Research finds end of year individual bonuses are counter-productive

An international team of researchers has found it makes better business sense to reward team performance rather than providing individuals bonuses, casting doubt on current business practices focusing on individual based rewards.

Published in the Journal of Business Research, the study was conducted by Dr Dan Ladley  from the University of Leicester, Professor Ian Wilkinson from the University of Sydney Business School and Professor Louise Young from Western Sydney University School of Business.

By modelling different types of group situations and conducting computer experiments, the team examined individual versus group based reward systems.

"We applied evolutionary theories to work groups by building computer simulations that modelled the interactions of entities which, over time, either co-operated as groups or operated in self-interest," says Professor Young.

"We examined the effects of individual and group rewards for more than 14,000 types of interaction games to mimic different types of group situations."

"We found is that in most situations, group rewards produce better performing individuals than individual rewards, with these high performers living in accomplished, cooperative groups".

Professor Wilkinson from the University of Sydney Business School said the findings recommend a shift away from purely individual based incentive and reward systems to group based systems that reflect the complex interdependencies among people working in a team.

"A championship team beats a team of champions chosen on the basis of individual performance," says Professor Wilkinson.

"Take sports: the Wallabies would be no good if everyone was out for themselves and wanted to score tries."

"Likewise if the Socceroos only valued those that scored goals and ignored and devalued the roles of others that set up the opportunities to score, they would have similar results. So it is in business."

The study was inspired by evolutionary psychologist William Muir, who conducted experiments to breed better egg-laying hens.

Traditionally, breeders in the egg industry were selected from the best egg-layers, which over time increased egg production but also produced groups of aggressive "mean bad birds" with short life spans.    

In contrast, breeding from all the hens in the best laying cages was found to produce "kind friendly chickens" who socialised well, had normal life spans and produced better quality eggs.

Professor Young says the study found group rewards also produced self-sacrificers, who actually enabled other group members to perform at a higher level.

"These self-sacrificers were not shirkers or free-riders, but actually crucial members of the group dynamic," she says.

"In contrast, individual rewards produced non cooperative groups of individuals bent on exploiting each other."

Ends

26 November 2016

Mark Smith, Senior Media Officer