Wally, Vijay, Sandra, and Consuela make up a software development team at Javasoft. The firm is considering implementing one of two incentive compensation schemes

In scheme A, each programmer receives an annual bonus if he or she meets all individual programming deadlines. In scheme B, members of the team share equally in a joint bonus if the team meets all of its product delivery deadlines. All four employees are equally talented but Wally is a slacker who does as little work as he can get away with. Which scheme might team members prefer? Which scheme will management prefer?

Team members (except Wally) prefer scheme A since it ensures that they are not denied the bonus because of one slacker. Team-based pay is only effective when the product is truly a team effort. In this case, scheme B may cause some resentment among team members especially since Wally is likely to be a "free-rider." Management favors scheme B because it is tied to the firm's goal of product delivery.