The Influence of Incentive Structure on Group Performance in Assembly Lines and Teams

Abstract

Modern manufacturing settings increasingly rely upon workgroups; however, evidence concerning the best fit among incentive structure, production environment, and group performance has been mixed. Young et al. (1993) examine the effect of group incentives on group performance in cooperative and noncooperative environments. Although theory and evidence from practice indicate that group incentives combined with cooperation should result in higher group performance, their results were contrary to this prediction. To further explore this issue, we examine the effect of individual, group, and mixed incentive structures on group performance in assembly lines and teams. We find no difference in group performance depending on incentive structure for assembly lines; however, group performance is higher under group incentives for teams. Supplemental analysis indicates group incentives support the teams’ ability to implement beneficial task strategies and although mixed incentives are theoretically appealing, they may send confusing signals to employees about where to direct their effort.

Does Congruence Between Incentive System and Locus of Control Affect Team Performance?

“…The results support the proposed hypotheses. Findings related to the first hypothesis, that the group incentive system encourages a better team performance compared to the individual incentive system, is consistent with the previous research [for example 18,23,32].…”

“…Empirical evidence shows that group-based incentive is effective for organizations as it is mutually accountable, in which the members work for the same purpose as co-workers; in addition to the ease in measurement and evaluation [1,23]. In contrast, the individual incentive, which serves as individual performance compensation, can bring out 'selfish' behavior, such as the tendency to conceal information [38] and deter team activity such as information sharing and discussion [18].…”

“…There are evidences that team performance is better when group incentive is applied [18,23]. However, other evidence shows that team performance is not significantly affected by the group incentive structure [26].…”

“…Group incentive system is the best motivator in an organizational setting that relies on teamwork [18,23,32,39] because it encourages the whole team to work together and share information [13,18]. This can be explained by organizational behavior literatures, for example social categorization theory [19] and goal interdependence theory [10].…”

“…Teamwork is an essential element in most organizations [23], so it is increasingly important to identify an effective strategy to build a team [20]. Since an organization consists of cooperating individuals, it is important to acquire the knowledge about interactions among team members and their effectiveness [15].…”