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Team-Based Rewards Structures and Their Impact on Team Trust Introduction and Objectives
By Courtney Calinog (MSLOC student)
Trust is a critical ingredient to ensuring a healthy team dynamic, with its absence dramatically hindering team success in any organizational context. As a result, the establishment and continual fostering of team trust is an important yet challenging task facing managers, coaches, consultants and organizational effectiveness practitioners alike.

Team trust can be influenced by a variety of factors, including the structures organizations put in place to reward their employees. An analysis of team-based rewards, in particular, suggests several interesting implications regarding their impact on team trust. While they can be highly effective when implemented correctly, team-based rewards can also be a trigger for team trust challenges. A deeper understanding of these dynamics can help the MSLOC community design and promote healthy team reward structures in their academic and professional pursuits.

This article will provide an overview of trust in teams as a well as a summary of team-based rewards structures. Through the lens of team trust, it will review the perceived benefits of team-based rewards, including a summary of the conditions where they can be the most effective. In addition, it will explore potential drawbacks to team-based rewards and their impact on trust. Finally, a case study demonstrating the successful implementation of team-based rewards in a low trust team will be reviewed.

Trust and Team-Based Rewards Defined
Trust

According to Ferrin and Dirks (2003), interpersonal trust is defined as “an individual’s belief that another individual makes efforts to uphold commitments, is honest, and does not take advantage given the opportunity” (p. 19). At the same time, Rousseau, Sitkin, Burt and Camerer (1998) recognize interdependence and risk as the two conditions that must exist for trust to arise. In other words, trust is best built in an interdependent team context where individuals must come together to share information and collaborate. Furthermore, there is a notable element of risk involved for individuals deploying effort towards a team goal when there is no guarantee that team members will reciprocate (Ferrin & Dirks, 2003).

Team-Based Rewards

For an increasing number of organizations, implementing a compensation plan that rewards employees for successful teamwork provides great synergy with their organizational model. Companies that have such plans take various approaches to structuring team-based rewards, including programs such as incentive pay, recognition, profit sharing and gainsharing. (See Table 1) Human resources professionals that use these plans indicate they can be an effective way to reward team performance, but “must be carefully structured to avoid unintended consequences that could undermine individual initiative and business goals” (Bolch, 2007, p.91).

Individual rewards compromise team performance

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Encouraging employees to work together, yet basing rewards on individual performance, can compromise their ability to work as a team, according to research conducted by Melbourne Business School professor Karen Jehn. 

Many employers claim to love using teams, "and yet, when you look at how they compensate staff, it's done at an individual level through salary bonuses", she says. 

Instead of encouraging members of the team to focus on group goals, this can foster competitive behaviour that divides them - particularly if dominant personalities are involved, Jehn says.  Are you sending conflicting signals?

Being Human managing director Catherine Smithson says rewarding individual behaviours while hoping for team behaviours, is a "common trap" for employers. 

If employees are not accountable for their individual performance,...
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