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More U.S. companies offer team incentive programs

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The number of U.S. companies with special incentive programs for teams or small groups of employees has doubled in the last five years, a survey by William M. Mercer Incorporated suggests.

About a fourth (24 percent) of large and mid-size companies surveyed by Mercer up from 16 percent in 1995 and just 12 percent in 1993 now use incentive programs to encourage employees to perform effectively in a team environment. What's more, another 23 percent of participating companies are currently considering adding such arrangements.

The 2,000 companies nationwide that participated in the Mercer survey employ an estimated 12 percent of all civilian workers in the United States.

"Whether at industrial or service companies, employee teams that are efficient and well-managed can be a potent force in helping an enterprise succeed," said Mercer consultant Steven E. Gross, who specializes in team-based reward programs.

"But an essential part of the equation involves compensation. Absent a sensible, carefully designed incentive compensation program that recognizes and rewards team results, a team or group is unlikely to perform at sustained optimum levels," he added.

Such pay arrangements, Gross said, "focus teams' attention on doing the right thing in order to get the desired results."

Overall, the survey finds that use of incentive compensation once limited almost exclusively to executives is spreading rapidly throughout U.S. business organizations.

For example, about a third (32 percent) of the surveyed companies now cover non-management employees under individual incentive plans, up from 23 percent in 1993. Looking ahead, a fifth (21 percent) of the respondents are considering adopting individual incentive programs.

As a corollary to variable compensation plans, in which employees' paychecks can expand or contract depending on performance, growing numbers of companies have adopted new performance appraisal systems, according to the survey.

One such arrangement that has won rapid acceptance is competency-based performance management, in which employees are rewarded for having, or attaining, certain competencies that encourage behaviors that make them especially effective in doing their jobs.

Twenty percent of the survey companies now have, and 25 percent are considering, these arrangements, about double the number in 1995 (the first year the survey asked about use of performance management programs).

About a fifth (21 percent) now utilize multi-rater performance management systems, up from 11 percent in 1995, and 24 percent are considering their use.

Also referred to as "360-degree" appraisal programs, they involve evaluation of an employee's performance by a wide range of individuals in addition to, or in lieu of, his or her supervisor. They can include subordinates, peers, customers and clients, and even vendors.

The survey, Mercer's 1998/1999 Compensation Planning Survey, is available for $150 ($75 for survey participants) at 800-333-3070.

William M. Mercer Incorporated is one of the nation's leading human resources consulting organizations.

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