Team-based pay schemes have been catching the eye of modern employers.
Advocates say that they encourage group endeavour and improve organisational performance. But salespeople, typically the most self-motivated of workers, have traditionally been rewarded according to individual performance. So are team-based schemes suitable?
Research conducted by the Institute of Personnel and Development (IPD) into 98 UK employers last year found that a quarter of them already used formal team pay schemes, while 47% were considering them. Most people in direct sales roles have traditionally been paid on an individual basis but as Duncan Brown, a pay and benefits specialist with Towers Perrin, says: 'More team aspects are coming in as a modifier for sales staff too.'
The key issue is whether team-based pay is more in line with the organisation's objectives than pay based on individual achievement.
Some companies in the motor industry are trying to avoid a 'hard sell' image. Towers Perrin advised Volvo on how to cut back the commission element of salespeople's pay, while introducing a method to relate pay to the performance of the dealership. 'That gives an incentive to introduce greater service so that customers come back,' says Brown.
Introducing a team pay scheme can be complex. 'The biggest problem with team-based pay is defining the team in the first place,' says Karen Giles, IPD policy adviser on pay. For example, the employer could look beyond the pure sales staff. 'The team could include people who are taking orders because they are at the customer interface and could have an impact on whether the team meets its targets,' explains Giles.
Another problem is that team pay schemes won't work if the actions of one individual make no impact on another. Derek Pritchard, director of reward consulting in the UK for Hays Management Consultants, says: 'You need a true team, like a football team. Each member is interdependent on the other and that's the kind of environment where team-based bonuses are applicable.' Sales staff can be less receptive to team pay schemes because competition and personal motivation can be an important boost to their performance.
High-performers could be demotivated if they feel they are propping up poorer sales staff. Norwich Union stopped using a team element for its sales staff two and a half years ago. 'We did have a team bonus that applied where all the team achieved a certain target, but that didn't work because you could have experienced consultants selling lots of business and some who were newer and sold less,' says Graham Warnes, remuneration and information manager for the direct sales business. In other words, high-achieving executives lost out.
Whether the benefits of team pay for sales staff outweigh the disadvantages depends on the specifics of a company and its culture. As Mark Edelsten, head of reward consulting at William Mercer, says: 'It depends on the organisation, the sector, the nature of the product, the way the salesforce is managed and developed and who those salespeople are.'.