December 1994

Team Incentives

With more and more agencies using teams to accomplish work, Federal managers and employees are looking for effective ways to improve and reward team performance. A team incentive plan is one tool agencies can use to promote team effectiveness.

One example of a process used to develop a team incentive plan comes from National Semiconductor, a leading high-technology company headquartered in California's Silicon Valley. Even though developed by a private sector firm, most of the steps and lessons learned can apply to the Federal sector. The companies process involves employees. In Federal agencies with bargaining units, this would, of course, mean involving unions.

• Establish Task Force
• Form Subgroups
• Develop Assessment Tool
• Develop Incentive Guidebook
• Results

Establish Task Force. National Semiconductor established a task force to develop a group incentive plan with the purpose of promoting and supporting an evolving team environment that uses total quality processes. First, the task force benchmarked other organizations' team incentive plans and found several key lessons learned that became instrumental in their incentive plan design. Those lessons were:

• Make goals simple and understood.
• Make the plan fair.
• Ensure there is no conflicting goal with other groups.
• Get employee buy-in and involvement.
• Use pilot units.
• Provide crisp, clear communications.
• Get buy-in from top management.
• Use "sunset" clauses.

Form Subgroups. Next, a communications subgroup was formed to ensure a high level of awareness. They managed expectations by using monthly all employee newsletters and videos.

Another subgroup studied the fit and integration of a team incentive plan into the organization. The members found that the largest disconnect involved their performance appraisal process. Their system used individual goals, measured individual performance characteristics, and used only one perspective (the manager's). As a result, they changed their performance appraisal program to include team goals, team participation measures, and 360-degree feedback.

Develop Assessment Tool. Another subgroup developed an assessment tool to determine a unit's readiness for incentives. The tool asked such questions as:

• Is the unit able to track its own bottom-line financial measures?
• Are employees able to have an impact on operational measures?
• Are management, supervision, and the workforce supportive of a new incentive system?
• Is there an established team environment?

Develop Incentive Guidebook. Next, a plan design group developed an incentive guidebook that outlined operational measures, operational goal setting, employee incentive opportunity guidelines, funding maximums, and other key factors to the plan. They also tested their plan to help ensure its success.

Results. By addressing all of these issues, this company successfully designed an incentive plan that had:

• Quantifiable measurements.
• Challenging but achievable goals.
• Significant payout opportunity.
• Payout funding within the organization's compensation guidelines.