Team incentives: 7 do’s and 2 don’ts


Do you avoid team incentives because you are worried about being fair? Are you concerned about rewarding free riders when only a few strong dogs pull the sled?

Worry no more. Teams perform better than individuals [Kuhn, “Experiments on Motivation, Incentives and Rationality” 2007], and you and your bottom line can benefit from rewarding teams.

From medical device sales to telco call centers, teams play a critical role in pre- and post-sales efforts, especially when getting the job done requires effective, high-speed interaction. Teams excel at high-speed interactions, and they are especially successful when they are diverse in role and gender [Rock & Grant, “Diverse Teams Feel Less Comfortable” HBR 2016].

The do’s

DO: Organize the team to maximize effectiveness. Include people on the team whose diverse knowledge can contribute to the goals of the team. The best teams include a variety of roles and members who value the results of the team over their individual contribution. This combination of diversity
and goal orientation is important for the success of the team.

DO: Give the team meaning by connecting to the larger objec­tives of the business unit, division or company. It may sound high-minded, but big-picture stories help guide our actions. A global bio-tech firm was challenged with introducing a new product in record time. By assembling teams that included the sales reps, sales engineers, customer service and invoicing specialists, the company beat their own aggressive goals.

DO: Give your teams clear goals and the autonomy to accomplish those goals. Don’t deprive your teams of these two important tools. When rewards are involved, be explicit up front: If the team achieves between 95 and 100 percent of the challenge, the team gets 90 percent of the reward. If they do better than 105 percent of the challenge, the team earns 110 percent of the reward.

DO: Each team member needs to be clear on their role and be rewarded based for that role. When everyone is clear, loafers and free riders are less likely to appear. In a 1996 article on the Kohler effect [“Social compensation and the Kohler effect,” Stroebe, et. al.], the authors noted free riders are more common when “no one can distinguish each member’s personal contribution.”

DO: Rely on extrinsic, non-monetary rewards. They are the best. A friend of mine speaks fondly of when her firm recognized her team (and their guests), some 20 years ago, for achieving a stretch objective. It was a luxurious dinner celebrating their accomplishments with their significant others. (Don’t cheap out by not inviting guests!) No cash. No prizes. Just great memories.

DO: Use kickers and bonuses, rather than gates or minimums, whenever possible to enhance the rewards. And use multipliers for exceeding goals, so that for instance, a team achievement at 110 percent earns a multiplier of 120 percent (1.2 times) the reward.

DO: Allow teams to compete against each other. This enhances bonding and belonging [The 4-Drive Model by Lawrence & Nohria] and makes the team more effective at developing solutions.

The don’ts

DON’T: Create a team with only top performers that have a very narrow set of skills — diversity is better.

DON’T: Don’t ask team members to rate each other. Our biases for reciprocity (or lack of), fairness (or lack of), preconceived judgements and hierarchy get in the way.

Please don’t hold back using team incentives because of your concern over loafers and free-riders. If you establish the teams with clear goals and are clear about individual expectations, your teams can thrive. Build and reward teams and watch your bottom line grow!

Tim Houlihan is chief behavioral strategist at BehaviorAlchemy, blending real world experience with behavioral science to improve ROI for clients. Learn more at Also, check out Tim’s podcast at

Online Bonus: Google spent two years studying 180 teams and discovered five elements that drive performance. See what tops that list here.

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