Most employers regularly assess their employees’ performance on one or more metrics. These metrics include:
- Sales goals.
- Work attendance.
- Workplace safety.
- Quality and quantity of work output.
Many employers offer employees incentives in an effort to increase their performance metrics. Once an employer decides that providing incentives is the way to motivate employees, the next choice is between individual and group incentives. The decision of whether to provide individual incentives vs. group incentives can be a difficult one to make, and because of this, some employers choose to offer both rather than creating an either/or situation with their incentive plans.
Benefits of Individual Incentive Plans
Individual incentive plans reward employees for the strong contributions they personally make. A few examples of individual incentives employers use to reward high achievers include:
- Comp time.
- Cash bonuses.
- Non-cash prizes.
- Stock shares.
- Profit sharing.
- Professional development opportunities.
The benefits of individual incentive plans include motivating employees to put their best efforts into their work and pushing lower-performing employees to develop their skills and improve their output. For the employer, individual incentive plans have the benefits of encouraging high-performing employees to stay with the company and ensuring that individual employees are equitably compensated for their output.
Drawbacks of Individual Incentive Plans
Individual incentive plans are not always perfect, though. In some workplaces, individual incentive plan drawbacks outweigh their benefits, making them the wrong choice for those organizations. Potential drawbacks include:
- Creating a fiercely competitive atmosphere that hinders teamwork.
- Causing lower-performing employees to become demotivated.
- Employees making unethical choices and cutting corners with their work in order to receive incentives.
Value of Team Incentive Plans
Another way employers can reward successful employees is with team incentive plans. These prizes reward entire teams for a job well done rather than the individual performers. These incentives are often the same as incentives offered to individual employees.
Team incentive plans have a few different benefits than individual incentives. These include:
- Encouraging collaboration and communication among team members.
- Fostering a stronger sense of community among employees.
- Driving all members of the team to hold themselves accountable for the team’s success.
- Promoting mentoring between senior and junior team members.
Drawbacks of Team Incentive Plans
A team incentive plan is not always the ideal way to promote strong employee performance, though. Just like individual incentive plans, a team incentive plan can have drawbacks. These drawbacks include:
- Creating resentment in employees who feel they “pick up the slack” for less-motivated team members.
- Employees with less experience or less expertise can feel pressured to perform above their comfort levels.
- When the team fails to meet its objective to receive a reward, employees might blame each other and single out an individual as the reason they failed to meet the objective.
Individual Incentives vs. Group Incentives
Whether individual incentives or a set of group incentives is the best way to reward employees for jobs well done depends on the nature of the workplace and the work being performed. In some workplaces, the right solution to the issue of individual incentives vs. group incentives is to offer both types of reward.
Employers could offer team incentives for achievements that require an entire team’s effort as well as individual incentives like bonuses and career development opportunities to the individual employees who go above and beyond what their roles typically involve. In some workplaces, offering both types of incentives makes sense because teams and individual employees are assessed according to different metrics.
For any incentive plan to be successful, the employer must make each reward and the benchmark for earning each reward absolutely clear to employees. Incentives must also be offered equally. Holding certain employees to a different standard than other employees at their level can create resentment and in some cases be considered a form of discrimination.
Lindsay Kramer has been a full-time writer since 2014. In that time, she's experienced the ups, downs and crazy twists life tends to take when you're launching, building and leading a small business. As a small business owner, her favorite aspect about writing in this field is helping other small business owners and aspiring entrepreneurs become more fluent in the terminology and concepts they face in this role. Previously, she's written on entrepreneurship for 99designs and covered business law topics for law firms.