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Many employees are already competing for incentives although they may not realize it. Our traditional appraisal systems (ratings of super, outstanding, good, OK, etc. linked to percent of raise) give the appearance of being individual (if you do this and this you can move from good to outstanding), but in reality, employees are competing against their colleagues for the few spots allocated for outstanding performers and the highest raises.


You bring up a really good - and important - point. Forced ranking systems do create competition, which employees may or may not realize, depending on how much they know about the process "behind the scenes." For that matter, any performance goal may be competitive as well, depending on roles, lines of responsibility, structure, work processes and culture. In understanding the degree to which incentives are or are not competitive, it is critical that we dig beneath the surface and understand the deeper dynamics at work.

Thanks for the great comment!

Competition among co-workers in general has a negative connotation, and can be harmful certainly. However, along the lines of good stress and bad stress - a little competition can be motivating. Isn't that what the incentives are meant to accomplish? I think the type of incentive does depend ultimately on the goal to be achieved and whether it should be individually based or a team incentive.

A team based approach can also motivate as the success of the team (or not) impacts all participants. But then you may have the slackers reaping the same rewards as the achievers - who among us hasn't done the bulk of a school project when others didn't do their part?

What I find most interesting from the study is that it points to the fact that there are other issues at play in gender pay equity. One can't just say that women are not treated equally. Women are also clearly not inclined to professions where one might earn more income. This will never change. Are we saying now we should change the way we work to make it fairer for those who don't like to work in a competitive environment?

Although the distributors of trophies to all might advocate for all incentives to be team based and shared equally, there would be valid reasons when that type of incentive should not be used. Some work cannot be team based and there are still individual goals that can be incentivized. Or as management plans often are, a combination of the two, part team, part individual. Perhaps that is the best option to satisfy both character types.

Karen -

Nice job highlighting the complexities at play here on a number of levels. Yes, successful talent management and even issues like gender pay equity are never as simple and linear as some would have us believe - or as we might like to think ourselves.

Appreciate the great comment!

The logic of 'team variable pay' is partially based on an attempt to eliminate competition between individuals where work requires coordination and cooperation and not individual performance alone. Although we certainly can have competition between teams, teams often provide better 'support systems' for individual team members.

Studies suggest teams with team-based variable pay outperform teams that either have no variable pay or have pay designs that create competition at the individual level. High technology was a 'hotbed' for team-based variable pay and resulted in some admirable improvements in work quality and satisfaction with work. However, it seems that paying at the team level, even in technology companies, has fallen out of favor.

One of the most influential forces in the elimination of pay designs (including team-based pay) has been the proliferation of surveys of what has been come to be called 'best practice'. In statistics we would call the result 'regression to the mean' with everybody 'wearing the same blue hat' so to speak.

The 'secret sauce' of effective survey use is to find out what other organizations do and then come up with a solution that is 'better' in terms of fit with your organization.

I think that if we could get some honest person from Wells Fargo to write on this blog about the negative influence of 'competitive individual incentives' we would find an interesting story to ponder.

Jay covered two different situations involving "competition" in his comment. First half, he commented about intra-employer competition, where teams or individuals vie against each other in the same organization. Second half switches to inter-employer "competition" where the organization compares its pay system to those of different enterprises. First case shows fellow workers pitted against each other. Second deals with one employer studying the context of its reward programs against those of other enterprises. Same word but very different applications. Fascinating!

At Wells Fargo, for example, the individual sales incentive plans were probably based on targets derived from studies of normative total pay rates for similar productivity at like enterprises. There, the applicable "competition" was probably only between employers rather than between co-workers ... but it could have been both: sales objectives and contingent pay targets might have been shaped by surveys while the bonus reward budget could have been distributed per judgments based on making workers fight each other for their pie piece. Competition is certainly complicated.

Belated thanks for the comments, Jay and Jim.

I share Jay's observation that team-based pay seems to be falling at least somewhat out of favor. In the very small sample size of conversations I've had with organizations who have moved to a bigger or even exclusive focus on individual performance in their incentive plans, I have encountered the response that it was a decision based on "best practice." Eventually, best practices like this do become self-reinforcing via surveys.

Also interesting that this shift, if it is happening, may be happening as many firms move to substantially change their performance management systems. There's a story there, I'm sure.

Appreciate the great conversation!

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