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Chapter 17
Rewards and Recognition

The happy team books of the past decade suggested that it's such a great thing to be on a team that people will do it for free. Our observations do not bear this out. Work is an investment people make. They demand a return on that investment. If you do not pay them, they will not work. This principle of human resources was established during the late Mesozoic Period, in the case of Og vs. Magog.

No, pay/don't-pay is not the issue. The issues are how and whom you pay. Teams are a new thing, but except for a few departures (paying in stock, profit-sharing, gainsharing), not a lot of quantum thinking has been applied to compensation, rewards and recognition for teams.

We shall attempt to apply some now.

 

     This book's sole sports analogy

Consider the following fictional scenario, from Saint Louis' Trans World Stadium.

Quarterback Curt Warner has a bonus in his contract. It says that if he plays 50 quarters through the regular 16 game season, he earns a $2.75 million bonus. Seemed like a good idea when the bonus was drawn up -- the team wanted to reward him for staying healthy.

But here it is, the last game of the year. His team, the Rams, are tied for first place with the division rival Atlanta Falcons. Warner is playing. The score is tied 17-17, but he's thrown four interceptions. His defense has been on the field all day. One more turnover and they can kiss the season goodbye. Warner knows his arm is hanging by a scrap of tendon, but he's keeping mum. Coach Dick Vermeil grabs him on the sidelines and tells him, "I'm taking you out." Warner replies, "Do that and I'll sue you."

Huh? The problem here is that the reward Rams management thought was so clever came back and bit them on the behind. At a moment when every player should have been focused on the team goal of winning the division, the fictional Warner was willing to sink the team to claim his $2.75 million. In his own mind he was only doing what was asked of him. And a system of rewards focusing on individual action was about to undo the entire team.

     Something rotten in the state of rewards

Despite some talk about team rewards, most team members are paid today exactly as they were paid in the days before teams, on a strict individual basis.

We are rewarding individuals when we should be rewarding teams or the workforce as a whole. Not that there cannot or should not be "stars." Once again the 80/20 rule comes into play -- 20 percent of team members accounting for 80 percent of team success. But a successful team is always chipping away at the 80/20 rule -- it seeks to get the very best out of all its members.

In the typical Japanese corporation today, about a third of all compensation is based on company performance.

We ask unions to help increase productivity when they know that success means decreasing the workforce, laying people off -- the exact opposite of their best interests.

We establish bonuses to motivate people, but the bonuses don't motivate because they are automatic or guaranteed.

We patronize team members by dangling carrots in front of them. My, isn't that an attractive carrot?

We set up policies and procedures to instruct team members to do the right things without being supervised every moment -- but we fail to shape a culture within our organizations that lets teams and team members feel secure doing the right things.

Teams will not carry out business objectives if doing so puts them at risk.

Teams don't fail because the people on it are stupid. Nor because they don't enshrine the virtues of customer satisfaction, quality, and the rest. Teams fail when the people on them don’t feel safe going after their own stated goals.

     The importance of security

What does "secure" mean? It means a company professing to be serious about quality mustn't punish teams who undertake initiatives to complete their mission.

It means that team members exhorted to use their minds must feel free, and even encouraged, to disagree with one another, and with management as a whole.

It means that teams encouraged to increase productivity will not be "rewarded" for their success with layoff notices. We all claim we want teams to "take risks" -- but if the company is in a downsizing free-fall, how much risk are teams likely to take?

     The real culture

Managers often think they can influence behavior based on quarterly goals or semiannual financial targets. The opposite is truer, that it is day-to-day culture -- the informal signals about what is valued and what is not -- that drives behavior more than anything else. So how do we un-confuse our systems of rewards? By getting back to basics, and creating a system of rewards that reflects reality.

The challenge is to find mechanisms that can help us to influence team performance that are consistent with the strategic direction and priorities of the organization as a whole.

We have flexibility in altering our rewards system that we aren't even aware of. To tap into this flexibility, we need to ask several questions:

v     What rewards do teams and team members value?

The issue every team leader faces is how to get the people reporting to you committed to your goals. There is no one-size-fits-all method for achieving this alignment. Industries differ widely from one another, and the kind of people who choose to work in one industry -- a government service bureau, say -- are usually different in kind from the people who choose to work in an sales organization. There are different kinds of rewards at different companies, because they want to attract different kinds of people.

People also have different compensation needs at different stages in their career. The needs of a 25 year old are very different from those of a 50 year old in the same organization.

v     What motivates people?

Most people will chime in and say, cash. But it isn't that simple. Cash can be a feeble bond if working conditions are unhealthy or the work itself is unsavory. For skilled workers there must usually be something besides cash on the barrelhead -- security, the feeling of being appreciated, being left alone, pleasant working conditions, time off to recoup.

For some people the best reward of all is work itself -- the challenge of a tough job. For some it is the interaction with other skilled team members. For some it is the intellectual gratification of addressing and solving a knotty problem.

     Say it with cash

Still, for many people, and many occasions, the best reward in a commercial enterprise is good old money. Three financial options that have met with success are profit sharing, gainsharing, and employee ownership. The idea behind each is to reward teams when they perform well. Each method has the side virtue of giving team members a strong degree of ownership in the organization, and a sense of true participation in the organization's overall strategy. Each also falls short of the stated goal of motivating people to commit to organizational objectives.

§         Gainsharing is a system whereby money or resources that are saved by a team are returned, in some degree, to the team. Gainsharing is in use at many thousands of companies. It links people with organizational success.

Problem: The easiest gainsharing plan to set up is a companywide or locationwide system. It is harder to measure the success of most kinds of individual teams in dollars -- design, research, quality improvement and problem-solving teams being exceptions.

§         Profit sharing is better known and more widespread than gainsharing, perhaps because the idea is simpler. Every year or quarter, a dividend is paid to employees based on cooperate or divisionwide performance. Usually, the money is tumbled in with the worker's retirement plan or 401(k) plan.

Problem: Profit sharing is individual-oriented, and organization-wide. It doesn't address team performance. Also, deferred rewards like retirement money never quite feel like rewards.

§         Employee ownership. These plans go by such names as stock option plans, stock purchase plans, and employee stock ownership plans.

Problem: Ownership is great, but some companies aren't worth owning, even with terrific workforces. And again, this approach doesn't do much for teams.

     Reengineered rewards

As organizations continue to reengineer and overhaul themselves, cash takes on a new face as a team reward. Tomorrow's team members will likely find that the new workplace provides less, not more, opportunity for promotion. Companies getting rid of unnecessary management levels will not be anxious to promote you to one of those evacuated positions. Thus, team members may find themselves stuck for many years in fairly static positions -- by title, anyway. You may spend twenty years with the job title customer service representative.

Sounds terrible, right? But these twenty years will not be at burger flipper wages. In the reengineered organization, companies will need to compensate good team members for their vertical limitations with nice juicy horizontal rewards.

Think about it. A team member with deep experience in meeting customer needs will be a very valuable person, able to command substantial salary and benefits.

Downsizing is a drag, but survivors who deliver the goods to an organization's customers will be richly rewarded. "I'm a customer service representative. And I make $155,000 a year."

     Team-defined rewards

Management gurus insist that teams should not define their own reward system -- "That's putting the monkeys in charge of the chicken coop." But we think it's an approach worth considering anyway. Team members shouldn't set their pay levels, for instance; but they may make valuable contributions to defining benefit choices and designing recognition programs.

You may be a distinguished mind-reader, and picked the perfect reward last time. Next time, however, why don't you ask workers what they would like as an incentive or reward? You can't predict what will light a fire for them.

Consider team-proposed rewards as a kind of compensation laboratory. Yes, there will be some bad ideas, but there will be some that you would not have thought of in a million years by yourself, and the best will carry over to other teams as well.

     Thirteen low-cost or no-cost rewards

We have so far focused more on compensating business teams than the non-business teams we are all on, such as volunteer work. But nonbusiness teams have been the pioneers in alternative rewards.

How do you let workers know on a team basis that their efforts are appreciated? "Cash is always in good taste," is a well-worn adage. It's also an untrue adage -- reward a deed done out of simple decency or honesty with a few bucks and watch the look on the good-deed-doer's face.

Few team leaders have a laundry basket of financial favors to hand out to deserving team members. But there are still lots of no-cost or low-cost ways to keep team members involved and in the mood to perform:

ƒ      Establish a prize. Establish a quarterly "most valuable team member" award that teams themselves vote on. Establishing a "biggest improvement" and "best team spirit" award, too -- it helps keeps individual performance stars from getting all the attention.

ƒ      Get 'em involved. People having impact on reaching goals appreciate being part of forming those goals. Bring your best people into the planning process and they will walk through fire for you.

ƒ      Power to the people. What better way to spur productivity than to give proven achievers authority to spend a few buck to increase sales, please customers, or improve critical processes? (But use the Empowerment Grid, so the infusion of new power doesn't blow them up.)

ƒ      Not rich, but famous. Establish a "hall of fame" in your unit or department -- a gallery of pictures, trophies, and plaques, with an emphasis on winning teams as well as winning individuals. If you don’t have a physical location, do it in your print materials, or on your website.

ƒ      Praise in print. If you have access to internal publications -- newsletters, magazines, tabloids -- get word of your people's performance to the editors. They will be grateful.

ƒ      If they had a hammer. Everyone's dying for a faster laptop, cellphone, or wireless email kit. See that your top producers have access to your best tools.

ƒ      Meet the boss. Getting a chance to hobnob with the Group VP or even CEO is a big deal, and shows you care about your people's career tracks.

ƒ      Share the spotlight. A pat on the back means more when it occurs in plain view of co-workers. But be careful your reward ceremonies don't divide workers into winners and losers, or over-stress individual achievement.

ƒ      Privy privvies. Everyone likes perks -- admission to the executive wash room, dining room, or gym. A parking place close to the building entrance. A direct phone line, bypassing the switchboard.

ƒ      Free lunch. Many companies purchase annual tickets to sports events, concerts, and other events, and many take travel, entertainment and other goods and services as trade-outs. Why not share them with the people who make your unit a success?

ƒ      Stock options. If your company isn't up to a companywide stock purchase plan, consider a smaller-scale plan as a reward that binds your winners even closer to the company's fortunes.

ƒ      Lavish them with attention. Years ago, the famous Hawthorne experiments showed that people show more interest in their work when management shows interest in them. Paint the office, move things around, invite juggling clowns for lunch -- anything to break the monotony and show that you care.

ƒ      Show 'em you care. A good team works like a family, and is fueled by respect and even affection. Let performers know their contributions are appreciated by you, personally. Look them in the eye and tell them that. It beats dinner for two at the Pump & Munch, hands down.

     Who decides who is rewarded?

The greater the likelihood that the person you report to controls rewards, the greater the likelihood they will influence your behavior. At bureaucratic organizations, this logical rule of thumb doesn't apply -- simply come to work and keep breathing and you get everything that's good. Reward systems cannot be automatic or remote -- to be effective they must be managed from close-range. Are rewards stipulated by the same entity that measures individual and team performance? They should be.

Should team leaders and team members be part of the individual evaluation process? It is a tough call. People on the team have the best knowledge of the value of one another's work. But team members must not be put in the position of politicking one another for promotions and raises. Best to have the evaluation occur outside the team, with some evaluative information supplied from within.

     What behaviors are rewarded?

Are workers rewarded just for showing up every day? For individual performance? Group performance? Organizational performance? Only a company with a narrow array of functions should be using a single reward approach. It is natural to use incentives to compensate sales people. But if it is good to encourage people in sales, why leave out support functions? The entire bandwidth of a company's workforce must be looked at to find rewards that push people together toward organizational success.

Rewards must be for achievements that matter, not noncontributing, non-value-adding activities. People must feel their work is important. People who cannot make the crossing to be more accountable even with training must be winnowed out and replaced.

Most organizations spend an inordinate amount of time trying to use their merit budget appropriately. One of Wm. Edwards Deming's Fourteen Points, however, is that merit raises be abolished. Not only are they destructive of team spirit -- each member's raise coming at the expense of every other members' raises -- but they just don't work. Splitting 4 percent into X number of even shares at the end of the year is not an incentive -- by definition, you incent before the fact, not after.

This is such a simple idea -- aligning your team's reward and performance with its business objectives. All it takes is clear thinking, some careful study, and the honesty to see what your organization is really saying to its teams.

 

 

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The New WHY TEAMS DON'T WORK
What Goes Wrong and How to Make It Right

"The American business approach to workplace teams is filled with powerful subtleties and is also quite different from the Japanese. The phrase, "How come all this quality stuff don't work," nicely sums up the challenge making teams work in America. Authors Robbins and Finley present practical solutions to the problems with and misconceptions about teams that will be valuable to any organization inclined to assign teams to work on legitimate operational issues. Pragmatic team tips covered here include team decision-making, communication skills with teams, reward and recognition ideas, the importance of effective team leadership, and the fundamental factor of organizational culture that could help or hinder team success. The authors swap narration of chapters, enlivening this useful handbook on how to make the commitment to teams a success. Serves well any manager's interest in maximizing productivity and quality improvement with teams. Recommended for all quality professionals." -- Quality World