In the past, most reward systems have been geared to the individual employee. However, with the emergence of teams in most of today’s organizations, systems are being revamped to reward teamwork. A good example is Behlen Manufacturing Company in Columbus, Nebraska. The 1,100 mostly production employees are organized into 32 teams. Some of these teams have only a handful of members, whereas others have as many as 60. Although each individual receives a relatively low base-pay component, the rest of the compensation is variable and is determined in a number of different ways, including how one’s team is performing.

The centerpiece of the manufacturing company’s variable-reward plan is gain sharing, an increasingly popular form of compensation whereby all members share a usually fixed percentage of the documented savings or performance gain accomplished by the team. Behlen employees can earn monthly gain sharing of up to $1 an hour when their teams meet productivity goals. The CEO explained this team reward system as follows: “If you’re in a group that makes stock tanks, for example, from the start of the process to the end of the process, over all shifts, all month long, if the team achieves certain levels of productivity, each of its members is rewarded anywhere from 0 cents to $1 an hour for every hour worked in that area." Documentation of the gains is based on actual pounds of products, so that everyone on the team knows exactly how well their team is doing. 

Another part of the company's variable- reward system involves profit sharing. Employ- ees receive 20 percent of the profits. In recent years this has resulted in everyone's getting a profit-sharing bonus equivalent to three weeks' salary. Still another part of the reward package is the employee stock ownership plan. Each employee receives company stock equal in value to 2 percent of his or her base salary each year. Senior managers in the company partici- pate in the same reward system as the workers, receiving the same proportional benefits. How- ever, in the case of managers, performance is calculated on the gross margin of their business unit before selling and administrative costs are deducted.

How well has this company in the middle of the Great Plains performed with this organizational reward system? In each of the eight years this pay plan has been in place, performance has exceeded top management’s expectations. In addition to the $5 million the firm saved because of safety, quality, and efficiency ideas that were submitted through the teams, the company has exceeded its profit goals each year. In fact, in the most recent reported year profits were $1 million greater than expectations. The CEO explained it this way, “As people focused in on their gainsharing opportunities—and they’ve understood their profit-sharing opportunities—we’re seeing positive productivity improvements in every corner of the plant.” 

Question

1. Explain the organizational reward system this firm uses. 

2. Although this reward system has obviously been very effective, what more can be done? What specific recommendations would you make? 

3. What if the agricultural economy goes bad and the sales of this agribusiness company greatly decreases? What will be the impact on the reward system this company uses, and what would you now recommend?