Explain team and group incentive plans

In addition to incentive plans designed to improve individual performance, there are plans that focus on group or team performance. These programs are particularly important for managers to understand today because they focus attention on higher levels of performance, and because of the widespread trends toward team- and group-based methods of work and organization. A fairly common type of group incentive system is an approach called gainsharing. Gainsharing programs are designed to share the cost savings from productivity improvements with employees. The underlying assumption of gainsharing is that employees and the employer have the same goals and thus should share in incremental economic gains. One specific type of gainsharing plan is an approach called the Scanlon plan. This approach was developed by Joseph Scanlon in 1927. The Scanlon plan has the same basic strategy as gainsharing plans because teams or groups of employees are encouraged to suggest strategies for reducing cost. However, the distribution of these gains is usually tilted much more heavily toward employees, with employees usually receiving between two-thirds and three-fourths of the total cost savings that the plan achieves. Some kinds of team- or group-level incentives go beyond the contributions of a specific work group. These incentives are generally organization wide. One longstanding method for this approach is profit sharing, in which some portion of the company's profits is paid at the end of the year into a shared pool that is distributed to all employees. This amount is either distributed at the end of the year or put into an escrow account, and payment is deferred until the employee retires. Various types of stock-based incentives are also ways to tie incentives to the performance of the firm, although these are more typically used with executive employees rather than hourly employees.