2. Individual Incentive pay plan
Pros Cons
Clear line-of-sight plan for participants Contributes to an “every man for himself”
environment
Demands performance and results, for pay May hinder effective team sales behaviors
Clearly differentiates between high and low
performers
Creates crediting issues when a sales effort comes
from multiple contributors
Encourages a strong “sales culture”
Team-Based Incentive Pay Plan
Advantages:
o Financially:
A team-based incentive plan helps increasing performance: If you don’t
perform well, you don’t get paid. At group level, employees operating under
a team-based incentive pay plan recognize that the greater their collective
performance, the greater payday each will enjoy at the project’s completion.
Employees are often motivated by the fear of letting down their team
members.
o Group Effort
When a team paycheck is riding on the collective performance of several
individuals, team members feed off one another’s energy and enthusiasm
for the project.
Knowing that performance is tied to payment, team members are more
likely to find ways to work together effectively as a group. There’s little
room for disagreements, when all participants are working toward a
collective, common goal.
o Strength-Based Contributions
In a team effort approach, each employee brings a unique set of skills and
experience to the table. When each member works in her own comfort zone,
it creates a dynamic and effective team. One team member’s weakness may
be another’s strength, which creates an overall balance.
o Peer Pressure
Employees working on salary-based solo projects are usually held
accountable to an immediate supervisor, whereas a member of a team-based
incentive pay plan is held accountable to an entire group of people.
Individuals who are not pulling their weight or contributing to the group in
an equitable manner will usually be put on notice by team members that
their performance level is unacceptable. This level of peer pressure prevents
slacking.
3. o Employer Advantage
Employers benefit from a team-based incentive plan is much the same way
they benefit from using a commissioned sales staff. If performance goals
are met, both the team members and the employers make money.
If the goals go unmet, the employer loses less than he normally would be
paying employees a straight salary or by hourly rate.
o Reduce Employee Turnover
Attractive total rewards packages reduce employee turnover because
employees who feel satisfied with their pay and conditions are less likely to
be enticed by a competitor. Members of the team become committed to the
shared goal and are reluctant to leave their colleagues. Lower employee
turnover benefits companies by reducing costs of recruiting and training
new employees.
Cons:
o Spreads incentives across high and low performers, potentially leading to free-rider
problem
o Dilutes pay-for-performance culture
o Hinders management’s ability to quickly diagnose performance driver(s)
