I promised to share my thoughts about team reward programs with a colleague, so I may as well post them here.

A First Principle: Being on a high performance team is its own reward. Don't diminish it.Attempting to recognize the highest performing team from a bunch of high performing teams is not a good return on investment. Stand them all up at the award ceremony and give 'em a hand, then pour champagne and let them share their stories.

That said, many companies and consultants are struggling with reward and compensation systems that promote teamwork. Here's my $.02. Singling out a few from many fosters competition. So singling out the best team within a company fosters competition between the teams. Fostering competition between the teams promotes impermeable boundaries on the teams, i.e., a lack of information sharing and collegiality between teams. So singling out one or a few teams for an award promotes anti-teaming behavior.

Or as Peter Block put it about fifteen years ago, “Moving the treason from the level of individuals to the level of teams is just moving the treason to a different level.” Who's Peter Block? He's a distinguished organizational consultant and author.

Therefore, attempting to award the best of middling or low-performing teams among a group of middling or low-performing teams will provide a negative return on investment.

Another First Principle: Design reward and recognition systems around Opportunity rather than Scarcity.

A story. I consulted with a hospital HR committee that had just designed a reward and recognition program as a way to promote the new Vision, Mission, and Values of the hospital — let's call it Masterpiece Hospital. Each month this program would select the one individual in Masterpiece Hospital who best epitomized the new Masterpiece Hospital Vision, Mission, and Values. The individual would receive a write-up in the Masterpiece Hospital News, a plaque, a visit to the executive dining room for an executive thank-you lunch, an employee-of-the-month parking place, and five free lunches in the employee cafeteria.

They requested my feedback on this program. I asked two questions.

Q: How many people are employed at Masterpiece Hospital?
A: About 5000

Q: How many months will it take for every employee to demonstrate that they now epitomize the new Vision, Mission, and Values of Masterpiece Hospital?
A: Oh. Uh. We'll go back to the drawing board.

I advised them to follow my Another First Principle offered above. In a month they called me back to check out their revised program.

The revised program gets rid of the committee to pick someone every month and all the costs associated with that as well as the made-up plaques and other perks. Instead, Masterpiece Hospital will publicize an internal HOT!-line that any employee could call to tell a story on any other employee about how they were epitomizing the new Masterpiece Hospital Vision, Mission, and Values. All positive reports would be summarized in the Masterpiece Hospital News. It was a much cheaper and more elegant design and provided Opportunity where before there was none (instead of designing a new source of Scarcity where before there was none).

In the first month the Masterpiece Hospital News was filled with stories. In each of the next three months the Masterpiece Hospital News had to expand the size of the paper to contain the stories.

Moral of the story: Most reward and recognition systems do more damage than good by designing new forms of Scarcity instead of new forms of Opportunity. Have you fallen prey to this?

If I ruled the world of compensation, reward, and recognition systems, here's what I would experiment with.

1. Felt Fair Pay (FFP). Research shows that there is a FFP for every job. Look up and read about the fifty years of research by Elliot Jaques on the universal laws of hierarchy. I'd start with the concept of FFP for every job in my organization.

2. Collective performance shares. If there was a bonus available, I would make it contingent on the performance of the largest aggregate possible of the entire organization. So for a super-corporation, I'd tie it to overall corporate performance. I would also allow sub-aggregates, but always at the highest level not yet measured and bonused, and always as a smaller percentage than the last. The more you reward sub-unit performance — including stand-out individuals — the more you activate sub-optimization.

3. Peer recognition. I would then create reward and recognition pools for acknowledgement of teams by peer teams and recognition of individuals by peer individuals. Many companies destroy team dynamics by selecting individuals within high-performing teams for individual recognition. When teams perform highly, it is the interaction between team members, not the members themselves, that creates the high performance. If you ask such members who was singly responsible for the high performance of the team they'll say “Huh?” or “We were” and mean it. Stand up one performer from that group and give her $1000 for “contribution to the team above and beyond” and you'll never see high performance from that group again. Instead, give the $1000 to the team and let them spread it around. I firmly believe that no one outside of a high performing team can reliably assess who contributed the most (or least) to the team's performance.

4. What about stand-out individual performance? I would use that as a basis for establishing reputation and negotiating FFP. I think the higest paid individuals will eventually be those who have built a reputation by serving on the most high-performing teams. Perhaps this is a ledership model for the APLN to promote. I know I do.

I also know I'm in the minority with my views because they don't fit practically into today's reward and recognition practices. But I don't know how to offer incremental improvements for a system I feel is broken. That's probably why I'm not a consultant with the Hay Group.

What do you think?