down to individuals. It would be silly to say, "Kumiko is at 100% but Rodolpho is only at 97.5%. I'll talk to Rodolpho and help motivate him." If there is a failure in the process, then everyone should be involved to fix the issues and ensure they don't happen elsewhere.
Some groups within organizations have a long tradition of using individual targets. Sales managers, in particular, love to rank people on individual quota attainment. There is a sense in the minds of experienced sales managers that individual competitiveness is a "motivator" for better performance.¹,²
Individual targets overlook the fact that people within a group have different strengths, skills, and backgrounds. (Academics call this "worker heterogeneity.") Great leaders recognize those human dimensions and mix-and-match people accordingly.
Early in my own career, my manager made the smart decision to align me with a more experienced technical specialist. We had the same customer set, same set of of targets, shared jointly.
This joint model worked well for two reasons:
- Customers who needed more expertise or more complex help had access to that help. If I had a customer set of my own, there would have been a disincentive to collaborate with more experienced specialists and my customers would have suffered as a result.
- I had some skills and ideas that added to my more experienced colleague's technical skill set. With a teaching background and a bit of a flair for the dramatic, I created some technical demonstrations that were a break from the usual. (Let's just say that technical demonstrations were often quite tedious in those days. For starters, we all wore dark suits with identical white shirts.) Together we created a different approach and our customers appreciated it – and bought more as a result.
My colleague's technical experience was far beyond my own, yet together our diversity of background and approach made our total achievement more than just the sum of our individual parts.
This personal experience of mine has been tested experimentally. Workers at Koret Company, a garment factory in California, switched from individual incentives (pay per piece) to payment to small teams of 6-7 people, all paid at the same piece rate but divided equally based on the group's total output. ³
Workers were grouped and shifted from individual incentives to group payments over a period of two years, which means that the researchers were able to observe the same workers under both conditions at different times.
When small teams were used, productivity increased an average of 18% over individual working by themselves. Employment retention rates when employees worked and were paid as a team was the same as when individual payments were the norm.
I particularly thought this result was notable:
The participation of high-ability workers . . . as well as the fact that productivity (levels) of three teams exceeded the productivity of the highest-ability worker, indicate that team production may expand production possibilities by utilizing collaborative skills.
In other words, by forming people into teams, the overall productivity went up for the organization, and for some teams, the average performance level of the total team was higher than any single person in the group had performed as an individual.
In a further result, the authors noted that
some workers joined teams despite an absolute decrease in pay, suggesting that teams offer nonpecuniary benefits to workers.
In more plainspoken language, work is not just about making the most money.
"Nonpecuniary benefits" from teams might include more chance to socialize with other people at work, opportunity to learn new skills from others, and benefit from what the authors term "income smoothing." (Jobs with individual incentives are notorious for having frequent periods of little or no pay, balanced by much larger checks at erratic intervals.) And maybe working together as a team is just less boring and more fun.
As a leader, don't make the mistake of assuming everyone has to be – or wants to be – independent of everyone else. A team approach, with a shared metric, will often yield far better results. What can you do to rethink or revitalize your current strategy?
I'll have more ideas on performance and metrics in the Thursday post. Thanks as always for reading!
- This bias towards a highly competitive, individualized approach to sales creates a problem when trying to hire sales people. Sales people who have been successful in the past may not work well without an individual metric. Their previous success as individual performers may be a poor predictor of success in a shared model – even though a team compensation plan may work best for the organization in the long run. Consider how you change your hiring and onboarding practices to best utilize a new type of sales person successfully in a group environment.
- David Mamet perfectly captured the traditional sales hyper-competitive incentive speech in his play Glengarry Glen Ross; Alec Baldwin portrayed it in the very R-rated movie version here. Ask any sales person; chances are she will say that she knows a manager just like that. The SNL parody on "Elf Motivation" is hysterical. It also features Alec Baldwin, who appears to briefly revert to the original movie script by accident! Watch the original movie version first.
- Hamilton, B. H., Nickerson, J. A., & Owan, H. (2003). Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation. Journal of Political Economy, 111(3), 465–497. https://doi.org/10.1086/374182