Individual Vs. Group Incentive Plans

by Chris Joseph; Updated September 26, 2017
...

Employers seeking ways to increase productivity without necessarily adding more workers may turn to incentive programs as a motivational tool. Incentive programs may be individual- or group-based in nature, depending on the type of organization and the particular objective it wishes to achieve. A number of factors help determine which type of incentive program is better for the organization.

Identification

An individual incentive plan is intended to reward individual workers based on reaching certain performance goals. A common example is giving a salesperson a bonus for reaching a specified production level or providing additional compensation to a factory worker for producing a desired number of goods during his shift. Group incentive plans are designed to reward each member of a team or organization for a joint accomplishment such as improving profitability or reducing expenses.

Suitability

An individual incentive plan is typically more appropriate where a worker's productivity does not depend on the performance of others, such as a salesperson who works independently and has complete control over outcomes. Group incentive programs can be suitable where individual contributions are more difficult to measure. An example is a profit-sharing program where all workers are rewarded based on the company's ability to reach an overall profitability goal.

Group Incentive Considerations

Group incentive programs can foster an atmosphere of teamwork and cooperation in an organization. Top performers may be more willing to help those who are struggling or are new to the organization when rewards are based on the performance of the group as a whole. On the other hand, top performers may come to resent underachievers that they view as unwilling or unable to make an equal contribution to the effort.

Individual Incentive Considerations

A major benefit of individual incentive programs is that they reward top performers for their efforts and can serve as a motivating force for goal-oriented employees. They may also help to motivate underachievers who previously may not have seen the purpose in putting forth extra effort. Potential drawbacks include the creation of a "dog eat dog" work environment where every worker puts her interests ahead of those of her co-workers and workers pushing the boundaries of ethical behavior to reach their goals, such as a salesperson who lies to prospects just to make a sale.

Photo Credits

  • Jupiterimages/BananaStock/Getty Images