#131 from R&D Innovator Volume 3, Number 12          December 1994

Rewarding Cross-Functional Teamwork
by Glenn M. Parker

Mr. Parker is president of Glenn M. Parker Associates in Lawrenceville, New Jersey.  This article is adapted from Cross-Functional Teams: Working with Allies, Enemies and Other Strangers (Jossey Bass, San Francisco, 1994).

Although training and technology are quickly moving to facilitate the expansion of cross-functional teamwork, performance appraisal (which I discussed in R&D Innovator, Volume 3, No. 6) and rewards are lagging behind.  Charismatic leadership and speeches about commitment can only carry an organization so far. 

A cross-functional team comprises a group of people representing a variety of departments, disciplines, or functions, whose combined effort is required to achieve the team’s purpose.  When effective, cross-functional teams can speed up both product development and turnaround on customer requests, improve an organization’s ability to solve complex problems, serve as a vehicle for organizational learning, and act as a single point of contact for a project.

A recent study of 4,500 teams in more than 500 organizations found that in 80 percent of the organizations’ compensation systems still rewarded individual behavior. Teams and team players want to be rewarded for doing the right thing, so if we cannot develop systems that encourage collaboration, the whole movement to team-based organizations, including cross-functional product development teams, will be derailed.

What methods have been used to reward teamwork? How effectively do they encourage and support the essential elements of cross-functional teamwork:  collaboration, conflict resolution, satisfying customer needs, and solving complex problems? 

Rewarding Teamwork With Money

Gainsharing programs allow group members to “share the gains” of efforts made by some of their co-workers.  Thus it establishes an incentive to help co-workers achieve their goals. 

From the standpoint of rewarding successful cross-functional teamwork, it’s important to note that although rewards are distributed to employees on the basis of team performance, gainsharing plans use different definitions of "team," which can vary from a small group to the entire organization.  Obviously, when the unit is large, the line of sight between the reward and the performance of the individual team is obscured.

Other problem areas associated with the application of gainsharing to cross-functional teams include:

•        the measurement of cost savings or productivity gains in research laboratories;

•        the ability of team members to see the relationship between the performance of their team and the reward in large organizations;

•        the necessity of rewarding people who provide necessary support and service to the team.

Rewards must be directly related to team performance, so that if the team succeeds, all members will be rewarded. 

Knowledge-based pay encourages staff to learn new skills and acquire knowledge about the jobs of other team members, by offering incremental pay increases after the new skill is acquired.  This method encourages collaboration among team members and facilitates process improvement, since team members can perform many tasks and can see how the total process works.

At Johnsonville Foods, fellow team members decide whether a member has acquired a new skill.  That company is also working on a system that gives bonuses to teams that exceed goals, and to individuals who exceed standards or instruct their teammates.  This allows the company to support the team-learning concept while at the same time recognizing outstanding individual performance.

Knowledge-based pay systems reward the behavior of cross-functional team members and assumes that new learning activities will directly increase team and overall company success.  This works when cross-team learning is critical to success, but does not require results before rewards are distributed; manifesting new behavior on the job is sufficient, since it allows research team members to easily see the relationship between performance and payoff.

One-time bonuses.  Temporary teams, formed for a specific purpose and a defined duration, can be offered bonuses for delivering the goods on-time (or ahead of schedule), being under budget, or producing cost-saving ideas.  In 1987, for example, Honeywell’s Space Systems Group had a chance to win a major contract for highly specialized computer chips, if it could design the best chip first.  Intent on turning out perfect chips with reduced design time, the project manager invented a "bounty system."   He offered each engineer $150 if a chip passed the first design step on time, and up to $1,200 when three chips passed in one design cycle.  The team could receive up to $4,000 for similar passes.  The team designed two perfect chips in the first cycle, putting Honeywell nine months ahead of the competition.

Team incentive systems.  There are other ways to bring rewards to the team level.  One biotechnology company pays a bonus to cross-functional teams that shorten the time needed to bring new products to the Food and Drug Administration for approval.  (Rewards are not paid, however, if the FDA requires more data that should have been part of the original application.)

Rewarding Teamwork Through Recognition

Thus far, I have talked about reward programs that are tied to specific objectives, but it’s also possible to reward cross-functional teams for an unplanned or extraordinary effort.  This is where a good recognition program can enter the picture. 

But who should do the recognizing?  Some people appreciate recognition from an authority figure (such as a supervisor), while others value acknowledgment by colleagues and teammates.  Some people appreciate public rewards, such as having authorship of a paper; others prefer intrinsic rewards, such as the opportunity to take on a challenging assignment.

The Language Standards Department of Bell Communications Research, a 120-person group of computer scientists, engineers, and support personnel, operates a successful recognition program.  While the reward criteria are broad (for example:  creativity, promoting teamwork, giving assistance to others, having positive impact on clients), the nomination form requires specific examples of how the criteria were met and what benefits were achieved. 

The selection committee includes the department director, another manager, five non-management people, plus the permanent, volunteer secretary-facilitator.  In other words, the selection is made by peers and senior management.  The broad base of the selection committee encourages people to think beyond their “home” team and recognize cross-functional teamwork.

Quarterly awards of $150 per person are given to both teams and individuals.  Winners may choose the cash or a gift worth that amount.  In addition, the winner's photo, along with a detailed description of the accomplishment, is posted on a prominent bulletin board for three months.

Not every department, division, or company can establish a program for rewarding cross-functional teams, but they can recognize effective teams and positive team players--every day and at no cost.   One company has a regular "In Appreciation" column in its monthly newspaper, to which employees submit items thanking other employees for extra effort:

To Dolores and Frank (Development):  Thanks for showing us how your methods can be applied to testing the new glass.

         Sam, Anita, and Jess (Analytics)

To Loren (Accounting):  We really appreciated your coming in on Saturday and Sunday to help us get that report completed on such a tight schedule.  We wouldn’t have made it without you!

         Buzz and Julie (Packaging)

These messages recognize individuals and teams who support the concept of cross-functional teamwork.

Extrinsic or Intrinsic?

Recognition in a company newspaper or on a bulletin is a form of external reward which appeals to people who respond to "extrinsic motivation."  Other extrinsic ideas for recognizing teams:

•  giving verbal praise at staff meetings;

•  inviting the team to present its work at a company conference;

•  prominently displaying a poster with team photographs and accomplishments;

•  sending the team on an outing, such as a boat ride or to a ball game;

•  inviting the team to your home for a barbecue;

•  placing a photograph and story about the team in the company or community newspaper;

•  encouraging team members to speak at professional conferences by paying travel expenses;

•  asking the CEO to attend a team meeting to praise its performance;

•  sending a letter to the CEO detailing the team's work;

•  giving each team member a tee-shirt, hat, or mug with his or her name (or the team's name) on it.

Other people respond to intrinsic rewards, which appeal to the "inner self" of team members.  For example:

•  asking the team to accept a new challenge;

•  writing timely, thoughtful comments in the margin of the team’s reports;

•  giving the team the opportunity to meet off-site;

•  giving the team improved resources, such as new equipment;

•  asking the team's opinion about tough problems or new business opportunities;

•  asking the team to help another team start up or solve a problem;

•  offering to pitch in and help the team directly;

•  empowering the team to act independently

Team-Based Recognition

Here’s how to make sure that the reward system recognizes the integration of diverse priorities that is so crucial to the success of cross-functional teams:

•  Team awards must reinforce the cross-functional team concept.  A true team award recognizes the combined effort of all team members in all related functional areas.

•  Individual awards must reinforce the cross-functional team concept.  Individuals should be rewarded for rolling up their sleeves and pitching in to help the team succeed.

•  Bring the reward down to the team level.  Team members must clearly see the relationship between their performance and the reward.

•  Reward individual team players, too.  We still need to recognize those people who go beyond the call of duty and make outstanding contributions to a team.

•  Use noncash rewards.  Cash tends to get lost in the compensation process, whereas merchandise and services tend to last longer, serve as motivators for other people, and often can be shared with family and friends.

•  Use your arsenal of informal methods.  Don’t wait for the establishment of a formal rewards program.  Much can be done on a low-cost and no-cost basis to recognize teams and team players.

Rewarding cross-functional teamwork is an important part of the overall team strategy.  Although many reward programs can serve as models, each organization should design its own system to meet its unique needs.