Compensation & Benefits Assignment Pros and Cons of Individual and

Team Based Incentives for Sales

Professionals

Shubham Singhal 80303120053 A051 PGDM- HR NMIMS, Hyderabad

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.

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)