Compensation systems: Team bonuses improve productivity

Work in a team

Awareness of the importance of collaboration can be increased through incentives.


Working in teams is not always easy. So-called free riders jeopardize the team’s success with the attitude of keeping their own workload to a minimum – trusting that the other team members will try even harder.

This is true in football teams – where not all eleven team members are always equally willing to go to great lengths to iron out the mistakes of others – just as it is in companies. Since teamwork in companies makes it difficult to measure the contribution of each individual, individual bonus payments are often of little help here. As I pointed out in my last column, they can actually reduce productivity.

A team bonus can help here. This is paid out when the team as a whole achieves a specific goal. In a publication in the American Economic Review, Guido Friebel, Matthias Heinz, Miriam Krüger and Nik Zubanov have shown that this can work even under tough market conditions. The authors examined the introduction of a team bonus in branches of a bakery chain that had come under strong competitive pressure due to the market entry of bakeries in Aldi and Lidl branches.

The chain, working with the team of economists, randomly divided its nearly 200 stores into two groups. In the first group, if the monthly sales target was exceeded, a bonus was paid to the entire branch team, graded according to the amount exceeded.

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The author

Matthias Sutter is Director at the Max Planck Institute in Bonn and author of “The Human Factor or What Matters in Working Life”.

(Photo: ECONtribute/Dustin Preick)

Irrespective of the function, for example as a branch manager or cashier, everyone got the same share of it, proportional to the working hours. The second group acted as a control group without a team bonus in order to be able to measure the effect of introducing the team bonus.

The effects were pronounced. The team bonus really paid off for the company. For every euro that was paid out as a team bonus, branch sales increased by EUR 3.80 and profit by EUR 2.10.

But the experiment revealed not only that the team bonus works, but also how it works. Greater job satisfaction or friendliness to customers were not decisive. This was the result of surveys and covert purchases.

Employees cooperated better as a team

Rather, the higher productivity was due to better coordination of the work processes. The employees evidently raised optimization potentials that they had previously ignored.

For example, the coffee machine or the oven were cleaned more frequently at times of low demand in order to be able to serve customers more quickly and without interruptions when there was a greater rush.

Overall, the team bonus resulted in a more collaborative attitude when working together because all team members realized that they should pull together to be successful.

More: Bankers expect fewer bonuses – is the big wave of layoffs now imminent?

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