The Impact of Reward Structure on Project Team Effectiveness

Abstract

There have been thousands of studies on teams and their performance, but there are still many unanswered questions. An important one is how an organization's reward structure supports the growing trend of using teams. Many organizations implement teams without changing the organizational systems to align with and support the use of teams, i.e., training, feedback, information and reward systems. As predicted by many authorities in the field of team effectiveness research, these teams often fail. One organizational subsystem that has been determined to be important is the reward structure. If the reward structure is not changed to support a team-based structure, the misalignment could negatively impact team effectiveness.

This research investigated the relationship between reward structure and team effectiveness using a laboratory experiment. This experiment involved groups of students working as a team on a design problem. The independent variable is the type of reward structure, manipulated over three levels: interdependent (group), independent (individual) and mixed rewards (both group and individual). The experiment used a design task, intended to be more representative of project team work where team members were assigned a functional discipline and worked together to solve a design problem.

The primary dependent variable in this study was team effectiveness: team performance as measured by the quality of the team's design, satisfaction of team members, and the ability and desire of team members to work together in the future. Other control variables investigated for their effect on these dependent variables included: cooperative behaviors, reward valence, effort, and autonomy preferences.

Few significant effects of reward structure were found. The reward treatment had a significant main effect on both cooperation and effort, but little difference existed between reward treatments. Some unusual results were found in the relationship between effort and cooperation with performance. Both effort and cooperation were negatively related to team performance. Cooperation, satisfaction and ability to exist were all found to be correlated. No one reward structure was found to be significantly better than any of the others in terms of team effectiveness or team process.