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Group Incentives

Group Incentives:

Group incentives programs reward employees for their collective performance, rather than for each employee’s individual performance. Group incentives programs are most effective when all group members have some impact on achieving the goal, even through individual contributes might not be equal.

Team members represent various cross-functional areas including research and development (R&D), Marketing, finance, and manufacturing.

Well designed group incentives plans ultimately reinforce teamwork, cultivate loyalty to the company, and increase productivity.

group incentives

Types of Group Incentives Plans:

Companies use three major types of group incentives plans

Team Based or Small Group Incentive Plans:

A small group of employees shares a financial reward when a specific objective is met. Team based is similar to individual incentives with one exception. Each group member receives a financial reward for the attainment of group goal.
There are three types of teams in an Organization.

  1. Work teams
  2. Project teams
  3. Parallel teams

Work teams:

Work teams refer to organizational units that perform the work of the organization on an ongoing basis. Membership is relatively permanent, and members work full time in the team. Customer service teams and assembly teams on production lines represent excellent example of work teams.

Project Team:

Project teams consist of a group of people assigned to complete a onetime project. Members usually have well-defined roles and may work on specific phase of project, either full time or in addition to other work responsibility of teams. Project teams usually work across such functions as engineering, product development and marketing to ensure that the final product meets company specification in the term of cost.

Parallel Teams:

Parallel teams or task forces include employees assign to work on a specific task in addition to normal work duties. The modifier parallel indicates that an employee works on the team task while continue to work on normal duty. Also, parallel teams or a task forces operate on temporary basis until it works culminates in a recommendation to top management.

Teams or groups may ultimately receive incentive pay based on such criteria as customer’s satisfaction (i.e. customer service quality), Safety records, quality and production records. Although these criteria apply to other categories to incentive programs as well (individual, companywide, and group plans) companies allocate awards to each worker based on the group’s attainment of predetermined performance standards.

You may also study: Types of Economic Incentives with Examples

Ways of Rewards:

  • Equal incentive payments to all team members
  • Differential incentive payments to team members based on their contribution to the team’s performance
  • Differential payments determined by ratio of each team member’s base pay to the total base pay of the group.

The first method– the equal incentives payments approach- reinforce cooperation among team members except when team members perceive differences in the member’s contribution or performance.

The second method– The differential incentive payment approach distributes rewards based to some extent on individual performance

The third method– Differential payments by ratio of base pay reward each group member in proportion to her/his base pay. This approach assumes that employees with higher base contribute more to the company so should be rewarded in accord with that worth.


Gain Sharing Plans:

A group of employees, generally a department or work unit, is rewarded for productivity gains. Gain sharing  describe group incentive systems that provide participating employees with an incentive payment based on improve company performance for increase productivity, increase customer satisfaction, lower cost or better safety records. Gain sharing was developed so that all employees could benefit financially from proclivity improvements resulting from the suggestion system.

Three components of Gain sharing

  • Leadership Philosophy
  • Employee involvement systems
  • Bonus

Leader Philosophy:

Leader philosophy refers to cooperative organizational climate that promotes high level of trust, open communication and participation.

Employee involvement system:

Employee involvement system derives organizational productivity improvements. This system use broadly based suggestion system


Bonus is third component of gain sharing plan, a company awards gain sharing bonuses when its actual productivity exceeds its targeted productivity level. The gain sharing bonus are usually base on a formula that measures productivity that employees perceive as fair and the employer believes will result in improvement in company performance.

The Scanlon Plan:

Joseph Scanlon first developed the gain sharing concept in 1935 as an employee involvement system without a pay element. The hallmark of Scanlon plan is its emphasis on employee involvement. Scanlon believed that employees will exercise self direction and self control if they are committed to company objectives and that employees will accept and seek out the responsibility if given the opportunity.
The Scanlon plan is a generic term referring to any gain sharing plan that has characteristics common to the original gain sharing plan devised by Scanlon.
Scanlon plan have three components:

  • An emphasis to teamwork to reduce costs, assisted by management supplied information on productions concerns.
  • Suggestion system that route cost saving ideas from the workforce through a labor management committee that evaluates and acts on accepted suggestions
  • A Monetary reward based on productivity improvements to encourage employee’s environment.

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