How to Make Your Team Pull Harder

(MoneyWatch) 

Everyone, it seems, wants to change the way America's workers are paid. Big companies, newly frugal from the brutal recession, want to ensure they're getting the most out of the workers they still have on their payrolls. President Obama wants not only to change the way teachers and doctors are paid, he's even attempting to overall the entire federal system. His aim: to strip government employees of their cushy salaries tied to longevity and instead pay people based on performance.

Pay for performance makes perfect sense, at least as a concept. You encourage workers to work harder by offering something extra in their paychecks, or by tying bonuses to specific goals. In practice, though, performance-based systems can prove disastrous. Just look at Wall Street, where the lure of nine-figure bonuses led to devastating short-term thinking. The key, then, is to tailor the system specifically to the needs of your organization. And then react quickly and forcefully to any unintended consequences.

Several companies' experience shows how a smart program of incentives can do everything you hoped, and how a wrong-headed one can send your team down the wrong track. Follow the links below to three instructive stories about successful programs and one humongous, but equally instructive, flop.

• American Airlines: They Thought They Had a Good Bonus Plan
• New England Patriots: Got Superstars? Great. Just Don't Pay Superstar Salaries.
• North Shore-Long Island Jewish Health System: Can Pay-for-Performance Work in Health Care? You Bet.
• Hewlett-Packard: An Oft-Taught Lesson in Incentive Pay Gone Awry
• Poll: What Motivates You at Work?