Seven years ago when Diane Yost walked into the president’s office at Arden Shore Child & Family Services, a not-for-profit agency that works with troubled and abused children, the agency was facing a $500,000 projected deficit. Today, the Vernon Hills organization has sold off residential property, restructured into a network of group homes and is celebrating its centennial year in the black with roughly a $4 million endowment. Yost gives the credit to her staff and the agency’s board, who she says grasped the singular vision of saving the agency to do the best possible job of placing kids from the Department of Children & Family Services into new environments.
So why is she hatching a plan to change the way her staff is compensated to look more like a for-profit business that pays based on team performance? “The non-profit world hasn’t been as good (as the corporate world) at measuring ourselves against outcomes,” said Yost, 51. “When an entire team is responsible for delivery of a product, there has to be a way of rewarding that.”
So this fall, Yost is working on a plan that will tie part of her 45-member staff’s individual salary increases to the team performance. She believes the nod to business performance will help in the agency’s quest to become accredited, her next goal. Yost said her staff was already motivated to its team mission of helping kids. For many other managers who work in groups or teams, balancing issues like pay raises in a group setting can be painful.
Despite the popularity of teams in the workplace, some evidence suggests that when it comes down to basing pay on such concepts, many companies and workers balk. In an opinion database kept by consultant Hewitt Associates in Lincolnshire, just 12 percent of workers said their pay should be based on how well they achieve team goals; and only 6 percent said pay actually is based on that factor.
And for companies that do determine workers’ pay based on the performance of their work teams, it doesn’t always play well for either side, said Sam Johnson, a principal with William M. Mercer consultants. “When a team only is being measured, what often happens over time is the best performers become disenfranchised because the awards are being smooth-curved. In many cases, team members are simply given equivalent raises,” he said. That can obviously work against managers trying to keep their best people.
And that’s where the question of ethics and fairness comes into play, and how you deal with it will affect how your team performs. “The factor that can erode performance more than anything else is the perception an organization is unjust,” said David Messick, a social psychologist who teaches business ethics and organization behavior at Northwestern University’s Kellogg Graduate School of Management. In a Kellogg continuing education seminar last spring devoted to work team issues for managers, Messick drove home a few key points for managers like Yost (who took the class) to keep in mind when handing out perks and raises in a group setting:
Most important, he said, is really thinking through several versions of what the fairest solution will be perceived to be. “Even if you think you have an obviously fair solution, think through three or four other options instead of going with your gut. You have to train yourself to think more carefully,” he said. “It’s almost never the case that there’s only one solution.”
Second, Messick said, remember that hybrid solutions are many times the best alternative. If you manage a team and have a set amount of bonus or raise money to hand out, base part of each person’s take on team performance, but also include a penalty or a credit for individual stars or duds.
Finally, Messick said, remember that any solution needs social acceptance. If you spend countless hours devising a pay-raise method but spend no time getting underlings to understand and accept it, the system is doomed for failure, he said. Instead, seek ways to combine people’s likely differences about how pay should be distributed and come up with compromises.
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E-mail: kiddstew@msn.com
