Goals Only Part of the Power of Group Pay

Despite growing evidence that incentives based on group performance improve that performance, how this happens still isn't clear. Two researchers looked at the role of goal-setting by team members in this process. Small groups of U.S. undergraduate students were asked to create words using the letters of a sentence. Each person could expect to earn around $9 an hour, but some teams received that pay as a flat hourly rate; others received $6 plus 3¢ per word created ("low-variable pay"); and the remainder received $3 per hour and 6¢ per word ("high-variable pay"). Each group was given a practice session, then tried it two more times.

Groups with high-variable pay performed significantly better than flat-pay groups, while the low-variable groups did little better. High-variable groups were more likely to discuss and set goals for their round 2 and 3 performances than those with flat or low-variable pay, but the teams that chose the toughest goals had the most direct effect on performance.

Individuals with high-variable pay were much more committed to those goals than those with flat or low-incentive pay. For statistical reasons, though, the researchers felt they couldn't test to see if the average commitment level of all members in a given group had an effect. Source: Guthrie, J., and E. Hollensbe (04), "Group Incentives and Performance: A Study of Spontaneous Goal Setting, Goal Choice, and Commitment," Journal of Management 30(2):263.