Can My Team Have a Raise?

Is it better to give the whole teama raise?

By PT Staff, published on November 01, 1993

Picture the scene: you are responsible for assessing the performance and handing out raises to a group of people who work for you. Easy, right? Not anymore, according to a team of researchers from the University of Southern California.

Traditionally, both managers and workers prefer salary increases based on individual achievement--so-called merit pay--to those based on seniority. But now that there's greater emphasis on group cooperation and team-based organizational forms, new pay strategies are needed. You've got to gauge--and then reward--the performance of an entire group as opposed to one employee's contribution.

The old system of merit pay wasn't such a good one anyway, claim USC's Edward Lawler III, Ph.D., and Susan Cohen, Ph.D. How can you define individual performance and measure it accurately? And while appearing to be democratic, the system, says Lawler, "doesn't really motivate people."

For one thing, the rewards tend to be small compared to the amount of work required to achieve them. "Then, of course, you're assuming that money is all that's driving an employee, which may not be the case. Finally, the rewards are often tied to behavior and performance that workers feel they can't possibly accomplish, so why bother?"

Reporting on what they call "the new pay for performance" at a meeting of the Society for Industrial and Organizational Psychology, Lawler and Cohen call for a more skills-based approach in salary assessment--focusing on an employee's ability to negotiate, for instance.

"Companies must assess skills acquisition and compare them with team performance. Rather like what professional sports teams do. If, say, the Chicago Bulls win another championship next year, the team should get a bonus and Michael Jordan should get a big raise."

The shift from job-based to skills-based assessment isn't easy, Lawler warns. The trick is to identify the skills you want an employee to learn. Once identified, however, such skills--and their acquisition--are easier to evaluate than a worker's often subtle contribution to the success of a specific project.